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Below are Essay & Assignments tackled by us on Auditing

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  • A discussion on the correct course of action an auditor should adopt under different circumstances
  • This assignment is based on the following Auditing questions –

    Auditor’s opinion regarding company’s financial statements, conditions and performance are based on mandatory requirements under the Corporations Act 2001. Specific auditing standards provide guidance to auditors in planning an audit and forming audit opinions. Refer to the following independent situations:

    i. Inventory on hand at year end has been valued at cost in the financial report of your client. However, net realisable value is 10% below cost according to the audit findings. The difference is a material amount.

    ii. In the previous financial year your client purchased property and entered into a contract to develop a shopping complex and then sell the developed real estate to an unrelated third party for a “cost ” settlement price. Following the sale early in the financial year, an economic recession resulted in rentals and occupancy rates being well below forecasts prepared by your client. Just before year end, the purchaser threatened to sue for damages alleging they relied on your client’s forecasts when entering into the . The amount of damages being claimed is highly material to your client. Your client has obtained an opinion from a well-known legal advisor which concludes that no damages should be payable. The directors have therefore included no reference to the matter in the financial report to be released next week. However, you have heard that the purchaser has also obtained legal advice which supports its case.

    iii. You are auditing a charity where net income is generally about 55% of gross revenues. Due to the small number of the charity’s staff, there is a lack of control over completeness of revenue. Despite your best efforts, you conclude that you do not have enough evidence to support the completeness assertion.

    iv. Management of ABC Limited has decided not to disclose directors’ fees in the accounts as they are not material. You cannot convince management to change its decision. However, you agree that the amounts are not material.

    v. Management of XYZ Limited has estimated that allowance for doubtful debts should be $550,000. As auditor you believe that the allowance should be $655,000. Management will not change its estimate.
    Profit before tax for the year is $445,000.

    vi. Your client has several bank accounts one of which is in a foreign country. Cash balances total $760,000 with the account maintained in the foreign country totalling some $530,000. You have been unable to obtain a bank audit certificate or any third party confirmation with respect to the foreign bank account. The client has been unable to supply you with bank statements or other supporting documentation in relation to this bank account. Materiality for the client has been set at $470,000. All cash balances are classified as current assets in the client’s financial statements.


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  • Audit case study
  • This report is based on the following case study -

    CASE STUDY

    Check and Tick, Chartered Accountants, have just been appointed as the auditor for ABC Plc, a company listed on the London Stock Exchange.
    You are the senior manager in Check and Tick in charge of this audit. You have been provided with the following brief about ABC Plc-

