QUESTION 3

Described below are situations which have arisen at four unrelated clients of your firm.

Rose Berhad (Rose) Your firm is the external auditor of Rose for the year ended 30 June 2021. Rose's financial statements show revenue of RM54.8 million, of which RM1.1 million relates to cash sales. During the audit, your firm identified that Rose had no system of internal control over cash sales. No other audit procedures were available to obtain assurance over cash sales. Rose's profit before tax is RM9.5 million.

Ceri Berhad (Ceri) Your firm is the external auditor of Ceri for the year ended 30 June 2021. In March 2021, Ceri sold a property to Amar. Amar is Ceri's managing director. Ceri's directors have refused to disclose the sale of the property to Amar in the financial statements for the year ended 30 June 2021.

Apple Berhad (Apple) Your firm is performing an engagement to examine and provide assurance on Apple's cash flow forecast for the three years ending 31 December 2024. The forecast has been prepared by Apple's directors in support of a loan application. Apple's bank requires the forecast to be examined and reported on by independent accountants. The cash flow forecast has been prepared on the assumption that revenue will grow by 8% pa. Your firm believes this is highly unrealistic because current revenue growth for Apple and the industry in which it operates is 2% per annum and 3% per annum respectively.

Required: For each of the three situations above, assess the implications for your firm's audit or assurance reports.