The chief financial officer (CFO) of a public company has worked her way to the top by gaining a reputation as a great accounting manipulator. She has earned the reputation by being very creative in finding ways to circumvent accounting standards to keep debt off the Statement of Financial Position and in manipulating accounting to achieve short-term earnings. After each short-term success, she has moved on to another company to utilise her skills.

(a)State the effect on Inherent Risk and/or Control Risk. (1marks)

(b)Provide an explanation for your answer in part (a).

(c)Briefly discuss how the situation will affect your overall plan for the expected scope and conduct of the audit.