TASK 1
Critically evaluate the risk-based approach to external audit with particular reference to the audit of Home Retail Group plc.
Note:
You should give examples of how you might collect evidence and assess the degree of business risk(obtaining an understanding of the entity and its environment and assessing the risks of a material statement) in the 2011 audit of the company and factors affecting the company's ‘control environment'.
Task 2
Identify those features of Home Retail Group plc's results fir 2009-2011 which might indicate to you as the external auditor that the company was facing going concern problems.
Note:
Use ratio to assess areas of audit risk analytically
Ratio examples:
Operating Profit margin ( % ), Operating Profit/ Total assets ( % ), Return on equity ( % ) EPS ( p. ), Interest cover ( times ), Gearing ratio ( % ),Current ratio ( : 1 ), Stock holding ( days ) Cash operating effic. ( % ), Free cash flow ( £M. )
Task 3
Identify any qualitative factors or information in the annual reports and accounts for Home Retail Group plc for 2011, including the report if the audit committee, that you as the external auditor would consider that might suggest that the company would be able to continue in business for the foreseeable future.
Note: Report of the audit committee e.g Movement on share, londonstockexchange.com
Task 4
Briefly outline the requirements of the UK version of ISA 700/ 750/ 706 and discuss the factors which would influence you as the external auditor in forming an opinion on the financial statements of Home Retail Group plc for 2011.