The following scenario relates to questions 82 - 86 Your audit firm Cal & Co has just gained a new audit client, Tirrol Co, in a tender in which Cal & Co offered competitively low audit fees. You are the manager in charge of planning the audit work. Tirrol Co's year end is 30 June 20X9 with a scheduled date to complete the audit of 15 August 20X9. The date now is 3 June 20X9. Tirrol Co provides repair services to motor vehicles from 25 different locations. All inventory, sales and purchasing systems are computerised, with each location maintaining its own computer system. The software in each location is the same because the programs were written specifically for Tirrol Co by a reputable software house. Data from each location is amalgamated on a monthly basis at Tirrol Co's head office to produce management and financial statements. You are currently planning your audit approach for Tirrol Co. One option being considered is to rewrite Cal & Co's audit software to interrogate the computerised inventory systems in each location of Tirrol Co (except for head office) as part of inventory valuation testing. The testing will need to take place while the system is live. You are aware that July is a major holiday period for Tirrol Co. 82 The audit junior is concerned about various circumstances of the audit, which are likely to increase audit risk. He has written to you with some suggestions. Which TWO of the following suggestions are valid?
A.
We should budget for the extra time required to document an understanding of the entity, its environment and its systems, and to verify material opening balances.
B.
Given the tight reporting deadline, a combined approach should be adopted on the audit, relying on tests of controls wherever possible.
C.
We must agree a clear timetable with the client for the testing of the computerized inventory systems, setting out availability of access to the system, files and personnel required to complete testing.
D.
As this is our first year of audit, we should agree separate fees with the client for any additional audit procedures required. If the client refuses, we should consider withdrawing from the audit as Cal & Co would be deemed to be lowballing.