Audit risk and Planning

You are a part of the team responsible for planning the Argent Minerals Limited (ASX code - ARD),

a listed mineral exploration company, audit engagement for 2020. You are required to gather

relevant background information and prepare a report for a meeting with your senior partners of

your auditing firm. Assume that this is the first time that the audit will be conducted by your audit

firm for this client.

Your report must address the following issues:

Required:

(a) Identify and briefly describe three key inherent risks that your team will consider for ARD

engagement. (9 marks)

(b) Are there any events or conditions that may cast significant doubt on the ARD's ability to

continue as a going concern? Explain. (9 marks)

(c) Based on your risk analysis and understanding of ARD and its environment, list and explain

three accounts that could be at risk of material misstatements. You also need to identify

the key assertion at risk for each identified account. (12 marks)

(d) With specific reference to the ARD's corporate governance arrangements, assess the

likelihood of the potential reliance that could be placed on the overall control

environment. (9 marks)

The answers for above questions should be reflective of your in-depth understanding of how the

ARD operates. You should conduct extensive research and perform an analysis of the annual

report of ARD for the year 2019 and any other relevant information that you have obtained. (Hint:

company's financial results, financial press and other business media).

Ex-audit firm partners

Academic research suggests that audit committee members with accounting expertise are

associated with timelier financial reporting. One simple way of attaining accounting expertise

onto audit committee is to recruit ex-audit firm partners onto the board of directors. However,

appointing former audit partners to boards and audit committees raises independence concerns.

As per requirements of Section 324 CI of Corporation Act 2001, a retired audit partner must not

take on a senior role in an audit client for two years from retiring. Nonetheless, extant audit

literature provide evidence that financial reports are of higher quality when former audit partners

are on the audit committee and raise doubts about the benefits of a rule limiting their

recruitment.

Required:

Explain how theses accounting experts could help or hinder the audit process and thereby have

an impact on the quality of a company's financial reports. (10 marks)