Question

Question two Mukwa is a privately owned business that sells medical product and devices to hospitals, clinics and the public. Certain changes have occurred in Mukwa during the year undergoing the audit. The auditor needs to evaluate the effect these changes have on audit risk and procedures.. Client changes: 1. An internal audit department headed by the finance director has been established. 2. A new inventory control system has been installed that reduces the access of unauthorized parties. 3. Inexperienced accounting personnel were hired in the accounting department. 4. Excess cash was used to purchase complex derivative securities. Using the components presented in the following table, evaluate the effect that these changes have on audit risk and procedures. (10 marks) No Po Auditor Type of audit risk Possible effect on the audit plan Auditors response to reduce risk RmA - AR

Auditing

Answer 1

NO	Type of Audit Risk	Possible effect on Audit Plan	Auditor response to reduce Risk
1	control risk	Change in Audit Plan and first Verify Internal Audit Report	-
2	detection risk	First to Understand the new system and then Plan New Audit Plan	arrange training session
3	control risk	Verify Vouchers
4	inherent risk	Control on Fund Management