Question 1 - Part a (i)

In this lesson

1. 0:00 Setting materiality and planning the answer
2. 0:44 Understanding the client background and structure
3. 3:03 Identifying audit risks from opening information
4. 7:38 Payroll control weaknesses and outsourcing risks
5. 11:48 Joint arrangement accounting and intangible asset concerns
6. 16:03 Historic boat valuation and classification issues
7. 19:18 Dockyard damage, impairment and insurance receivable
8. 23:01 Analysing financial trends and opening balances risk

About this lesson

You'll discover the practical strategy of working backwards from marks to determine how many risks to discuss (typically 5–6 well-developed risks rather than many superficial ones), and why thorough analysis of each risk—explaining accounting issues, relating them to the scenario, and quantifying potential impacts—is essential for earning professional marks alongside technical marks. The lesson walks you through a realistic audit scenario involving a boat-building company, demonstrating how to extract audit risks from client information, financial statements, and exhibits. You'll see how to identify key risk areas including payroll control weaknesses and outsourcing arrangements, joint venture accounting treatment, recognition of donated assets without a specific accounting standard, impairment of damaged property, and the implications of being a new audit client. Each risk is examined in depth, showing you how to connect the facts to relevant accounting standards (such as IFRS 11, IAS 38, and IAS 16) and explain why the client's accounting treatment may be incorrect. You'll also learn the importance of calculating materiality first, setting up briefing notes for communication marks, and using financial analysis—such as comparing expense movements to revenue growth—to support your risk identification. The lesson emphasises professional judgment in prioritisation: knowing which potential issues warrant discussion based on available information and materiality, and which should be noted but not developed without sufficient evidence or figures.

Duration: 27m