Essay in Business & Finance

Essay in Business & Finance

1. (i)  Sleek introduced a new accounting system in January 2016 following a brief testing phase. Sleek has faced several issues with the new system and the system has not been consistently operational since its implementation. This has resulted in a number of general ledger accounts at year end having to be based on estimates, as large portions of actual data relating to these balances had been lost.
2. (ii)  As a result of pressures to reduce costs, the directors of Sleek Ltd made the decision to retrench its credit department responsible for debt collection in August 2015. The debtors’ turnover is 3.2 times.
3. (iii)  Due to increased competitive pressures, Sleek Ltd has recently moved the manufacturing of some of its clothing lines out of Melbourne into regional areas. While Sleek Ltd saves around 20% in costs, the manufacturing process takes longer and on several occasions late delivery has resulted in lost sales.

Required: 

Explain the impact of each of these separate issues on your assessment of audit risk (specify the component of audit risk), the materiality level and the audit strategy that would be adopted.