Question 1

You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to medium-

sized home appliances. This is the second year you are conducting the audit. You have had

documented your assessment of inherent risk and control risk for this audit based on your

understanding of the company. Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic home appliances has been

favourable and the industry as a whole has been growing steadily.

2.Ivory Ltd recently switched to a new integrated central accounting system. During the

switch, audit trails were not kept intact due to system failures.

3.Ivory has recently appointed a new financial controller. The old controller resigned to

take a job in another city.

4.Ivory has always been a follower in the industry and seen as a bit old-fashioned and

conservative.

You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to medium-

sized home appliances. This is the second year you are conducting the audit. You have had

documented your assessment of inherent risk and control risk for this audit based on your

understanding of the company. Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic home appliances has been

favourable and the industry as a whole has been growing steadily.

2.Ivory Ltd recently switched to a new integrated central accounting system. During the

switch, audit trails were not kept intact due to system failures.

3.Ivory has recently appointed a new financial controller. The old controller resigned to

take a job in another city.

4.Ivory has always been a follower in the industry and seen as a bit old-fashioned and

conservative.

You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to medium-

sized home appliances. This is the second year you are conducting the audit. You have had

documented your assessment of inherent risk and control risk for this audit based on your

understanding of the company. Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic home appliances has been

favourable and the industry as a whole has been growing steadily.

2.Ivory Ltd recently switched to a new integrated central accounting system. During the

switch, audit trails were not kept intact due to system failures.

3.Ivory has recently appointed a new financial controller. The old controller resigned to

take a job in another city.

4.Ivory has always been a follower in the industry and seen as a bit old-fashioned and

conservative.

You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to medium-

sized home appliances. This is the second year you are conducting the audit. You have had

documented your assessment of inherent risk and control risk for this audit based on your

understanding of the company. Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic home appliances has been

favourable and the industry as a whole has been growing steadily.

2.Ivory Ltd recently switched to a new integrated central accounting system. During the

switch, audit trails were not kept intact due to system failures.

3.Ivory has recently appointed a new financial controller. The old controller resigned to

take a job in another city.

4.Ivory has always been a follower in the industry and seen as a bit old-fashioned and

conservative.

You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to medium-

sized home appliances. This is the second year you are conducting the audit. You have had

documented your assessment of inherent risk and control risk for this audit based on your

understanding of the company. Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic home appliances has been

favourable and the industry as a whole has been growing steadily.

2.Ivory Ltd recently switched to a new integrated central accounting system. During the

switch, audit trails were not kept intact due to system failures.

3.Ivory has recently appointed a new financial controller. The old controller resigned to

take a job in another city.

4.Ivory has always been a follower in the industry and seen as a bit old-fashioned and

conservative.

You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to medium-

sized home appliances. This is the second year you are conducting the audit. You have had

documented your assessment of inherent risk and control risk for this audit based on your

understanding of the company. Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic home appliances has been

favourable and the industry as a whole has been growing steadily.

2.Ivory Ltd recently switched to a new integrated central accounting system. During the

switch, audit trails were not kept intact due to system failures.

3.Ivory has recently appointed a new financial controller. The old controller resigned to

take a job in another city.

4.Ivory has always been a follower in the industry and seen as a bit old-fashioned and

conservative.You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to mediumsized home appliances. This is the second year you are conducting the audit. You have had documented your assessment of inherent risk and control risk for this audit based on your understanding of the company. Below are some extracted notes from your working papers: 1. Over the past several years, the market for domestic home appliances has been favourable and the industry as a whole has been growing steadily. 2. Ivory Ltd recently switched to a new integrated central accounting system. During the switch, audit trails were not kept intact due to system failures. 3. Ivory has recently appointed a new financial controller. The old controller resigned to take a job in another city. 4. Ivory has always been a follower in the industry and seen as a bit old-fashioned and conservative.

You are conducting the 30/06/15 audit of Ivory Ltd which manufactures small- to medium-

sized home appliances. This is the second year you are conducting the audit. You have had

documented your assessment of inherent risk and control risk for this audit based on your

understanding of the company. Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic home appliances has been

favourable and the industry as a whole has been growing steadily.

2.Ivory Ltd recently switched to a new integrated central accounting system. During the

switch, audit trails were not kept intact due to system failures.

3.Ivory has recently appointed a new financial controller. The old controller resigned to

take a job in another city.

4.Ivory has always been a follower in the industry and seen as a bit old-fashioned and

conservative.

You are conducting the 30/06/20 audit of Tasman Ltd, a Hobart based manufacturer of home storage solutions.This is the second year you are conducting the audit.You have documented your assessment of inherent risk and control risk for this audit based on your understanding of the company.Below are some extracted notes from your working papers:

1.Over the past several years, the market for domestic storage solutions has been favourable and the industry, as a whole, has been growing steadily.

2.Tasman Ltd recently switched to a new integrated central accounting system.During the switch, audit trails were not kept intact due to system failures.

3.Tasman Ltd has recently appointed a new financial controller.The old controller resigned to take a job on mainland Australia.

4.Tasman Ltd has always been a follower in the industry and seen as a bit old-fashioned and conservative.

Required:

For each item state the impact on inherent risk and/or control risk and justify your answer.

[Total for Question 1 = 10 marks]

Item

Impact on Inherent Risk/Control Risk

[1 mark each]

Explanation

[1.5 marks each]

1.

2.

3.

4.