Learning Objectives: - Understand and be able to explain the regulatory framework of auditing, planning and reporting process. - Critically evaluate organisational internal control and business risk techniques, and be able to apply this knowledge to different organisations. Identify, analyse, assess and measure audit risk. Sabden Holdings (SH) a limited company, is a publisher of a monthly magazine 'Country Discovery'. Approximately 70% of the magazines revenue is derived from advertising, the remainder being subscription income. Individual advertisements, which may be quarter, half or whole page, are priced at £750, £1250 and £2000 respectively. Discounts of 10% to 25% are given for repeat advertisements and to major advertising customers. SH's management has identified the following risks relating to its advertising revenues: 1. Loss of revenue through failure to invest in developments which keep the presentation of advertisements up to date with competitor publications. 2. Due to unsuitable credit limits being set, business is accepted from a small proportion of advertising customers who are not creditworthy. 3. Published advertisements may not be invoiced due to incomplete data transfer between the editorial and invoicing departments. 4. Individual advertisements are not charged for at approved rates – either in error or due to arrangements with the advertisers. In particular, the editorial department does not notify the invoicing department of reciprocal advertisement arrangements, whereby advertising customers provide SH with other forms of advertising. 5. Individual advertisers refuse to pay for the inaccurate production of their advertisements. 6. Cash received at a front desk, which is significant, may not be passed to cashiers, or be misappropriated. 7. the risk of error arising from unauthorized access to editorial and invoicing system. 8. The risk that the editorial and invoicing systems are not available. 9. the computerized transfer of accounting information from the invoicing system to the general ledger may be incomplete or inaccurate. 10. The risk that SH may be used for advertisements which do not meet the national standards authority's 'code of advertising'. Risks are to be screened out, as 'non-applicable', if they meet any of the following criteria: 1) The effect of the risk can be quantified and is less than £5000 2) The risk is mitigated by an effective risk strategy e.g. insurance 3) The risk is likely to be low or its effect insignificant Those risks not screened out, called 'applicable risks', will require further consideration and are to be actively managed. You have been employed as a consultant by SH and asked to prepare a report that incorporates the following tasks. All tasks must be professionally evaluated and include real life examples and up to date references whereever possible. Task One For each of the above risks identified by management, evaluate, with a reason, and a practical example, whether it should be considered an 'applicable risk'. Task two Evaluate suitable internal controls to manage any FOUR of the applicable risks identified in task one. (SH's management is now considering setting up an internal audit function to improve the company's systems and risk management process.) Task three Evaluate, with example, the advantages and disadvantages of outsourcing the internal audit function to an audit firm rather than setting up a department in-house. Please complete task to 2:1 honors degree level and also send details of where the references were accessed from.