    BRIEF
    ABC Plc (ABC) is a London-based manufacturer of table fans. It secures most of the components from Asia and a small part from the UK. Its only manufacturing plant (Plant) is in the outskirts of London which employs about 100 employees. The manufacturing manager (MM), his three supervisors as well as all the production operators are housed in the Plant. The only store, handling components and completed fans, is also located in the Plant.
    ABC's city office (Office) is located in the heart of London. The purchasing manager (PM) and the sales manager (SM) together with their team members operate from the Office. All other support functional heads like human resources, finance, logistics and legal are also located in the Office. The managing director operates mostly from the Office though he spends about 20% of his time in the Plant.
    The purchasing department has a list of approved vendors who supply almost all the components required for production. These vendors have been doing business with ABC since its inception 10 years ago. There was no major issue with any of them. Over the years, they have established their credibility for price, quality and delivery to the complete satisfaction of ABC. Any addition/deletion of vendors require PM's approval.
    The components required for the production process are fairly standard. The stores supervisor (SS) keeps a record of component movements, both receipts and issues, in a spreadsheet. He generates a purchase requisition (PR) whenever the stock level seems low by visual inspection. The PR requires MM's approval before it is sent to the purchasing department. The official purchase order (PO) is then initiated/sent to the approved vendors by e-mail with a copy to the SS. The details of all PO's which are in sequential order are kept in a spreadsheet.
    The PO extracts the unit price from a file (spreadsheet) maintained in the purchasing department. This file contains a list of all vendors approved for specific components together with approved price. This file gets updated when vendors get added/deleted which must be approved by the PM. This is however not very frequent. As regards price, it is only updated when a vendor requests for an increase which is negotiated/approved by the PM. This spreadsheet is the main source of information required by the people in purchasing department.
    ABC conducts an annual stock-taking of all components and any discrepancy in quantity is adjusted in the financial records. SS has full responsibility of planning and conducting this stock-take which is also attended to by representatives from the finance department. Significant discrepancies require further investigation. Again, SS has the sole responsibility for this investigation. Over the years, there has not been many such cases though.
    All sales of completed fans are made through approved distributors (currently 10). Initially ABC had only one distributor but as business grew, both in volume and market, more distributors were added. Any addition/deletion of distributors requires SM's approval who also performs credit check before establishing credit limit for each distributor. ABC does not have a full-fledged credit manager mainly due to cost constraint.
    Credit limits are only reviewed when distributors request for an upward revision due to increase in business volume. Once a month, the SM reviews the ageing analysis (prepared by accounts department) of all receivables and sends routine reminders for amounts which are overdue. The bad debt written off over last few years has been low (below 2%) which he considers reasonable in such a business.
    All distributors receive standard credit of 30 days. The selling price as well as discounts are all pretty standard. Once approved by the SM, these are maintained in a spread sheet widely used by the personnel in the sales department.
    When new orders are received, sales staff would first check the credit status of the customer from the last available monthly ageing analysis report. If the order exceeds the credit limit and/or the customer has overdue receivable, the SM has to review the situation. He has the sole responsibility of making any exception and allow shipment or reject the order.
    If the credit is clean, an invoice-cum-delivery order would be generated by the sales personnel. The original of this document goes to the distributor with a copy to SS for shipping arrangements. All invoice-cum-delivery orders are sequentially numbered and details are recorded in a spreadsheet. This spreadsheet is the source document for the accounts department to record sales in the books of accounts at the end of each month.
    SS is responsible for making arrangements for delivery of items based on the invoice-cum-delivery order received from the sales department. Goods received by the distributors are acknowledged on a separate document which is maintained in the stores. However, this document is not sequentially numbered nor is it matched with the invoice-cum-delivery order. This document is retained in the stores for "sometime" and then destroyed under instructions from the SS. ... Less

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  • Audit plan on Cloud 9 Pty Ltd
  • ABSTRACT
    PART “A”
    INTRODUCTION
    History
    General and Industry-specific economic trends and conditions
    Competitive environment
    Product information
    Customer Information
    Supplier information
    The Effect of Technology
    Laws and regulations affecting the industry
    BUSINESS RISK
    INHERENT RISK
    PRELIMINARY ANALYTICAL PROCEDURES
    PART “B” Calculating the preliminary assessment for materiality
    Bases for Evaluating Materiality
    Starting and Ending points
    Internal Control Weakness
    Bibliography
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  • Audit Plan on Energy Australia for the year ended June 30 2010
  • This document contains the audit strategy developed by us for conducting the audit of Energy Australia Limited for the financial year ended June 30, 2010 in accordance with Australian Auditing Standards.

    It serves as the basis for performing the audit of financial statements and provides us the familiarity with the organization, its operations, internal controls exercised by the management and key risks involved in the business operations.

    Based on the audit plan, we carry out our work for auditing the financial statements to provide reasonable assurance to users that financial statements of the entity represents a true and fair view of the entity’s affairs and are free from any material misstatement


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  • Auditing assignment on the collapse of an Australian company One.Tel
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  • Auditing case study
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  • Auditing Plannig case study on Santos
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  • Discussion on ‘Audit expectation gap’
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  • Essay on Can auditors remains truly independent when conducting an annual audit of financial statements if their firms provided non-audit service to audit clients?
  • Executive summary on independent auditors
    Introduction on assignment on independent auditors
    Laws enacted to curb the independence
    History of the debate on financial statement audit by independent auditors
    Review of related literature of on financial statement audit
    Effects of financial statement audit
    Case study on independent auditors
    Conclusion & Recommendations on financial auditing assignment
    List of financial statement audit references

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  • Is Auditing a negative activity?
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