问题详情

(a)Defineauditriskandthecomponentsofauditrisk.(5marks)
YouareanauditsupervisorofAmethyst&Coandarecurrentlyplanningtheauditofyourclient,AquamarineCo(Aquamarine)whichmanufactureselevators.Itsyearendis31July2016andtheforecastprofitbeforetaxis$15·2million.
Thecompanyundertakescontinuousproductioninitsfactory,thereforeattheyearenditisanticipatedthatworkinprogresswillbeapproximately$950,000.Inordertoimprovethemanufacturingprocess,AquamarineplacedanorderinAprilfor$720,000ofnewplantandmachinery;onethirdofthisorderwasreceivedinMaywiththeremainderexpectedtobedeliveredbythesupplierinlateJulyorearlyAugust.
Atthebeginningoftheyear,Aquamarinepurchasedapatentfor$1·3millionwhichgivesthemtheexclusiverighttomanufacturespecialisedelevatorequipmentforfiveyears.Inordertofinancethispurchase,Aquamarineborrowed$1·2millionfromthebankwhichisrepayableoverfiveyears.
InJanuary2016Aquamarineoutsourceditspayrollprocessingtoanexternalserviceorganisation,CoralPayrollsCo(Coral).CoralhandlesallelementsofthepayrollcycleandsendsmonthlyreportstoAquamarinedetailingthepayrollcosts.Aquamarineranitsownpayrolluntil31December2015,atwhichpointtherecordsweretransferredovertoCoral.
Thecompanyhasapolicyofrevaluinglandandbuildingsandthefinancedirectorhasannouncedthatalllandandbuildingswillberevaluedattheyearend.DuringareviewofthemanagementaccountsforthemonthofMay2016,youhavenoticedthatreceivableshaveincreasedsignificantlyonthepreviousyearendandagainstMay2015.
Thefinancedirectorhasinformedyouthatthecompanyisplanningtomakeapproximately65employeesredundantaftertheyearend.Nodecisionhasbeenmadeastowhenthiswillbeannounced,butitislikelytobepriortotheyearend.
Required:
(b)DescribeSIXauditrisks,andexplaintheauditor’sresponsetoeachrisk,inplanningtheauditofAquamarineCo.(12marks)
(c)ExplaintheadditionalfactorsAmethyst&CoshouldconsiderduringtheauditinrelationtoAquamarineCo’suseofthepayrollserviceorganisation.(3marks)


请帮忙给出正确答案和分析，谢谢！