Kieko Co. Ltd imports, sells and services mobile telephones to retailers. You have been provided with the following information for the 30 June 2019 audit of Kieko Co. Ltd

Kieko Co. Ltd sells to retailers in both Australia and New Zealand

Inventory is usually provided to retailers on a sale or return (consignment) basis

Kieko Co. Ltd has an employee bonus scheme based on sales

There has recently been a large increase in the number of faulty phones being returned by retailers. The reason for the fault has not yet been determined by Kieko Co. Ltd

Perpetual inventory records are maintained for all inventory using a well-known computer inventory package

Physical inventory is counted monthly, reconciled to the perpetual records and appropriate adjustments made

The technology in the telephone industry changes very quickly and new models are released regularly

The managing director plays golf with your brother-in-law

The following information has been extracted from the financial records of Kieko Co. Ltd:

2019 2018

Unaudited Audited

$000 $000

Sales revenue 16,500 15,600

Inventory 3,600 2,200

Accounts receivable 5,450 4,100

Required:

a) You are planning the audit of Kieko Co. Ltd for the year ended 30 June 2019 and are concerned about the risks associated with accounts receivable and inventory. Identify three (3) factors for each of accounts receivable and inventory that increase audit risk. Discuss why these factors increase audit risk with reference to financial report assertions.

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b) You believe that computer assisted audit techniques may be able to assist you in the audit of Kieko Co. Ltd for the year ended 30 June 2019. For each of accounts receivable and inventory, specify four (4) ways in which audit software could be used to assist in the audit of the key assertion at risk as identified in Part A.

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