Berjaya Gemilang Company (BGC) operates a road maintenance company. Consider the following information.

Your firm has just been appointed auditor of BGC at its annual general meeting. During your planning of the audit, you notice that BGC is an unlisted public company and its director do not consider it to be reporting entity. BGC has prepared special-purpose financial report for the past 5 years. It has significant bank debts and is required to lodge audited accounts with its banker within 90 days of year end.

BGC recently won a substantial contract to perform road maintenance work for Malaysia government for the next 3 years. As a result of winning the contract, to meet the increased demands and satisfy the specialized nature of the work for the government, BGC purchased additional machinery. The machinery has an expected life of 10 years.

BGC is also involved in the manufacture of backyard water tanks. A revolutionary process developed a couple of years ago has enabled BGC to build a tank far superior to any of its competitors, at half of the price. It has therefore denominated the market over the past few years. However, you recently read a weekend newspaper in which you saw an article previewing BGC's main competitors' new tank. It is mad of a new material called Xenarafom, and it will be superior to BGC's tank and cost 30% less.

Dikehendaki / Required:

i)Terangkan secara ringkas mengapa setiap daripada tiga situasi di atas mempunyai risiko.

Briefly explain why each of the three situations above represent a risk.(explain for each scenario) what is the problem-can answer using tabe-

BGC is non listed company (not public listed company) cannot be traded in open market

Mainly to be used for bank loan purposes, when they prepare the FS it to secure loan. Increase inherent risk because management is capable to manipulate the financial report to make sureFS just to look good - control risk

2^nd scenario is also inherent risk because after 3 years the machinery can be obsolate. What will happen to the usage of the machine.

3^rd scenario is inherent risk- competitors has discovered new product & reduce the cost by 30%.(how company manage risk- any cost enhancement / new raw material/ new supplier)

ii) Identify the main account or group of accounts affected by these risks and how the risks would be affected the audit plan.

The auditor need to investigate all the financial document since there is tendency for manipulated FR.

Fixed asset n depreciation expense account to assess the....

The auditor must review sales acoount to confirm the sakes. Discusss with management how they wanna resolve the problem. ( any efford from them whether they wanna increase the sales)