You are a part of the team responsible for planning the Land & Homes Group (ASX code – LHM), a property development company, audit engagement for 2020. You are required to gather relevant background information and prepare a report for a meeting with your audit seniors. Assume that this is the first time that the audit will be conducted by your audit firm for this client.
Your report must address the following issues:
(1) What are the areas in which LHM conducts its operations?
(2) Are there any events or conditions that may cast significant doubt on the LHM’s ability to continue as a going concern? Explain. Your answer should be supported by at least three factors.
(3) What do you consider to be the three major business risks associated with the current year’s audit? Explain.
(4) Based on your risk analysis and understanding of LHM and its environment, list and explain three accounts that could be at risk of material misstatements. You also need to identify the key assertion at risk for each identified account.
(5) Identify an appropriate base and set planning materiality for LHM. Explain why you have chosen this base and the percentage you have used.