QUESTION 13

Mark Fay is an audit senior at Holden & Ford, a large international audit firm. He has been asked by the audit partner to evaluate the following audit risks of a major international client. For each of the audit risks described below complete the following:

Identify the impact (i.e. increase or decrease) on the component(s) of audit risk affected and explain why it is an audit risk; and

Identify the prime audit assertion(s) to be tested and the key account balance(s) affected; and

Identify the best audit procedure you would use to reduce the risk of material misstatement.

As part of the business risk assessment for a major audit client, the auditor reviews the minutes of monthly directors meetings. It was noted that the payroll manager was dismissed six weeks prior to year end because it was discovered that he had falsely included his wife and daughter on the payroll for the past two years.