Consider the following independent situations, all of which apply to audits of entities for the year ending 31 December 20X7:

(i) Slipway Limited, a listed company, has been experiencing declining sales over the

last 2 years. Cost cutting has proved difficult due to the high level of imported

machinery used in Slipway's operations and consequently margins have been falling.

While the bankers are presently happy to continue providing Slipway with loan

facilities, they do expect to see improved results in the next financial report. Articles

about Slipway's expected financial results appearing in recent press reports all had

quite a pessimistic tone.

(ii) Discount Foods Limited is a large supermarket chain with offices in all capital cities

around Australia. Until 30 June 20X7 data processing relating to payroll transactions

will be carried out in each capital city by an independent computer service bureau.

(iii) Getaway Pty. Limited is a long established firm which has been operating a boutique

hotel in the Blue Mountains for over 20 years. During this time, it has adopted a

conservative business strategy that has seen it produce adequate, though slightly

unimpressive, results. A new CEO has been appointed to run the firm from 1

September 20X7. He has already released his plans for renovating the hotel, despite

not officially serving as CEO yet. You have also heard him discuss the

implementation of a new marketing strategy to boost occupancy rates.

(iv) Angora Pty. Limited is a small primary producer specializing in the production of

angora wool. Angora's recent display at a trade show has seen orders flood in from

overseas buyers. The accountant, Michael, has done his best to satisfy the orders as

quickly as possible while maintaining the appropriate (foreign currency) accounting

records. However, from some of the questions he has been asking you, you suspect he

is out of his depth.

(v) Kings Pty. Limited has been manufacturing uniforms for the Australian market for the

last 40 years. The government's recent tariff reduction policy has placed Kings in

direct competition with cheaper uniforms manufactured overseas. In a bid to retain

market share, Kings has been selling part of its school uniform range at less than cost.

However, overall profit figures remain buoyant.

Required:

For each of the above independent situations describe the overall impact on audit risk and identify the specific component(s) of audit risk affected.