You have been assigned as the audit team leader of Bank Salalah, a medium-sized bank, for the end of year audit. Your firm is a newly appointed audit firm of the bank. The bank has been operating in the last three years and has a plan of establishing its second branch to be located also in Salalah. Informal discussions with some employees disclose that employees are happy with the bank because “there are just few rules to follow”. However, your communication with previous auditors revealed several significant adjustments done in the bank accounts. One of these was in the inventory of office supplies. Initial review of bank procedures indicates material weaknesses including a flaw in the handling and recording of office supplies. There are also some indications of leniency in some basic operations like purchasing. For example, employees are allowed to get whatever they need from the storage room. Another example is, the purchase officer can buy from any supplier of his choice. Review of past financial reports indicates fluctuating income in the past three years. It was also noted that key officials were constantly rotated in any key positions of the bank. The management expects the auditor to report on weaknesses in the design and implementation of internal controls on top of the usual audit of financial statements of the bank. Required: Discuss matters that you would consider in developing the audit strategy for Bank Salalah.
Following are the matters that would consider by the auditor in developing the audit strategy for Bank salah:
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