All board members approve the capital expenditure budget every six months. As the construction industry relies heavy on expensive and specific equipment, such cost account for more than 40% of Katie's annual cash outflow. Katie depreciates these assets per Katie's asset acquisition and management policy, which complies with the requirements of the applicable accounting standards. Katie also hires an external consultant annually to ensure that all capital acquisitions and related depreciation, revaluation and impairment charges meet the accounting standards.

Requirement

1. Must identify the critical area of the client's financial report where misstatement are likely to occur.

If the risk of material misstatement is;

- at the financial report level, you must explain the risk in detail and how it will affect the financial statements.

- at the account or transaction level, you must identify the exact account name or the transaction at risk and state the related assertions.

2. Considering all the material misstatements identified above, you must draft a preliminary audit strategy for this client

3. Must test at least two internal controls that are present in the case study