Scenario:

You are the audit manager at Black & Blue, undertaking the audit for the year ended 30 June 2020 of High Tech Ltd, an electronic component manufacturer located in Sydney. During the planning stage of the

audit you discovered that one of High Tech Ltd's major suppliers went bankrupt one month ago, causing major product shortages. To overcome the problem, Peter James, the husband of the finance director,

Natalie James, provided electronic components to High Tech Ltd through his private company. There is no formal agreement in place with Peter James, however, the goods are being provided at competitive

prices. You are concerned about the electronic components that Peter James' company is supplying, because his products are new to the market and you have heard some of High Tech Ltd's staff complaining

that they are of poor quality.

The board has informed you that although sales have been strong this year, High Tech Ltd has suffered significant cash flow problems because a major debtor, Creative Ltd, is experiencing financial difficulti

As a result, Creative Ltd is taking well over 120 days to pay outstanding amounts, despite Creative Ltd's terms of trade being payment within 30 days. Creative Ltd makes up 40 per cent of High Tech Ltd's sal

and the board has been reluctant to take any action that might adversely affect those sales. As a result, High Tech Ltd has had to increase its dependency on its line of credit, and this has caused it to

temporarily breach the debt-to-equity ratio required in its loan covenant with Big Bank Ltd.

PART A) Identify two key account balances at risk of material misstatement and for each account balance identify the key assertion at risk. Also explain why the account balance and assertion are at risk

the below format to answer the question: (9 marks)

Key account balance at risk

Rey assertion at risk

Explanation

- (as a guide, your answer should be minimum approximately 20 rows to adequately address the question)

PART B) Describe one (1) substantive test of detail that you would undertake for each account to address the assertion and risk identified (5 marks)

- (as a guide, your answer should be minimum approximately 6 rows to adequately address the question)

PART C) Identify and explain two key going concern factors that would place the going concern assumption at risk in relation to High Tech Ltd's financial report for the year ended 30 June 2020. (8 marks)

- (as a guide, your answer should be minimum approximately 6 rows to adequately address the question)

PART D) Identify and explain one key related party transaction factor that would increase the risk of material misstatement. (4 marks)

(as a guide, your answer should be minimum approximately 6 rows to adequately address the question)