Question 1

SECTION B - CONSTRUCTED RESPONSE

Company: Titan Forge Global
Year-end: 30 September 2026

You are the audit manager at GlobalAssure LLP. You are planning the audit of Titan Forge Global, a heavy manufacturing company that produces industrial machinery. The company has recently expanded its operations into South America, resulting in significant transactions in foreign currencies.

During the year, Titan Forge implemented a new, highly complex Enterprise Resource Planning (ERP) system to integrate its global supply chain. The implementation faced several delays and data migration issues.

Furthermore, Titan Forge offers a standard 3-year warranty on all machinery sold. Due to a design flaw in a new line of presses launched this year, there has been a 40% increase in warranty claims compared to the previous year. Management has kept the warranty provision at the same percentage of revenue as last year, arguing the flaw is a 'one-off' event.

Required:
(a) Identify and explain FIVE audit risks from the scenario above. (15 marks)
(b) For each of the risks identified in (a), recommend an appropriate auditor's response. (15 marks)

Accepted Answer

Use a tabular format. Column 1: Identify the risk from the scenario and explain WHY it is a risk (what assertion/account is affected). Column 2: Provide a specific, actionable audit procedure to address that exact risk.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Identifying business risks (e.g., 'the company might lose customers due to the defective press') instead of audit risks ('the warranty provision is understated').

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 3

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