AUSTRALIAN AUDITING AND ASSURANCE

ABC Education Ltd operates business colleges. Its customers come from a range of professions such as lawyers, medical practitioners, accountants and others. ABC delivers knowledge update courses that allow its customers to maintain their professional accreditations as well as more generic courses such as supervisory skills, professional writing and so on.

ABC has invested a significant amount of money in a new integrated IT system that includes customer booking system, inventory control for course material, purchase and sales recording, payroll and HR all linked around a nominal ledger and management reporting module. This new system was funded through bank borrowings. This is the first time the company has borrowed so extensively and it is starting to understand the effects of the terms and conditions applied to the load that require it to maintain certain interest cover and gearing ratios.

The colleges have classrooms full of customers and therefore have a significant number of people in their buildings. The company is subject to strong health and safety rules as well as fire protection legislation. One of ABC's main costs relates to property rental and one of its key performance measures is to maximise revenue per square metre. It is clear from feedback from students that the value they place on the organisation is directly linked to the lectures that ABC employs. LEcturers quickly obtain a reputation in the market place and a good reputation is directly linked to higher class sizes. As a result, ABC seeks to create salary packages that incentivise staff to maximise student numbers.

You have to identify and explain the business risks in the case above and identify and explain the audit risks in the case above seperately.