Question

Express Comfy Co. operates an airline business since few years ago. The company’s year-end is 31 December of each year. You are the Engagement partner in charge and you have started planning the audit. You are setting a meeting with the client to identify any relevant audit risks. From your meeting you came across the following: In order to expand their flight network, Express Comfy Co will need to acquire more aeroplanes; they have placed orders for another six planes at an estimated total cost of QR70 millions and the company’s CEO has requested from the procurement director to handle this matter. Accordingly, the Procurement Director assigned Mr. Hamad ALKaaby to handle this transaction. Due to his prolonged experience and the trust the company is having in Mr Hamad, the Procurement Director has delegated all power and authority to Mr Hamad with no need to return back to him during the processing of this transaction. Mr. Hamad is now the one communicating with the vendors (suppliers), preparing the invoices, following up on things, and he is the one to check the fleet of planes when they arrive to ensure they meet the quality standards set by the company. 3 In addition, the company has spent an estimated QR50 millions on refurbishing (restoring) their existing planes. In order to fund the expansion, the Finance Department has applied for a loan of QR80 millions. It has yet to hear from the bank as to whether it will lend them the money. Notably, the CFO of the company has assigned four accountants from the finance department to handle the processing of this loan request. Four accountants have been assigned due to the fact that Ms. Reem Almansoury, the Chief Internal Auditor of the company, is currently on vacation and one of these four accountants has been asked to cover for her during her absence. The company receives bookings from travel agents as well as from individuals directly via their website. The travel agents are given a 90-day credit period to pay Express Comfy Co, however, due to difficult trading conditions a number of the receivables (travel agents) are struggling to pay. Furthermore, and due to the complexity of the online transactions, Engineer Ahmed El-Sabbahy has been assigned to handle these transactions, who in turn is responsible for all the online transactions with no other control procedures to protect the company from any sort of errors and/or fraud. Worth noting too, the website was launched few months ago and has consistently encountered difficulties with customer complaints that tickets have been booked and paid for online but Express Comfy Co has no documented record of them and hence has sold the seat to another customer. For this reason, the company is currently in communication with an external expert IT company to look into this issue.

2. Outline the members of the audit team who are expected to audit the records of East Comfy highlighting the role played by each of these members.

3. Outline the steps involved in the audit cycle as well as the audit strategy and relate these to East Comfy.

Answer 1