Areas of Heightened Audit Risk Assignment Example | Topics and Well Written Essays - 1500 words

Areas of Heightened study Risk - Assignment ExampleIn itself, this reduction of trade payables by 7,352,000 seems hooey and as such, an celestial sphere of heightened audit risk.This understatement could be associated with either a complete omission of some liabilities from the pecuniary statements and/or enter at a lower amount. This act would portray that Havelock Europa Company as healthier and less barbaric since the omission of some expenses that argon not yet paid lowers the debt and leads to an overstatement of incomes. From the financial statements of the Havelock Europa Company, the understatement could have been caused by the omission of contingent liability because, according to its policy, it considers contingent liabilities only when it becomes probable that it will have to correct payments under the guarantee (Havelock Europa Plc., 2013, p. 93). The next probable cause for this fall could be the omission of unearned revenues that wind from prepayments from custom ers for services and goods not provided. Finally, the understatement could be as a result of Havelock Europa Companys fraudulent financial reporting scheme.The Public Company Accounting Oversight Board (2014) states that related party proceeding, including those between a company and its executives, is a critical area as it has historically been characterised by increased risk of material misstatement. Therefore, this report also considers the proceedings between Havelock Europa Company and its executives and related parties risky. These transactions are prone to manipulations and are used to understate liabilities or overstate assets. This report is concerned with the decrease in the amount from transactions with the management and group companies to 877,000 in 2013 from 914,000 in 2012 and 1,377,000 in 2013 from 2,045,000 in 2012 respectively (Havelock Europa Plc, 2013, p. 94). As noted by Colby (2010), these related party transactions could be improper and arise due to sale and purchase transactions between undisclosed affiliates.