Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your audit client is Battery Bikes (BB), a retailer of electric bicycles with a single store in the Sydney CBD. BB imports bikes from all

image text in transcribed
image text in transcribed
Your audit client is Battery Bikes (BB), a retailer of electric bicycles with a single store in the Sydney CBD. BB imports bikes from all over the world, including the USA, Europe, and Asia, and sells over 50 varieties. BB believes that there is a huge potential market for these products and is currently in discussions with various banks to secure significant additional finance. The electric bike market is constantly evolving and highly competitive. BB's main competitor (Powered Pedals) has shops in every capital city, and there are rumors that Powered Pedals have bought the rights to be the exclusive seller of the Edisonic, the world's most sophisticated and popular electric bike. 1/ Provide two business risks faced by BB. (2 marks) 2/ Explain and justify your assessment of the Inherent Risk for the accuracy, valuation and allocation of inventory for BB, giving two reasons. (2 marks) 3/ For ONE of the inherent risk examples you provided in the previous question, state a preventative OR detective control and state how you would test that control. (2 marks) 4/ You have assessed Control Risk in relation to the valuation of BB's inventory as medium. You have almost completed your controls testing and have not found any exceptions. However, from your initial review of the BB inventory report, you have noticed that the carrying value of one bike is negative. IS negative. (a) Provide an example of an IT input control that may have prevented this error and explain how you would test this control (2 marks); (b) Provide an example of an IT output control that may have detected this error and explain how you would test this control (2 marks); (c) Explain 'parallel simulation and discuss whether parallel simulation would be useful in determining whether the error is pervasive. (2 marks); (d) After undertaking additional testing you have determined that this is a one-off error. Discuss how this finding will change your planned nature, timing, and extent of audit testing in relation to BB's inventory. (2 marks) 7 A? BUI Fr % 1/ Risk 1: Risk 2: 2/ Assessment of Inherent Risk in relation to the valuation of BB's inventory: Example 1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial & Managerial Accounting

Authors: Jan Williams

16th Edition

78111048, 978-0078111044

More Books

Students also viewed these Accounting questions

Question

Explain how costbenefit grids can be used to rank-order projects.

Answered: 1 week ago