Question

Scenario 3

Jupiter Mining Ore Limited is a major mining and exploration firm with operations in multiple galaxies. The company is looking to further expand its operations those solely within its core operations. The company’s total assets exceed $100 billion, liabilities of $45 billion, and annual sales close to $200 billion. The preferred auditor is Bad Eyesight Auditors.

Required: Consider the following scenarios independently to determine the type of risk, level of risk, and extent of audit work that may be necessary:

Due to changes in mining regulations and rules governing accounting for mining operations, Jupiter Mining Ore Limited had to significantly change the role and responsibilities of its internal audit teams, and internal audit processes during last year with some issues still unresolved.

• Type of Risk

• Level of Risk

• Expected Level of Audit Work

• Justification

Answer 1

In the present given scenario;

Type of Risk : Control Risk

Level of Risk : High

Estimated Level of Audit Work : Maximum

Justification : The given scenario is a control risk, one of the types of audit risk, as there is a mismanagement of the internal control system. The level of risk is high because the Company is generating high revenues and the assets too have exceed $100 Billion which is a signal that if proper careful internal measures and the associated internal risks are not controlled, the profit will be drastically wiped out. Therefore the work is also to the maximum extent since the recent changes in the mining rules & regulations and also due to the paradigm shift in the roles & responsibilities of the internal audit teams.

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