Case Study: Spring 2015
You will be allocated a company quoted on the Alternative Investment Market (AIM) on the UK stock exchange. You should obtain, or download a copy of, the company’s last annual report containing audited financial statements.
- From the financial statements, the management commentary in the annual report and other sources, and using appropriate auditing procedures, identify THREE areas of heightened audit risk relating to the audit of this company this year. Explain in detail, using some quantitative analysis, why you consider these to be areas of increased audit risk. (50%)
- In relation to ONE of the areas selected in Part A identify in detail, and explain the reasons for, FIVE substantive audit procedures you would carry out in attempting to reduce audit risk to an acceptably low level. (50%)
You are advised to allocate the word count equally between Parts A and B. Workings for any computations carried out in relation to the assignment should be included as an Appendix and need not be included in the word count.
Questions to consider
- What does the company do and where does it do it?
Do the financial statements indicate any anomalies requiring further investigation?
Are there any ethical issues affecting this audit?
Are there any recent changes in the economy, the industry, or the organisation creating risks?
Are there any recent changes in accounting regulation affecting this company for this year?
What are the key problematic accounting areas for this company?