Moira Manufacturing Ltd is a fast-growing business | My Assignment Tutor

Moira Manufacturing Ltd is a fast-growing business and is now your accounting firm’s largest audit client by far. During the past few years your firm has also provided various non-audit services for the client, including preparing the company’s tax returns and deciding on and implementing the new computer system for financial reporting.  Due to the need for funds to expand, the client has not paid its audit fees for the past two years. Identify and describe any relevant ethical standards that would be applicable to the above circumstances. SQ5.1 Ahmed Jaffar is the partner in charge of the audit of a leading manufacturing company, ACB Manufacturing Ltd. He is trying to assess inherent risk for the audit so as to develop an appropriate audit plan. The following independent situations, listed below, have come to his attention. For each independent situation: (i)                  Indicate whether inherent risk would increase or decrease, and why. (ii)                Identify the specific financial statement account(s) likely to be affected. Independent situationInherent risk (incr. or decr.) and whySpecific account(s) affected(a) Most of ACB’s profit comes from the sale of water tanks that it manufactures. Although it has a high selling price it is of such good quality that it has dominated the market for many years. A competitor has recently announced that they have developed a new raw material to produce an even better tank that they will sell for half the price that ACB charges.    (b) One of ACB’s wholesale clothing franchises has performed extraordinarily well, increasing its profit by 40% since the appointment of a new sales manager. It seems that the performance compensation system of bonuses based on sales (all made on credit) is working at boosting employee morale.      (c) ACB markets six different established products. Its sales, receipts and debt collection systems are well controlled. The terms of sales are clearly defined, with approximately 70 per cent of sales on 30-day account.          


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