Given the fact that CovePoint (Pty) Ltd operates out of 10 major centres country wide, I would asses how big my audit team will have to be. Based on the size, nature and extent of the entity, I would asses whether my firm has the necessary knowledge, skills and experience to deliver a quality service.
Based on the notes I have made about understanding the entity and its environment, I would carefully assess how the following matters would effect my overall audit strategy:
1. Since the financial statements are internally generated, I would assess whether the financial statements can be trusted due to the fact neither the financial manager, nor the financial director has any up to date knowledge on the International Financial Reporting Standards…show more content… Inspect prior years' working papers and enquire from management as to what significant events could have led to the liquidity problems. I would inspect the terms loan agreement and determine if it would be a conflict of interest for Avid Investors (Pty) Ltd to invest in a company where their employees are on the board of directors. The above mentioned procedures are performed to assess the risk of material misstatement present in the financial statement. This can especially influence whether the terms of the loan are fair or not.
4.1. I would investigate the extent of the fraud the company - how many department are involved, the effectiveness of the procedures in place to avoid the fraud, how many people were involved and what significant circumstances could have lead to fraud. The above mentioned should be done to determine the extent of the audit procedures that performed on accounts like inventory, cost of sales, bank, sales, ect.
4.2. The fact that the board members of Avid Investors (Pty) Ltd used their influence to cut the audit committee significantly increases the risk of material misstatement and malpractice. It significantly increases the audit
