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During your planning meeting with the finance director of Swansea Co, one of your audit clients, to update your knowledge of the entity, you are
During your planning meeting with the finance director of Swansea Co, one of your audit clients, to update your knowledge of the entity, you are informed that Swansea Co has improved profits during the year as a result of a change of major supplier to a cheaper alternative which supplies lower quality goods. The finance director expects that selling lower quality goods will not increase the customer complaints nor the level of returns. She also believes that the costs will not increase in the long term. Which of the following describes a valid audit risk arising as a result of the change in major supplier? O Customer complaints may increase as a result of the reduction in quality O Costs may increase in the long term if the level of returns increases O Purchases and payables could be overstated in the financial statements The provision for warranties could be misstated
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