ExpertACCA · Question 16 · Planning and risk assessment
SECTION B - CONSTRUCTED RESPONSE
Company: Titan Forge Global
Year-end: 30 September 2026
You are the audit manager at GlobalAssure LLP. You are planning the audit of Titan Forge Global, a heavy manufacturing company that produces industrial machinery. The company has recently expanded its operations into South America, resulting in significant transactions in foreign currencies.
During the year, Titan Forge implemented a new, highly complex Enterprise Resource Planning (ERP) system to integrate its global supply chain. The implementation faced several delays and data migration issues.
Furthermore, Titan Forge offers a standard 3-year warranty on all machinery sold. Due to a design flaw in a new line of presses launched this year, there has been a 40% increase in warranty claims compared to the previous year. Management has kept the warranty provision at the same percentage of revenue as last year, arguing the flaw is a 'one-off' event.
Required:
(a) Identify and explain FIVE audit risks from the scenario above. (15 marks)
(b) For each of the risks identified in (a), recommend an appropriate auditor's response. (15 marks)
SECTION B - CONSTRUCTED RESPONSE
Company: Titan Forge Global
Year-end: 30 September 2026
You are the audit manager at GlobalAssure LLP. You are planning the audit of Titan Forge Global, a heavy manufacturing company that produces industrial machinery. The company has recently expanded its operations into South America, resulting in significant transactions in foreign currencies.
During the year, Titan Forge implemented a new, highly complex Enterprise Resource Planning (ERP) system to integrate its global supply chain. The implementation faced several delays and data migration issues.
Furthermore, Titan Forge offers a standard 3-year warranty on all machinery sold. Due to a design flaw in a new line of presses launched this year, there has been a 40% increase in warranty claims compared to the previous year. Management has kept the warranty provision at the same percentage of revenue as last year, arguing the flaw is a 'one-off' event.
Required:
(a) Identify and explain FIVE audit risks from the scenario above. (15 marks)
(b) For each of the risks identified in (a), recommend an appropriate auditor's response. (15 marks)
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