Sports Direct International

Task 1

Part1)

The risk-based audit approach will minimise the possibility of audit objectives not being met. Consequently ISA 315, Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment (Redrafted)1, compels auditors to adopt a risk-based approach to audits. In so doing, it requires auditors to make risk assessments of material misstatements at the financial statement and assertion levels, based on an appropriate understanding of the entity and its environment, including internal controls.

The International Standard on Auditing (ISA 500)  establishes standards and guidelines on the quantity and quality of audit evidence and procedures in a way where auditor are enable to obtain sufficient appropriate audit evidence which indicate how they reached at  their audit opinion. . Audit evidence is about  facts that they need to proof the information about something as this evidence must support the audit assertions about his opinion. When collecting an evidence for a some company the audit should follow some procedures for gathering the needed audit evidence information recommended by ISA 500.

Business risk is the inherent risk of an organization that will have lower profit as the expected or even will have loss as the opposed taking a benefit.  Business risk is affected by various  factors such as sales volume , input costs,, administration regulations , monetary atmosphere as a whole  and competitions. It is the threats to board’s ability to attain its goals. The first component is financial risk- it is refer specifically to the money flowing in and out of the business and could be a chance of a financial loss. The second one is operational risk -  for example , it is a factor that could interrupts the company’s product in popularity and operations of a huge decline in sales and profitability. The last risk is the compliance risk- for example , the risk that the company could breach legal penalties in accordance of health and safety regulations.

The International Standards of Auditing (ISA 315) represent the obtain an understanding of control environment. According to this understanding there are some factors affecting company’s control environment and the auditor might assess whether :

1.  Management, for those oversight from claiming the individuals accused of governance, has managing  a culture of honesty and ethical behavior.

1.   The sthrengths in the control environment components as a whole establishment to alternate parts from claiming internal control, furthermore if the other components would not undermined the limitations in the control environment.

Sports Direct International is one of the largest sporting goods retailers and operates on a diversified contract of sports equipment, fitness and lifestyle clothes brands. The business is one of the leading sports retailers with the highest revenue in the UK. The use of ISA520 would help to gain an understanding and the overall review of Sports Directs.