You have just been appointed as a junior Audit Partner in Gripe Partners, an audit firm.Gripe Partners is in reality a sole practitioner, Mr Gripe, who has been auditing businesses in your suburb for 20 years. He is considered by locals to be a very nice man with a strong reputation for honesty.In late April, the firm is approached by Mr Boondoggle, the Chairman of the Board of Giant Corp Ltd (GC) a small manufacturing business, to conduct the audit of GC. Mr Boondoggle explains that the previous auditor had died, and they are looking for a replacement auditor. Mr Gripe asks you to undertake the preliminary review.

As part of your review of GC you undertake enquiries of businessmen in the neighbourhood. There is nothing directly adverse known about GC, and Mr Boondoggle is considered to be a very astute businessman. However, one person whom you know who worked with Mr Boondoggle previously, had a short private conversation with you. From this conversation it becomes clear than Mr Boondoggle micromanages, is very driven, and will not accept suggestions counter to his views. In fact, there was a feeling within the Accounting Department of GC that the accounts had to satisfy Mr Boondoggle regardless of the true situation.On behalf of Mr Gripe, you approach Mr Boondoggle to obtain a letter of authority to the previous auditor to discuss the audit history with you. Mr Boondoggle explains that he used James Quick Auditors. You note that James Quick Auditors was a sole proprietor, and on his death his estate destroyed all confidential documents. On being told this, Mr Gripe says "We can much better job than him, I will accept the audit!"

Analyse with explanations the above ratios, and indicate, with reasons, which balances and transaction cycles the above information will cause you to concentrate your audit activities on.

Mr Gripe asks you to come into his office so that he can plan the audit of GC with you. He says you should principally undertake to prove the assets listed in the Balance Sheet. If you cannot, then you should ask Mr Boondoggle for guidance. You ask about controls and Mr Gripe replies, 'We do not have to consider controls. No one has ever sued an auditor for failing to point out poor controls.'