course : auditing

Berry Yoghurt Electronics Limited is a designer of high technology healthcare equipment. For the current financial year the CFO of Berry Yoghurt Electronics Limited reported the following key account balances: (a) Sales Revenue - $111 million; (b) Gross Profit - $65 million; (c) EBIT $43 million; (d) NOPAT - $5 million; (e) Total Current Assets - $8 million; (f) Tatal Net PPE - $60 million; (g) Total Assets - $250 million; (h) Total Current Liabilities - $15 million; () Total Interest-Bearing Debt - $185 million; and () Total Equity $15 million. Lazy Auditing Services has been the auditor of Berry Yoghurt Electronics Limited for the past 4 years and were recently reappointed to audit the financial statements for the current financial year.

Required: Consider the following scenarios independently to determine the type of risk best relevant to the situation description and justify your answer:

Scenario 1

The audit team leader reported Berry Yoghurt Electronics Limited had no formal Internal control policles and procedures. The audit team were able to perform all the tests-of-transactions planned with no material discrepancles noted. The audit team were not permitted by the dlent to access documentation related the major divlslon of the company that accounted for 90% of sales and 85% of assets. As a result, only 2% of planned tests-of-balances could be completed.

scenario 2

Test-of-transaction evidence gathered by Lazy Auditing Servlces, Involving a sample of 50% of all sales, found concerns with only several transactions. Discrepancles between company and audltor computations of these transactions amounted to $10,000. During the cause of the audit, the audit team were able to complete all planned tests-of-controls, tests-of-transactions, and tests-of- balances.

scenario 3

The audit team were able to complete all planned tests-of-controls, tests-of-transactions, and tests-of-balances. The evidence collected from these tests did not highllght any obvlous errors. However, the audit team leader reported Berry Yoghurt Electronics Limited had Introduced a new sales revenue recognition model during the year. This revenue recognition revenue approach dld not conform with existing standards, norms, and practices. The new revenue recognition model meant $90 mlllon of sales revenue that would have been recorded In future years (under the traditional accepted method) had been recorded In the current financlal year.

audit opinion

justification

please answer clearly for both points and both scenarios