Auditing Briscoe Group Ltd: Business Activities, Industry Risks, Ethical Issues, and More

Business Activities and Regulatory Issues

a. What are the business activities of Briscoe Group Ltd, and primary regulatory issues in regards to preparation of financial statements that you will need to understand to carry out a successful audit? 

Using information you obtained about Briscoe Group Ltd, and the industry they are in, come to an informed view as to the ‘business’ and ‘industry’ risk for this prospective client. Be sure to set out the basis (reasons) for your decision.

b. Evaluate specific ethical issues that could potentially arise from performing a statutory audit on these financial statements. How should those issues be addressed? 

Refer to the Professional Code of Ethics as appropriate and the role of the Financial Markets Authority (FMA), and legislation.

c. What are the key accounting issues from your review of other sections in the annual reports and financial statements, including the accounting policies? Based on your understanding of the business and the accounting issues, what specialist skills and competencies will you need to carry out the audit?

d. Carry out a preliminary analytical review (using ratios) of the financial statements of Briscoe Group Ltd that would be appropriate for the client acceptance stage of the audit. Explain the reason for choosing selected ratios, what you find and, how the results would influence your decision to accept Briscoe Group Ltd as one of your clients.

e. Auditors' Legal Liability: Identify specific parties who may rely on the work of the auditor or audit firm. Also identify what remedies are available to those specific parties should they be dissatisfied with the standard of the audit work. Describe some conditions (with reference to existing legal precedent) in which they might be successful in any action taken.

f. Based on the 'business risk' and 'industry risk' identified for Briscoe Group Ltd , what assertions over account balances and other disclosures in the financial statements will these risks impact and how? How will you ensure that the assertions are materially OK?

g. Using your judgement, identify a 'base' and select a materiality level for Briscoe Group Ltd.’s balance sheet. Justify your decision. Allocate that

amount to the balance sheet accounts in proportion to their $ size and assess the results. Consider what would have occurred if you had chosen a larger or a smaller 'materiality' amount, or ' if you had allocated them differently.

h. The following question on Sampling is developed for teaching purposes and bears no relationship to events in any known organization, nor does it apply to Briscoe Group Ltd.