Audit Planning Project

You are the lead auditor for the Keystone Computer & Networks Inc. (KCN) audit. Information related to this company and respective audit are found in Appendix 6C pages 268 to 274 and in the attached file as well. Utilize this information to answer the questions below.

Auditing firms have standard auditing plans. In other words, the audit tests and steps are repeated from one client to another unless there is a red flag or concern. For Keystone Computers & Networks Inc. (KCN), there were several indications/red flags that additional audit steps are needed related to the 1) company's growth strategy, 2) the inventory strategy, 3) the ownership structure, and 4) the offering of sales warranties and 5) the debt agreement with Western Financial Services. For questions 1 -3, each question is asked what red flags do you identify, what accounts are impacted, and how do you adjust your audit plan?

Question 1 Part A

What are the red flags related to the company's growth strategy?

Question 1 Part B

What accounts are impacted by the company's growth strategy?

Question 1 Part C

How do you adjust your plans in regard to the company's growth strategy?

Question 2- Part A

What are the red flags related to the company's inventory strategy?

Question 2- Part B

What accounts are impacted by the company's inventory strategy?

Question 2 Part C

How do you adjust your plans in regard to the company's inventory strategy?

Question 3- Part A

What are the red flags related to the company's ownership structure?

Question 3- Part B

What accounts are impacted by the company's ownership structure?

Question 3 Part C

How do you adjust your plans in regard to the company's ownership structure?

Question 4

What key items should you know and understand regarding the company offering sales warranties?