Michael has drafted an audit plan for a new client. The client is Countrywide Capers, a party rental business. Countrywide Capers earns 80 percent of its revenue from renting out tents, tables, dishes, cutlery, napkins, and tablecloths. Michael’s plan shows that audit time is divided to reflect this revenue pattern (that is, 80 percent of the audit time is spent on the rental business and 20 percent of the time is spent on the retail business). Michael believes that the significance of the revenue activities should be the only driver of the audit plan because the client has no related parties and has a simple, effective corporate governance structure.
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What questions would you have for Michael before accepting his audit plan?
