You have been assigned to the audit of inventory for a private company that owns and operates a chain of retail jewelers. The company’s sales revenue has grown by 300% in the last two years, primarily by acquisitions. Because the company has grown through acquisition, the company has not yet brought two acquired companies (representing 35% of sales) under the company’s inventory system. As a result, the company is currently operating with three different inventory control systems.
What are your concerns about this client, and how would you address these concerns? Discuss this in terms of the Audit Risk Model.