You are an mudit assistant in a small audit firm. Prudential Partners, where the seniors saw it as important for the juniors to be an integral part of engaging and auditing the elient. Prudential Partners is engaging a new clicat called Gizmo L.td, which is operating in the technology industry for many years; however, this is the first time that Prudential Parnen is working with a client from this indastry, hence no prior experience. The audit Ieam is intrigued by this sew audit. Talks were finalesed and the partners accepted the engagement without doing any backzround information ce the client. You noticed this and began your ewn indrvidual investigation in the firm and the industry it operates in. duriag the audit, the team lave noticed the following trends. taune a. Girmo Lid has not been producing any new devices and as such nevenue has declined by 10\%6 and performing below industry level, there were no sale of fixed asset during the financial year. It was discovered that cee of Girmo Lid, major competitor has filed a patent for an improved version of the current prodact selling on the market, which coald prove to be a game changer for the connetior's position in the industry. It was also observed at Gizmo that the same person who collects the cash post the entries in the journal, no vault is there to store cash ovemight bence cash are kept in the registers. Jourmal entries are not authorised by management before posting it to the felevant books and ledgers. Aodit schedules of the account that were requested are noi being sabmined to the auditors on time; eleques are only authorised by one person. which is the financial controller. While perusing the aceounts, you have found that sapplies accounts have not being updated frequently, the same is for bank reconciliation. During the investigation it was revealed that there was an unusual amount of intangible assets that are unusual to the infustry that the elient operated in, no proper fixed asset registry was kept and as such, the anditor notices a machinery that represent 45% of the balance sheet of the elient. While assessing the control environment, auditors noticed that management overrides controls easily and that there is no internal audit department for a company that had multiple branches. 04/2 The Conndi of Community Calleges of Jamaica Page 2 axrow Reqwirnd: A. Define Analytical procedures and use this to qualitatively assess the elient's business risk in terns of threat to the besiness. (5 marks) B. Hentify EOUR (4) weaknesses outline in the case stady. (8 markx) C. Outline FOUR (4) audit procedures (cubotantive procedures) to test the areas of weaknesses identified above. (s marks) D. Define the test of control and evaluabe the effoctiveness of internal control using evidence from the case srudy. (9 marks)
