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Task- BUS306 Case Study Risk Assessment Questions : Outback Retail Ltd Audit Strategy

BUS306 Case Study Risk Assessment Questions : Outback Retail Ltd Audit Strategy | MU

Case Study: Risk Assessment

Assessment Type: Written Case Analysis

Topic: Risk Assessment

Company: Outback Retail Ltd

Assessment Weight: 10 Marks

Case Background

Outback Retail Ltd is a mid-sized Australian retailer specialising in outdoor gear. It operates 22 physical stores across WA, SA, and NT, and has recently expanded its e-commerce platform. The company is audited by Western Auditors Pty Ltd for the year ending 30 June 2025.

Recent Developments:

  • A new ERP system was implemented in February 2025, integrating inventory, sales, and finance.
  • The company launched a “Buy Now, Pay Later” (BNPL) scheme in partnership with a fintech startup.
  • A cyberattack in April 2025 led to temporary data loss in inventory records.
  • The CFO resigned in May 2025 amid internal investigations into aggressive revenue recognition practices.
  • The board is considering an IPO in early 2026.

Financial Highlights:

  • Revenue increased by 38% YoY, with 60% from online sales.
  • Inventory turnover dropped from 4.2 to 2.9.
  • Gross margin improved from 48% to 52%.
  • Trade receivables increased by 70%, with 25% past due >90 days.
  • Significant increase in deferred revenue from BNPL transactions.

Assessment Questions

Students must answer the following questions. Responses should be analytical, not descriptive.

Question 1: Audit Risk Identification (4 marks)

Identify and explain three distinct audit risks arising from the case. Each risk must relate to a different domain:

  • Financial Reporting Risk
  • Technology/Operational Risk
  • Governance/Strategic Risk

For each risk:

  • Describe the nature of the risk and its relevance to the audit.
  • Identify the financial statement assertions most affected.
  • Discuss how the risk could lead to a material misstatement.

Question 2: Audit Strategy Implications (3 marks)

For each risk identified in Question 1:- Explain how the risk affects your audit planning and procedures.

  • Discuss whether it increases inherent risk, control risk, or detection risk.
  • Suggest how audit resources or timing should be adjusted in response.

Question 3: Substantive Testing Design (3 mark)

Design one tailored substantive procedure for each risk that directly addresses the relevant assertion and audit objective. Justify your choice.

Submission Format

  • Typed document (Word)
  • Maximum 1,000 words
  • Referencing required (any sources used)

Marking Criteria

Criteria Description Marks
Risk Identification Depth, relevance, and clarity of analysis 4
Audit Strategy Impact Logical connection to audit planning and risk response 3
Substantive Procedures Appropriateness and specificity 3
Total

 

 

 

   10

 

 

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Auditing Risk Assessment – Assessment Rubric

This rubric outlines the marking criteria for the auditing case study assessment worth 10 marks.

  • Criteria 1: Risk Identification (4 marks)
  • Demonstrates depth and relevance in identifying three distinct audit risks.
  • Clearly explains the nature, significance, and affected assertions for each risk.
  • Shows understanding of financial reporting, operational, and governance risks.
  • Criteria 2: Audit Strategy Impact (3 marks)
  • Explains how each risk affects audit planning and procedures.
  • Correctly identifies the type of risk (inherent, control, detection).
  • Provides logical adjustments to audit strategy and resource allocation.
  • Criteria 3: Substantive Procedures (3 mark)
  • Recommends appropriate and tailored substantive procedures for each risk.
  • Justifies the relevance of each procedure to the audit objective.

Total: 10 Mark