Mars electronics is a new company for the Asia supplier, there is a high detection risk of audit

because the company is not familiar with the accounting policies, ledger accounts and balances of
transactions.
Auditor response: Mars electronics should ensure the supplier that its team is equipped with
adequate experience and it will get understanding of any material misstatement during the supply of
goods
2. The goods are in transit of two weeks. There will be risk that the inventory payables, cut off
inventory and purchases may not give accurate figure.at the year end only the goods received Will
be included in warehouse and inventory accounts/ balances.
Response: audit team will require a detail information of Cut off inventory or goods in transit of
supply. It willl sim to ensure that cut off is complete and açcurate.
3. There is a high risk that some receiveables will be over valued as the company has concern of
customer creditworthiness. As a result of bonus scheme, receivables will show over valued or over
stated figures. Because it is possible that some customers that sign up for the contract may not exist.
Response
Customers should be varified by the Audit team, wether they exist or it is a fraud or employees
seeking for high bonuses. It will also ensure valid amounts due to customers.
4.
There is a high risk that property plant and equipment will be overvalued if it is not in compliance
with IAS 16 rule of plant and property or disclosures may not be made in financial statements.
Response; discussion with the manager that for the undertaking of revaluation of assets as a whole
and the revaluation should be done by the experts.