(a) Risks Involved

The following risks are evident in the scenario:

1. Related Party Transactions: The directors’ companies supplying fuel and resources and trading on loans granted by the company pose a risk of conflicts of interest, lack of independence, and improper disclosure.
2. Subsidiary Operations in Ghana: Risks associated with cross-border operations include transfer pricing issues, lack of alignment between Nigerian and Ghanaian accounting standards, and potential inefficiencies in material procurement.
3. Annual General Meeting in Ghana: Holding the AGM in Ghana at company expense may raise concerns about misuse of company resources and stakeholders’ expectations.
4. Audit Scope and Coordination: Different auditors for the Nigerian company and its Ghanaian subsidiary pose a risk of inconsistencies and lack of comprehensive audit coverage.
5. Economic Environment: High operational costs and fluctuating turnover increase risks of going concern and financial instability.
6. Transport of Materials: Dependency on third-party logistics for material transport to Ghana could lead to supply chain risks and financial inefficiencies.

(b) Risk Assessment Procedures (ISA 550)

The auditor should adopt the following procedures for related parties as required by ISA 550:

1. Identify Related Parties: Obtain an understanding of the entity’s relationships and transactions with related parties, including those of directors.
2. Review Contracts and Agreements: Examine contracts and terms governing transactions with related parties to assess their commercial rationale.
3. Inspect Disclosures: Verify whether related party transactions are properly disclosed in the financial statements.
4. Assess Risk of Fraud: Evaluate the risk of fraud in related party transactions and the potential for manipulation of financial statements.
5. Obtain Written Representations: Request written confirmations from management regarding the completeness of related party disclosures.
6. Examine Loan Arrangements: Review loan agreements between the company and directors’ businesses to ensure compliance with regulatory requirements.
7. Perform Analytical Procedures: Analyze financial data to identify unusual or irregular transactions involving related parties.
8. Engage in Discussions: Hold discussions with those charged with governance to clarify their understanding and approval of related party transactions.
9. Test Controls: Evaluate the effectiveness of internal controls over related party transactions.
10. Communicate Findings: Discuss identified risks with management and those charged with governance.

(c) Key Guidelines for Group Audits (ISA 600)

The auditor should follow these key guidelines:

1. Understand Group Structure: Obtain an understanding of the group, its components, and their environments.
2. Engage Component Auditors: Communicate with component auditors to ensure clarity on the scope, materiality, and responsibilities.
3. Plan Group Audit Work: Develop an overall group audit strategy, including risk assessment and identification of significant components.
4. Evaluate Component Auditor Work: Review the work performed by component auditors and ensure alignment with group audit objectives.
5. Coordination and Communication: Ensure continuous communication between the group engagement team and component auditors to address identified risks.
6. Audit Report Consolidation: Combine the findings from both the Nigerian company and the Ghanaian subsidiary to ensure the consolidated financial statements are free of material misstatement.