Part 2: Risk of Material Misstatement (Inherent Risk) at the Financial Report Level

(6 marks; around 300 words)

From your Understanding of the Austin Engineering Ltd identify one(1) specific account balance (not account classifications!) that you consider at significant risk of material misstatement. For your chosen account balance:

a) Explain why the account balance is at significant risk of material misstatement (3 marks)

b) Explain one, key assertion at risk of not being valid (1 mark)

c) Detail one (1) relevant substantive audit procedure to address the assertion at risk as identified in b) above (1 mark)

d) Detail one (1) relevant practical internal control that would mitigate the risk in relation to the assertion at risk as identified in b) above. (1 mark)