QUESTION ONE

You are the Audit Manager responsible for the audit of Meggs Chops Ltd, a company that runs a chain of fast-food restaurants. You are aware that a major risk of this sector is that poor food quality might result in damages claimed by customers. You had satisfied yourself at the interim audit that the company's control risk as regards purchases of food and its preparation in the kitchen was low. However, during your final audit, it comes to your attention that one month before the year-end, a customer has sued the company for personal injury caused by food poisoning, claiming an amount of GH 100,000 in compensation. This amount is material to the stated profit of the company, but management believes that it has good defences against the claim.

Required: i. Recommend TWO (2) controls that the company should have in place to reduce the risk associated with food purchases and their preparation in the kitchen.

ii. State TWO (2) audit procedures you should carry out during controls testing to satisfy yourself that control risk in this area is low.

iii. Explain TWO (2) assertions relevant to accounts payable at the year-end date.

iv. In respect of the potential claim, state THREE (3) items of evidence you should obtain and explain how they might enable you to form a conclusion on the likelihood of the claim.