1. Gain an understanding of the nature of the entity and its industry and then identify
key business risks. After this is completed, assess where the risks of material misstatements could be in the financial report. Consider the factors affecting both
Inherent Risk and Control Risk. Finally, apply the Audit Risk Model [AR = f (IR,
CR, DR)] to the selected company. Which risk rating would you apply (Low, Medium
or High) to the company’s inherent risk assessment and control risk assessment?
How does this affect your assessment of Detection Risk and Audit Risk?
2. Perform analytical procedures of the Statement of Financial Position and of Financial
Performance over the last three years using appropriate ratios and/or metrics. Select
four key ratios and provide a brief explanation in the report. This should be
presented in a table format.
3. Discuss with your group members which account balances are considered “material”.
Explain how you calculated materiality for planning purposes and provide appropriate
justification for your decision-making.