Your audit client is "Novelty Necklaces", a manufacturer of necklaces with beads shaped like mythical creatures (e.g. unicorns). In relation to the completeness of accounts payable, you have assessed inherent risk (IR) as high and control risk (CR) as low.

1/ From your assessment of the business risk of Novelty Necklaces, provide one example of information that would support your assessment of high IR for the completeness of accounts payable and one example of information that would lead to an assessment of low IR for the completeness of accounts payable. (2 marks)

2/ Imagine and provide an example of a control activity of Novelty Necklaces that would support a low assessment of CR and state how you would test this control. (2 marks)

3/ Discuss the appropriate determination of detection risk (DR) and the consequent nature, timing and extent of audit procedures. (2 marks)

4/ After conducting the audit your working papers are reviewed by another partner in your firm. They make the following comment: "I agree you did the level of testing you planned.But we still might lose in court if we get sued". State and briefly define which element of the audit expectations gap is most likely being referred to. (1.5 marks)