Subject Code : BUSN3048
Assessment Task:


Task A – Understand the Client
1. Assess business risk Research Inghams to gain an understanding of the client.  You can use Internet research (e.g. business and financial media articles), IBIS World Industry Reports and the other information in the annual reports.  It is essential to reference all sources with in-text referencing and a reference list.   From your research, you need to: 1.1. Provide a brief summary of the client.  (5 marks) 1.2. Identify and assess business risks for Inghams related to industry, regulatory and other external factors. (8 marks) 1.3. Identify and assess business risks for Inghams related to the nature of the entity. (9 marks) 1.4. Identify any areas of the audit where you may need to use the work of others (3 marks). 
2. Perform a preliminary analytical review Perform preliminary analytical procedures on Inghams’ financial statements (note: source the 2018 & 2017 figures from the 2018 report, and the 2016 figures from the 2017 report).  You need to: 
2.1. Calculate the following eight financial ratios for 2018, 2017 and 2016.  For each ratio, show the numbers used in the formula as well as your final answer:  
2.1.1 Gross profit ratio (profitability) 
2.1.2 Net profit ratio (profitability) 
2.1.3 Days in receivables (activity) 
2.1.4 Current ratio (liquidity) 
2.1.5 Quick asset ratio (liquidity) 
2.1.6 Operating cash flow ratio (liquidity) 
2.1.7 Times interest earned (solvency) 2.1.8 Debt to equity ratio (solvency) 
2.2  Perform common-size (vertical) analysis on the Income Statement for 2017 and 2018.  
2.3 Interpret the results of your ratio and common-size (vertical) analysis in parts 2.1 and 2.2 above, focusing on the audit implications.    
 
Task B – Assess Inherent Risk and Control Risk 
3. Assess inherent risk Use the research and data you have prepared in Task 1 to assist you in this question. 
3.1. Discuss the risk of fraud in the audit of Inghams.  
3.2. Discuss any risk factors for the going concern assumption in the audit of Inghams. 
3.3. Discuss any risk factors arising from related parties in the audit of Inghams. 
3.4. Identify six inherent risks for Inghams at the assertion level.  For each of these risks, explain which key account(s) would be affected, the key assertion(s) at risk for each account, and briefly explain why these accounts/assertions are affected. 
3.5. Provide an overall assessment of the inherent risk level for Inghams (high, medium, or low) and briefly justify your assessment. 
4. Assess control risk 
4.1. Describe factors that contribute to internal control for Inghams at the entity level, based on the information provided in the annual reports. 
4.2. Provide an overall assessment of the control risk level for Inghams (high, medium, or low) and briefly justify your assessment. 
 
Task C – Plan the Audit Strategy and Set Materiality 
5. Plan your overall audit strategy 
5.1. Describe how your assessment of inherent risk (from 3.5) and control risk (from 4.2) relates to the overall audit risk, the planned detection risk, and the amount of evidence required to be gathered. 
5.2. Describe the relevant audit strategy to address Inghams’ risk profile. 
6. Set preliminary overall materiality 
6.1. Choose a relevant base and justify your choice. 
6.2. Consider a relevant percentage to apply to your base, select a preliminary overall materiality figure, and justify your choice.
6.3. Relate your overall materiality figure to your risk assessment from part 5.1

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