Case Study Of BHP Billiton Manufacturing Company

Decent Essays
1. The first inherent risk of expanding their new third berth considered at a high level in the acquisition and payment cycle. The business made significant expansion of operations can increase a breakdown risk in controls and strain controls based on the ASA 315 Appendix 1 paragraph 4. Therefore, the control risk might be considered in high level. Therefore, it is important for the company to increase internal control on accounting estimate and fair value measurement. Based on the audit risk model, the planned detection risk will be low-level (Arens et al. 2013, p.234). Because the higher inherent risk related to the lower planned detection risk (Arens et al. 2013, p.234). Thus, this will impact on the evidence mix for the audit planning. …show more content…
The third formalised the Paris Agreement might exist inherent risk and considered as a low-level in the sales and collection cycle. The management might be underestimating the fossil fuels usage for reducing cost on the emission. Therefore, the control risk will consider high in this situation because the company have the ability to control their usage of fossil fuels and expect to future replacement of using fossil fuels. Thus, the planned detection risk will consider have a high level which based on the audit risk model (Arens et al. 2013, p.234). The evidence mix will impact on this case.
BHP Billiton is a large business which has low inherent risk and complex internal control in this situation, thus, the auditor need to apply the extensive test of controls and reply on the company’s internal control due to business have high control risk (Arens et al. 2013, p.297). Moreover, the auditor needs to cut the amount of testing on substantive tests of transaction and test of details of balance. Because it will save time and money to become more
…show more content…
The fourth, BHP Billiton announced new operation model and new dividend policy may have inherent risk and seem as a medium level in the sales and collection cycle. Under this circumstance, the new operation model, and new dividend policy might be given more pressure to the manager to make fraud on the financial statement for a strong balance sheet. Based on the company might have a lack of practice on the new operation model which will cause inefficient on their internal control. Therefore, under audit risk model, the planned detection risk will be regard as medium level (Arens et al. 2013, p.234). As a result, the evidence mix will influence the auditing

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