You are an audit manager at E & G Chartered Accountants and you are busy planning for the audit of Detailed Ltd a local company that deals with buying and selling mobile phones that are targeted at younger people. The company imports all its mobile phones for resale from companies overseas which invoice Detailed Ltd in US Dollars.

The majority of Detailed Ltd customers are small retailers who will then resell those mobile phones to independent customers. The small retailers that buy from Detailed Ltd usually pay within 30 days from the date invoiced to them by Detailed Ltd. It has been noted that due to Covid 19 pandemic, a number of their customers are experiencing severe cash flow problems which lead to their balances having an outstanding for over 120 days.

Detailed Ltd has also implemented a new computer system called practice manager. The accounting package was supplied by a certain software company that has recently started trading. You have been told that the software supplier assisted Detailed co. with the process of changeover from the old system to the new system and the management of Detailed company has decided that there will be no need to involve the auditors during the system change-over.

Juliana the bookkeeper is solely responsible fi for the input of financial data, but due to the change over she is also several weeks behind with his work. She is however planning to catch up by working overtime and hopes to be up to date by the time of the external audit happening.

REQUIRED

Identify and explain the audit risks relating to the external audit of Detailed Ltd. Where possible, your answer should refer to certain specific items in financial statements which may be at risk of misstatements.,