Question
You are the audit senior of Audit air and are planning the audit of Aphro Ltd for the year ending 31 December 2021. Your firm
You are the audit senior of Audit air and are planning the audit of Aphro Ltd for the year ending 31 December 2021. Your firm has been the external auditor of Aphro Ltd for 12 years and Chris Jack has been the audit partner for the whole 12 years your company works for this client. Chris and Eri Thom, the managing director of Aphro, have known each other socially for many years and play squash regularly. Aphro Ltd manufactures and sells face and body cosmetic products in the UK, using as its main ingredient, organic olive oil that is imported from Greece. On 15 July 2021, Aphro Ltd opened its first store in London. Until then, it used to sell its products online. Your client had to finance the acquisition of the store premises through a 4-year loan from the bank. The loan agreement requires your client to meet loan covenants, and any breach in the loan covenant would result in the loan becoming repayable instantly.
Identify the ethical issues arising from the information provided and any safeguards you consider appropriate to address each issue. Identify audit risks in respect of the financial statements of Aphrodite: identify the risk, list the factors that have led you to identify that risk, and explain how you would respond to this risk during the audit.
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