Assume you are engaged to audit XYZ corp. They are a privately held construction company with two shareholders. They are seeking a bank loan of $1,000,000 for expansion. All of their construction projects are of similar nature and are in the state of California. The shareholders place great emphasis on the quality of their financial statements and adherence to ethical business practices. One of the shareholders was a former auditor and places great emphasis on having robust and effective internal controls.

INDICATE YOUR INITIAL PLANNING JUDGMENTS: (Low, Medium, High)

Audit risk (AR)	Inherent risk (IR)	Control risk (CR)	Detection risk (DR)
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