MAA303 Audit and Assurance - Chapter 3: Risk assessment I

3.23 Risk assessment

Melinda has drafted an audit plan for a new client. The client is Jimmy’s Cakes, a café and catering business. Jimmy’s Cakes earns 60 per cent of its revenue from the café (food and beverage sales for sit-down customers and take-away) and 40 per cent from catering. Melinda’s plan shows that audit time is divided to reflect this revenue pattern (that is, 60 per cent of the audit time is spent on the café business and 40 per cent of the time is spent on the catering business). Melinda believes that the significance of the revenue activities should be the only driver of the audit plan because the client has no related parties and a simple, effective corporate governance structure.

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What questions would you have for Melinda before accepting her audit plan?