Background

You have been promoted to the role of senior manager at GYG, a medium sized professional services firm with offices in the Sydney metropolitan area. GYG provides audit services to a range of organisations, but specialises in the audits of firms in the manufacturing industries. GYG has a December 31 2022 reporting date, so during November 2022 you met with the audit senior of GYG, Ray Hall, to discuss a number of issues and findings Ray has identified relating to three of GYGs clients.

Impact of business risk at Hales Ltd.

Hales Ltd is an Australian owned company that obtains and refurbishes second hand electronics such as mobile phones and laptop computers. Recently, Hales has started using a new cleaning technique that is meant to be more effective and less costly. Hales has also decided to focus on the export market, and has been refurbishing electronics for several Pakistani companies where the electronic goods are then sold to consumers. Recently however, there have been long delays in shipping the goods to Pakistan due to industrial action amongst customs workers at Australian ports. The delays have annoyed Pakistani customers who have threatened to reduce the amounts they owe by 20% on account of lost sales. Adding to Hales concerns is that another of their customers, Blossom Ltd, is claiming that the latest batch of computers they received from Hales were defective, and are refusing to pay their account which is already 4 months overdue.

Question 1 (3 marks)

What are the business risks, the relevant accounts and assertions impacted on by the business decisions made by Hales Ltd? Justify your position.