You are the auditor in charge of the audit of the municipality of Brockville, Ontario. Affectionately known as Brockvegas by locals, the municipality has a budget of approximately $500 million, and has had a balanced budget for the last three years. There about 10 people in the accounting office and the rest of the employees are operational, dealing with the supervision of road work, garbage collection and similar matters. Many services were outsourced, minimizing the need for employees. The municipality has a chief executive officer and a controller and reports to the council of elected representatives.

Required: For each of the following situations, state a preliminary conclusion for audit risk, inherent risk, controls risk and detection risk. Justify your conclusions. State any assumptions that are necessary to reach your conclusion. What is the impact of this risk assessment on the amount of evidence required?

		PRELIMINARY CONCLUSIONS AND JUSTIFICATION FOR AUDIT RISK, INHERENT RISK, CONTROL RISK, AND PLANNED DETECTION RISK. WHAT IS IMPACT ON LEVEL OF AUDIT EVIDENCE REQUIRED? (5 MARKS EACH)
1	This is the 10th year that your firm has served as auditors of the City. Your firm has a good understanding of the Citys business processes, which have not changed significantly over this time. In fact, the City is still using the same finance system as it did a decade ago! Finance team members have also remained stable, and the City has maintained consistent funding and taxation revenues.
2	The newspapers in Brockville are reporting a scandal regarding the Chief Executive Officer of the City, and a sordid love triangle between the CEO, the Citys Finance Manager, and the President of a private company recently awarded a significant amount of City contracts. The scandals are unproven at the time of the audit.
3	Year 12 of your firms audit relationship with the City. A new Finance Manager has been hired, who has embarked on a major digitization project which has transformed many of the Citys business processes. Physical documents have been entirely eliminated from the Citys operations in favour of electronic documents and e-signature verification.
4	Year 15 of your firms audit relationship with the City. The City is experiencing some financial hardship due to debt levels taken on for the transformation project. Management advises you that the City is barely meeting certain debt covenants, and that they have concerns whether the City could repay the debt if covenants were violated. The City is also experiencing large losses as tourism related revenues have declined, and operating expenses increased due to the COVID pandemic.