2) The Audit firm Dewy, Cheatham, & Howe has been asked to perform an attest audit of Crook Puppy Investments (CPI) Ltd (an investment firm that has been registered with ASIC for 10 years).

Your early assessment of CPI Ltd indicates that it has a high-risk business environment (IR is very high = 0.90), poor to none existent internal controls (CR is medium = 0.60), and the detection of problems during any reasonable level of audit is very poor (DR is high = 0.74).

Required: a) List and discuss what you need to consider before accepting the CPI Ltd audit engagement. b) Show the audit risk model and use it to estimate and evaluate the audit risk of the CPI Ltd Audit engagement. c) If your firms Audit Risk tolerance is 0.04, would you accept the audit? Explain. d) If your audit firm accepts the audit, how would the information in part (b) be used to set the audit strategy?