[The following background information is identical to the previous question] Your audit client is Quality Constructions (QC), a company that builds small office buildings (3-5 floors) in capital cities around Australia and which is wholly owned by its founder, Kerry Bricker. QC currently has 10 projects at various stages of completion. QC has been profitable for many years, partly because of its policies of offering fixed-price contracts and a 10% refund if projects aren't finished on time. Due to recent flooding in QLD and NSW, QC has been affected by the difficulty of obtaining building supplies and the higher cost of supplies that are available. Consequently, 7 out of the current 10 projects are behind schedule and it is expected that only 6 of these projects will be profitable. In order to protect the viability of the business, QC has decided to pursue larger projects and has just secured a contract to construct a 15-story tower, for which they received a 30% deposit payment just before yearend. QC's finance director (Jessie Smith) tells you that 'this new deal means there's plenty of cash in the bank, even if we lose a few dollars on the small projects'. Additional Information You have assessed Control Risk in relation to the accuracy, valuation and allocation of Quality Constructions' plant and equipment as low. From your initial review of the listed investments report, however, you have noticed that the useful lives for some items have been input incorrectly. For example, a new van has been entered as having a useful life of 10 months whereas a new computer has been entered as having a useful life of 36 years. Required (a) Provide one (1) example of an IT input control and one (1) example of a manual control that may have prevented this error ( 2 marks); (b) Define 'test data'. Explain how test data could be used to test the IT control you discussed in part (a) (2 marks); (c) After undertaking additional testing you have determined that this is a systemic error and reassessed Control Risk as high. Discuss how this finding will change your planned nature of audit testing in relation to the accuracy, valuation and allocation of Quality Constructions' plant and equipment. ( 2 marks) (d) You are evaluating the validity of the going concern assumption of Quality Constructions. In addition to the information provided above, state two examples of mitigating factors that, if present, may support an opinion that Quality Constructions remains a going concern. ( 2 marks) [The following background information is identical to the previous question] Your audit client is Quality Constructions (QC), a company that builds small office buildings (3-5 floors) in capital cities around Australia and which is wholly owned by its founder, Kerry Bricker. QC currently has 10 projects at various stages of completion. QC has been profitable for many years, partly because of its policies of offering fixed-price contracts and a 10% refund if projects aren't finished on time. Due to recent flooding in QLD and NSW, QC has been affected by the difficulty of obtaining building supplies and the higher cost of supplies that are available. Consequently, 7 out of the current 10 projects are behind schedule and it is expected that only 6 of these projects will be profitable. In order to protect the viability of the business, QC has decided to pursue larger projects and has just secured a contract to construct a 15-story tower, for which they received a 30% deposit payment just before yearend. QC's finance director (Jessie Smith) tells you that 'this new deal means there's plenty of cash in the bank, even if we lose a few dollars on the small projects'. Additional Information You have assessed Control Risk in relation to the accuracy, valuation and allocation of Quality Constructions' plant and equipment as low. From your initial review of the listed investments report, however, you have noticed that the useful lives for some items have been input incorrectly. For example, a new van has been entered as having a useful life of 10 months whereas a new computer has been entered as having a useful life of 36 years. Required (a) Provide one (1) example of an IT input control and one (1) example of a manual control that may have prevented this error ( 2 marks); (b) Define 'test data'. Explain how test data could be used to test the IT control you discussed in part (a) (2 marks); (c) After undertaking additional testing you have determined that this is a systemic error and reassessed Control Risk as high. Discuss how this finding will change your planned nature of audit testing in relation to the accuracy, valuation and allocation of Quality Constructions' plant and equipment. ( 2 marks) (d) You are evaluating the validity of the going concern assumption of Quality Constructions. In addition to the information provided above, state two examples of mitigating factors that, if present, may support an opinion that Quality Constructions remains a going concern. ( 2 marks)