During your semester break, you participated in a vacation program at a local audit firm. During the vacation program, you assisted an audit senior on the planning for Flight Center, including developing appropriate substantive audit procedures. You have one more semester to complete your post graduate course and have indicated to the audit manager that you would like to work on a full-time basis at the audit firm on completion of you course. The audit manager has asked you to write a report as part of the process of determining your suitability as a candidate for a permanent role in the audit firm. The manager wants to assess your ability to apply the knowledge you gained, to the audit planning process and developing appropriate substantive procedures as well as your report writing skills.

You are required to address the following in your report:

1. Identify 4 business risks of Flight Center, that will increase the risk of material misstatement (specifically inherent risk) at the assertion level for classes of transactions or account balances. For each business risk, identify only 1 class of transaction or account balance (income statement or balance sheet line item), and for each class of transaction/account balance please identify the assertion most (only one) at risk of misstatement. You need to explain why each business risk will lead to a risk of misstatement to the specific class of transaction/account balance and assertion that you have identified.

2. Describe in detail, the appropriate substantive procedure that will address each of the class of transaction or account balance and assertion identified as at risk of material misstatement. The description of procedures must be detailed enough for someone without auditing knowledge to be able to carry out the procedures correctly.

3. Refrain from repeating the same combination of account balance/class of transaction and assertion in your answers. For example, if you have identified the existence of inventory as the assertion and account balance at risk of misstatement for your first business risk identified, do not use the existence of inventory for the second, third or fourth business risk. You can identify inventory as at risk but for an assertion other than existence, or you can identify the existence of a different account balance to be at risk of misstatement.