Question: You are the audit senior responsible for the audit of MNC limited. You are currently planning the audit for the year ended 30 June 2010, and during your initial planning meeting with the financial controller he told you of the following changes in the company's operations.

1. Due to the financial controller's workload, the company has employed a treasure . The financial controller is excited about the appointment, because in the two months the treasure has been with the company through foreign- exchange transactions in Japanese yen.

2. To help achieve budgeted sales for the year, MLC is about to introduce bonuses for sales staff. The bonuses will be an increasing percentage of the gross sales made by each salesman above certain monthly targets.

3. The managing director has just returned from the USA, where he signed a contract to import a line of clothing that has become the latest fashion fad there. The company has not previously been engaged in the clothing industry.

Required:

Discuss the components of audit risk that have been affected in each scenario.

Subject : Audit and accurance