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Question 1 (15 marks) Answer all of the requirements for each of the following independent situations for your audit client: (1) The audit client's management
Question 1 (15 marks) Answer all of the requirements for each of the following independent situations for your audit client: (1) The audit client's management team recently won a national award for ethical business practices. (2) The audit client has recently taken over another company. The audit client has show its own shareholders that the takeover is beneficial to audit client's financial position and performance. (3) The pay package of the audit client's chief executive officer (CEO) includes a bonus payment if the CEO achieves 10% profit growth for the current financial year. (4) Access to the audit client's office buildings is restricted by swipe card access to authorised personnel. Required: (i) The three elements of the fraud triangle are: (A) incentives/pressures; (B) opportunities; and (C) attitudes/rationalisation. For each of the four independent situations above, identify the most relevant element of the fraud triangle (e.g., write B if you think the answer is opportunities), and indicate whether the situation results in higher or lower fraud risk (i.e., write higher or lower). No additional explanation is needed. If fraud risk is not affected, write N.A., i.e., not applicable. (4 marks) (ii) Analyse how each situation affects the components of the audit risk model and the amount of audit evidence required. E.g., whether there is an increase or decrease in inherent risk, and briefly explain why. Marks are given only if correct explanations are provided. You do NOT need to explain why a situation does NOT affect a particular component of the model. (11 marks) [End of this question]
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