William Buck is an audit senior at Audi, a large international audit firm. The audit partner has asked him to evaluate the following audit risks of a major international client. For each of the audit risks described below, complete the following:

1. Identify the impact (i.e., increase or decrease) on the component(s) of audit risk affected (1 mark) and explain why it is an audit risk (1 mark); and

n. Identify the prime audit assertion(s) (1 mark) to be tested and the key account balance(s) (1 marks) affected:

and

m. Identify the best audit procedure to reduce the risk of material misstatement. (1 mark)

A)As part of the [business risk assessment for a major audit client, the auditor reviews the minutes of (monthly directors' meetings. It was noted that the payroll manager was dismissed six Weeks before year-lend because it was discovered that he had falsely included his wife and daughter on the payroll for the past two years.

B) Due to the leconomic downturn, your client now uses cheaper product components to reduce costs.

This has not limpacted their sales or prices.

However, your client is

experiencing increased warranty claims for product repairs.