TASK 1

Critically evaluate the risk-based approach to external audit with particular reference to the audit of Home Retail Group plc.

Note:

You should give examples of how you might collect evidence and assess the degree of business risk(obtaining an understanding of the entity and its environment and assessing the risks of a material statement) in the 2011 audit of the company and factors affecting the company's ‘control environment'.

Task 2

Identify those features of Horne Retell Group pies results for 2012 — 2014 which might indicate to you as the external auditor that the company was facing going concern problemsNote: 

Use ratio to assess areas of audit risk analytically

Ratio examples:

Operating Profit margin ( % ), Operating Profit/ Total assets ( % ), Return on equity ( % ) EPS ( p. ), Interest cover ( times ), Gearing ratio ( % ),Current ratio ( : 1 ), Stock holding ( days ) Cash operating effic. ( % ), Free cash flow ( £M. )

Task 3

3. Identify any qualitative factors or information in the annual reports and accounts for Home Retail Group plc for 2013/ 14 , including the report of the audit committee, that you as the external auditor would consider that might suggest that the company would be able to continue in business for the foreseeable future.

Task 4

With reference to the Independent auditors' report of Home Retail Group plc and specifically the areas of particular audit focus identified by PwC discuss the factors which would influence you as the external auditor in forming an opinion on the financial statements of Home Retail Group plc for 2014.

Indicate briefly the form that your opinion might take including any emphasis of matters paragraph that you may consider making in relation to the appropriateness of the going concern basis.