Auditing case . answer the case as much professional as you can. the other stuff is reference and information.

Planning Memo

Name

Institution

Introduction

International standards for auditing 260 require the auditor to communicate in an effective manner for the matters which relate to the audit to ones who are charged with the governance of the organization.

Business Risks

Introduction

This can be explained as the company exposure to factors which are likely to lower the profits of the company leading to failing. We have got different factors which could converge towards creating a business risk. At times the top leadership of the company create situations in which the company is exposed to great risk.

The business risks that MTC is facing comprises of the following:-

Effect of hit products

The results of the company success or failure are affected by the specific products and contents.

To be able to soften on this impact MTC has to create continuous hit products eg strengthening the development, fostering of content and enriching the lineup of products. Presence and absence of the hit products could affect the company’s financial condition and operating results.

Fluctuating quarterly operation results

In the business there is usually growth of sale in the third quarter due to Christmas and end year quarter. The company has to work on comparing up with introducing other products for other seasons where the seasonal fluctuation of operating results should continue.

Finance risk

This involves credit which is being extended to customers or the debt load. Fluctuation of interest could also affect the company.

Adjustment should be considered for the business plan which will be vital in avoiding the harm on cash flow leading to unexpected loss. Debt has to be kept at minimum and create the plan.

Competition risk

Though MTC could be aware of many competitors in the market it’s easy to miss out on offering what appeals to the customers.

In the case the company might become so comfortable with status quo where they are not looking for ways of making continuous improvement. Increase in competition combined with the unwillingness to change could result to loss of the customers.

Audit Risk

Security of funds

Due to nature of the funds there is a higher possibility of loss through misappropriation and theft. For the auditing it has to test the adequacy of the internal controls which governs the safety of the funds.

Management override

In each organization the senior managers could be in the position of overriding routine daily financial controls. All audits should take this as a risk and adapt audit procedure accordingly.

Fraud

According to ISA 200 auditor will maintain professional skepticism in the entire audit thus recognizing possibility of material misstatement as a result of fraud by notwithstanding the past experiences of the auditor for honesty and integrity in entity management and ones charged with governance.

Materiality

In specific circumstances of MTC funds we do believe particular transactions, account balances or the disclosures of the misstatement of less than the materiality for financial statements are expected to influence decisions of the users, we have to determine performance materiality levels being applied to particular transactions.

Reference

Johnstone K.,Bedard J.C.,(2003). “Risk Management in Client Acceptance Decisions”, The Accounting Review, V. 78, Issue 4.

Berberich G.,(2005). The Effects of Audit Methodology and Audit Experience on the Development of Auditors 'Knowledge of the Clients Business, University of Waterloo,NR.

Neal T.L. & Riley R.R.(2004). Auditor Industry Specialist Research Design. Auditing: A journal of Practice &Theory