Case:

Banyan Tree Holdings ("Banyan Tree") is a leading international operator and developer of premium resorts, hotels, spas and residences. Banyan Tree also manages and/or has ownership interests in niche resorts and hotels. Banyan Tree's independent auditor is Ernst & Young LLP.

You are an audit manager in JBG LLP. JBG is an established professional accounting firm that provides audit, tax, and advisory services.

For purposes of this assignment, assume that Banyan Tree would like to change its auditor, and JBG has been invited to tender for the financial statement audit of Banyan Tree.

Question 3

Your partner decided to submit a proposal to become the auditor for Banyan Tree. After the tendering process has concluded, Banyan Tree selected your firm, JBG, as its financial statements auditor.

As the audit manager, you have been assigned by your audit partner to lead the upcoming financial statement audit of Banyan Tree.

The audit team is at the stage of engagement planning, with a view to developing an audit plan.

You have been tasked to perform a risk analysis of Banyan Tree. You begin by obtaining an understanding of Banyan Tree and its environment to identify areas of risks that may result in material misstatements.

The partner has arranged an audit planning meeting to brainstorm potential risk areas. In preparation for the meeting, the partner requests you to perform research and report detailing the following:

part (a)

Analyse and examine the industry and regulatory factors that are relevant to the auditor's understanding of Banyan Tree and in identifying risks of material misstatements. Your discussion should cover three (3) industry factors and three (3) regulatory factors.

part (b)

Based on your understanding of Banyan Tree and its environment, analyse Banyan Tree's accounts or transactions to identify five (5) accounts or transactions that possess a high level of inherent risk, which you as the auditor need to take note of.

Provide reason(s) supporting why you have identified these accounts or transactions as having high risk.

Note that your identification of accounts or transactions and supporting reasons should be in the context of Banyan Tree. In addition, the originality of your answers and ideas is an important consideration when marks are awarded. Answers that demonstrate originality will be awarded more marks than answers that can be directly derived from parts of Banyan Tree's annual report. (15 marks)

part (c)

Illustrate one (1) management assertion relating to each account or transaction that you identified in (b), which you as the auditor are most concerned about. Refer to SSA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment, paragraph A125 for the list of assertions about classes of transactions, account balances, and related disclosures. (5 marks)