[LOKULE]

you are the manager responsible for prospective new clients and you have visited bolington plc publishers which publishes a small range of fiction books. The chief executive is Daniel Dunbar and he has asked your firm to make a proposal for the company’s audit and other services

MK publishers have heavily borrowed from its bank and a major repayment of the loan is due shortly. The company is already on its overdraft limit as a result of the advances to the new authors. Daniel is in negotiation with a foreign bank for further finance

Many of the company’s books are printed in a country with an exchange rate which is very favourable to Uganda. The financial press have lately suggested that this rate may change in the near future

The company recently purchased a very large and complex computer system to control all its affairs. The IT manager has just left and gone to Australia

The company has no formal management accounting system but the new IT system, when it is working, will supply this

Daniel wishes to maintain the company’s high share price so that he can use the shares to take over a competitor

The company recently took over an ailing printing firm. Daniel reckons he can turn it around

Discussion

Identify and describe the principal business risks relating to bolington publishers

Justify an appropriate audit strategy for the first audit of bolington publishers

Suggest some procedures that bolington publishers could implement immediately to manage the risks

What effect might these risks have on the financial statements

[Author]

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