Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

) - Inherent Risk and Materiality Tasks Preliminary Inherent Risk Assessment - Review the description of Southwest Appliances, Inc. and identify four inherent risks based

) - Inherent Risk and Materiality Tasks

Preliminary Inherent Risk Assessment - Review the description of Southwest Appliances, Inc. and identify four inherent risks based on the information provided. Inherent risks can flow from client's business risks, the nature of its governance structure, and its strategic plans. However, you need to be clear about how your risks create an increased risk of material misstatement in the financial statements and not just how they might create risks of lower performance for the firm. Thus, for each inherent risk, describe the feature of the firm you believe affects inherent risk and explain how and why. By "how," I mean whether in increases or decreases inherent risk. Make sure your "why" addresses a specific risk to the accuracy of the financial statements and whether audit effort should be increased or decreased for specific accounts or related groups of accounts if possible.

Limit your inherent risk analysis to the verbal information in the case and not the financial statement data.

Preliminary Analytical Procedures - Review Southwest Appliance's financial statements, ratios, and industrial data presented at the end of the case. Identify four accounts that you believe need additional audit scrutiny and explain why. Preliminary Materiality Judgment- Set a preliminary materiality level for the Southwest audit. Document your materiality level and explain why you chose it.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forensic And Investigative Accounting

Authors: G. Stevenson Smith D. Larry Crumbley, Edmund D. Fenton

10th Edition

0808056301, 9780808056300

More Books

Students also viewed these Accounting questions

Question

2. Ask questions, listen rather than attempt to persuade.

Answered: 1 week ago