Whirland Chemical Company
Josh Crowder 103915953 70-360
Whirland Chemical Company
There are a number of factors with Whirland Chemical Company that raise concern and increase the audit risk of this company. We will go over the major concerns one by one, and then determine the level of audit risk we are willing to accept on this engagement.
* a) b)
* First of all, we are auditing Whirland for the first time.
Because this is the first time we are auditing Whirland, a lot of research has to be done on the operations of the company. We need to have discussions with their previous audit firm, look over the working papers of these audits, get familiar with the organisational culture, review any documentation Whirland has regarding their internal controls. A significant amount of work has to be done to become familiar with the organisation.
* Dispute with previous auditor concerning inventory valuation and timing of sales, which could raise some concern as to whether or not there will be issues with erroneous journal entries in the current year
A lot of communication should be done with management as well as other accounting personnel at Whirland to determine what the result of these transactions were, and if they were recorded properly in the end. We will also have to discuss these issues with the previous audit firm, as management may not be willing to cooperate, given their history.
* Somehow Whirland has managed to be highly successful in the past two decades, regardless of the fact that the rest of the industry was suffering hard times. Typically, if an industry overall is struggling, most companies will be travelling in the same direction. They could possibly be slowing down much slower than the other companies in the industry but they do not usually have such high success in these times.
This is where professional skepticism will have to be in play. More testing should be done to look deeper into transactions and accounts such as
Whirland Chemical Company
There are a number of factors with Whirland Chemical Company that raise concern and increase the audit risk of this company. We will go over the major concerns one by one, and then determine the level of audit risk we are willing to accept on this engagement.
* a) b)
* First of all, we are auditing Whirland for the first time.
Because this is the first time we are auditing Whirland, a lot of research has to be done on the operations of the company. We need to have discussions with their previous audit firm, look over the working papers of these audits, get familiar with the organisational culture, review any documentation Whirland has regarding their internal controls. A significant amount of work has to be done to become familiar with the organisation.
* Dispute with previous auditor concerning inventory valuation and timing of sales, which could raise some concern as to whether or not there will be issues with erroneous journal entries in the current year
A lot of communication should be done with management as well as other accounting personnel at Whirland to determine what the result of these transactions were, and if they were recorded properly in the end. We will also have to discuss these issues with the previous audit firm, as management may not be willing to cooperate, given their history.
* Somehow Whirland has managed to be highly successful in the past two decades, regardless of the fact that the rest of the industry was suffering hard times. Typically, if an industry overall is struggling, most companies will be travelling in the same direction. They could possibly be slowing down much slower than the other companies in the industry but they do not usually have such high success in these times.
This is where professional skepticism will have to be in play. More testing should be done to look deeper into transactions and accounts such as