You are the audit partner of CCC &Co audit firm, and audit the work for Melbourne Ltd. You issued an unmodified auditor's report for the year ended 30 June 2021. Several employees of Melbourne Ltd were charged with systematically and deliberately entering fictitious transactions and embezzling about $5 million in year 2019. CCC &Co audit firm has been notified by the legal representatives of Melbourne Ltd. that they are taking legal action against your firm based on the audit for the year ended 30 June 2021. They claim that you and your audit team were negligent in conducting the audit, due to your failure to identify the activities of the employees of Melbourne Ltd. Required: 1. What are the legal requirements to successfully sue an auditor for negligence? 2. Do you think Melbourne Ltd was guilty of negligence? Explain and provide relevant case(s) to support your answer.

part b

You are the audit partner of CCC &Co audit firm, you are planning for the audit of a Melbourne bedding retail business, XYZ Ltd. Inventory is material, and items range in value from $1 to over $500. The nature of the store means that many items are specially ordered with special branding and promotional packaging. Orders are placed 5 months in advance from overseas suppliers. Large deposits are required to be paid to suppliers when orders are placed.

BUACC3741 Auditing Semester 2 2021

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You believe that the account balance for inventory is at risk of material misstatement. Required: 1. Identify a key assertion at risk in relation to inventory. 2. For the assertion in part 1, identify a type of evidence that would be persuasive.

please answer both q 1 and 1 2 of both part a and b