You are the audit senior responsible for the audit of Anglers Limited. You are currently planning the audit for the year ended 31 December 2014. During your initial planning meeting held with the financial controller, he told you of the following changes in the company's operations.
1) Due to the financial controller's workload the company has employed a treasurer. The financial controller is excited about the appointment. In the two months the treasurer has been with the company he has generated a small profit for the company through foreign-exchange transactions in yen.
2) To help achieve the budgeted sales for the year, Anglers is about to introduce bonuses for its sales staff. The bonuses will be an increasing percentage of the gross sales made, by each salesperson, above certain monthly targets.
3) The managing director has returned from the USA, where he signed a contract to import a line of clothing that has become the latest fashion fad in the USA. The company has not previously been engaged in the clothing industry.
Required:
For each of the scenarios above:
1. Identify if and how inherent or control risk is affected.
2. Explain how that will impact on audit risk.
3. Explain how detection risk will be affected in response to (b).