Merit company has long-term agreements with several suppliers to supply the raw materials used in construction. Every month, the purchasing department assesses the purchase requirements and sends the purchase requisition request to the CFO for assessment. Once approved, the purchasing department sends the purchase orders to the suppliers. The terms and conditions are as per the agreement signed by both parties. Any variation from these terms and conditions requires the approval of both the CFO and the CEO.

Requirement:

1. Must identify the critical area of the client's financial report where misstatement are likely to occur.

If the risk of material misstatement is;

- at the financial report level, you must explain the risk in detail and how it will affect the financial statements.

- at the account or transaction level, you must identify the exact account name or the transaction at risk and state the related assertions.

2. Considering all the material misstatements identified above, you must draft a preliminary audit strategy for this client

3. Must test at least two internal controls that are present in the case study