QUESTION 5 (18 marks - 6 marks each scenario] lan Hammo is an audit senior at Datt & Prasad, a large international audit firm. He has been asked by the audit partner to evaluate the following audit risks of a major inter- national client. For each of the audit risks described below complete the following: (0) 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 (ii) Identify the prime audit assertion(s) to be tested and the key account bal- ance(s) affected; and (ii) Identify the best audit procedure you would use to reduce the risk of ma- terial misstatement. NB: The situations are independent of each other and are to be treated separately in your answers. Description of audit risk Impact on the compo Prime asser Best audit proce nent of audit risk af tion(s) dure to reduce fected (1 mark) and (1 mark) and risk (2 marks) explanation as to why key account it is an audit risk (1 balance(s) af- mark) fected (1 mark) 1111 ERIC SOUL > Description of audit risk Puti vi LG IP DUOLQU prvus nent of audit risk af tion(s) dure to reduce fected (1 mark) and (1 mark) and risk (2 marks) explanation as to why key account it is an audit risk (1 balance(s) af- mark) fected (1 mark) (a) A subsidiary of the client is Es- tate Jewellers Ltd. The com- pany specialises in jewellery from deceased estates, pur- chases pieces at auction, cleans and remodels them and then sells them to the general public. At year-end, Estate Jewellers expects to have around 2,000 pieces of jewel- lery on hand, ranging from small items worth $50 to more expensive items worth over $10,000. No two items of jew- ellery are the same. Because of the complex nature of the in- ventory, Estate Jewellers en- gaged an expert to provide a year-end valuation report. The expert used the client's inven- tory price list and amended ac- cording to his estimate of the (lower of cost or net realisable) value of each item