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Case Study Situation

You are an audit manager for Alder Auditing Bureau, a firm that has recently gained two new audit clients of a similar size. Your audit staff have completed their preliminary investigations of the two clients. You are reviewing their notes which can be summarized as follows:

Client 1 Feyaty-Al-Madinah

Feyaty-Al-Madinah is an old-fashioned family company which has been in business for over a thirty years and trades as wholesalers of fruit and vegetables. Its management structure is divided into five layers ranging from supervisor, deputy manager, manager, senior manager and director. The senior managers and directors have been with the company for many years. Each level of management has clear authority limits set down in the company manual, which also sets out detailed written procedures for every job. Management at all levels generally has an unforgiving attitude to errors and inefficiencies. Most of the systems are paper-based, although the accounting ledgers are maintained on a computer and there are rigid systems of authorisation before transactions can be processed. Staff turnover in clerical posts and at supervisor and deputy manager level is high.

Required

1. In your review of the control environment for each of these clients, what conclusions would you draw about the risk of error arising in the accounts? (200 words)

2. Explain the Concept of Audit Sampling and types of Sampling Risk. (200 words)

3. What are the transactions and documents processed through the revenue process?(150 words)