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AUDIT TEST 1 AUDIT TEST Audit test Name of the University

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Added on  2020-05-11

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In case of Natural Supplements Nelson Limited (NSNL), it can be seen that there are some of the major factors that are the potential of acceptable audit risk of the company. In case of Natural Supplements Nelson Limited (NSNL), it can be seen that there are some of the major factors that are the potential of acceptable audit risk of the company.

AUDIT TEST 1 AUDIT TEST Audit test Name of the University

   Added on 2020-05-11

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Running head: AUDIT TESTAudit testName of the studentName of the universityAuthor note
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1AUDIT TEST Table of ContentsPart A.........................................................................................................................................2Answer to Question (a)..........................................................................................................2Answer to Question (b)..........................................................................................................2Answer to Question (c)..........................................................................................................3Answer to Question (d)..........................................................................................................4Answer to Question (e)..........................................................................................................7Part B..........................................................................................................................................9Answer to Question (a)..........................................................................................................9Answer to Question (b)..........................................................................................................9Answer to Question (c)........................................................................................................10References................................................................................................................................11
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2AUDIT TEST Part AAnswer to Question (a)Acceptable audit risk is one of the major factors in the auditing process of thecompanies. Acceptable audit risks refer to the particular risks or risks factors that the auditorswillingly take at the time of providing unqualified audit opinions (Botez, 2015). With theincrease in acceptable audit risks, the auditors of the companies become willing to accepthigher detection risks. In case of Natural Supplements Nelson Limited (NSNL), it can be seenthat there are some of the major factors that are the potential of acceptable audit risk of thecompany. In this context, it needs to be mentioned that it is the responsibility of the auditorsof the companies to assess the audit risks of their business. For this reason, the auditors arerequired to consider each of the potential audit risks incidents (Demartini & Trucco, 2016). Itcan be seen that there is a rise in the dollar price of New Zealand. Due to this, there can be achange in the values of assets and liabilities for NSNL. Another major factor is the approvalof sales order in the absence of sales director, Thomas. There is a possibility that the salesvolumes can be manipulated in the absence of Thomas. This is a major risk factor. It can beseen that in the absence of hedging process, there is a risk of exchange rate gain and loss(Guénin-Paracini, Malsch & Paillé, 2014). Many other factors are of medium risk factors.Thus, based on the above discussion, it can be seen that the level of acceptable audit risk isneither low nor high as it is medium.Answer to Question (b)Inherent and control risks are two of the major audit risks for the businessorganizations. Inherent risks are considered as the risks that are natural or intrinsic in thebusiness organizations (Ruhnke & Schmidt, 2014). However, control risks arise due to themalfunction in the internal controls of the companies. In case of NSNL, it can be seen that in
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3AUDIT TEST the presence of the sales director, some other people in the organization record these salesrecords (Vijayakumar & Nagaraja, 2012). This process opens the chance for manipulation inthe sales figure of the company and it can lead to material misstatements. As it is due to thelack of internal control, this risk will be classified as control risks. It can be seen that theinventory department of NSNL is understaffed and this aspect creates pressure on theemployees of this department. Due to this, there can be mistakes from the end of employeesin the values regarding stocks. This aspect can lead to material misstatements. From theprovided information, it can be seen that 50% of the total inventory includes overseassuppliers. This particular aspect needs to be mentioned in the financial reports of thecompany (Blankley, Hurtt & MacGregor, 2012). In case, this particular amount is notrecorded in the financial reports, it will be an aspect of material misstatement. This risk isinherent with the accounting system as this is associated with the accounting system of thecompany. This risk will be classified as control risks.Answer to Question (c)As per the risks assessments, the record of sales in the absence of sales directors canbe regarded as of high risks. In case, any major sales figure are not taken into consideration,the financial position of the company will be majorly affected. The risk of understaffed ininventory department is a medium risks for the company as the company will be able to carryon the works of inventory with limited number of employees (Arens, Elder & Mark, 2012).The information of 50% foreign suppliers is of low risks. In case this is not mentioned in thefinancial statements, it will not put any major effect on the financial statements of thecompany.
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