Company A are a company who operate a construction business based in Wales. The company are currently having an external audit and you are at the planning stage of the audit. This is the first year that your firm have audited company A. Company A are a family run business which has grown to become a successful business with a turnover of over 12,000,000. The management of the business are mostly family members and as such have total control over the internal control systems including full access to all the financial systems. Recently there has been a large turnover of staff in the accounting department of Company A which has caused some difficulties in completing work accurately. Company A have struggled to find appropriately trained staff resulting in existing staff being forced to work overtime. Staff are naturally unhappy about this situation especially as they have also become aware of incentives being paid to certain members of management for successful completion of work to deadlines, for example the payroll and VAT submissions to HMRC. Due to lack of storage Company A have recently made arrangements to store a large amount of inventory at a third-party location. Company A use a well-known accounting package for all financial areas except for the payroll department, which is processed using a different, more complex system. To date, the payroll system has been run by one person, Wesley, who is very experienced and has complete charge over the payroll since the company started trading. The managing director of Company A told you We are very lucky to have Wesley running our payroll. This is an important area not only because of the regulatory requirements but also because of the large sums of money involved. As a company we are very proud to have someone we can trust 100%. The finance director of Company A has indicated that one of their major customers may be going into administration. Sales to this customer account for 30% of the companys overall turnover.

Required: a) Using the scenario above, Identify and discuss FOUR audit risks that should be taken into consideration when planning the audit of Company A. Provide an audit response for each risk identified. (8 marks)