about the client and its environment in order to obtain an understanding of the clients business operations and risks, which helps the auditor to assess the clients inherent and control risk. This guides the auditor in developing an overall audit strategy. Based on the audit strategy, the auditor determines the necessary audit procedures to be included in the audit plan.

You have been tasked by the audit partner to conduct some background research to gain an understanding of Singapore Airlines and its environment, which would assist your audit team to identify and analyse the inherent risks that can have a material effect on the financial statements.

The auditor needs to collect various types of information about Singapore Airlines and its environment, including the industry, regulatory and other external factors, as well as the nature of Singapore Airlines business, and its objectives and strategies. The audit partner requests you to write a report based on your findings.

Question 1

Indicate and explain the industry, regulatory and economic factors that are relevant to the auditors understanding of Singapore Airlines and in identifying risks of material misstatements in the financial statements. Discuss the following: Industry conditions, e.g. competitive conditions, technological changes, and industry trends; Regulatory factors; and Economic conditions.

Your analysis should cover three (3) industry conditions, one (1) regulatory factor, and two (2) economic conditions. Make an overall assessment as to whether the information discussed in (a) about Singapore Airlines industry, regulatory and economic factors point to inherent risk as high, medium, or low. Justify your assessment.