WSML exports large dozers to mining firms in China. Tight checks by Australian customs officials have delayed several shipments of dozers. These delays have angered Chinese customers who are threatening to deduct 40% from the amounts owing as compensation for lost time. WSMLs main competitor, Complete Manufacturing Limited (CML) has taken advantage of this and started supplying dozers to the Chinese market from its New Zealand branch for quicker deliveries and at prices lower than those offered by WSML.

During the period, the Australian dollar has remained steady against the Chinese Yuan, although it fell by about 5% against the US dollar. Debtors are invoiced in $US at the time of shipment, and payment is received in $US one month after the shipment is delivered. It takes around four weeks for the charter vessels to travel from WSMLs shipyard at Westmantle Bay to China. A recent downturn in the Chinese economy is affecting forward orders, which have fallen by 15%.

a) Identify the key account from the information provided that is subjected to an increase in audit risk. In your explanation, please mention the key assertion(s) at risk of material misstatment for each of the accounts identified?

b) Identify how the audit plan will be affected and recommend specific audit procedures to address the risk assoiated?