Audit of Australian Timber Limited (ATL) - Case Study - Auditing Assignment Help

Assignment Task

Case Study

You are an Audit Senior currently planning the 30 June 20X1 audit of Australian Timber Limited (ATL). ATL operates a timber sawmill in Wilga, Western Australia. ATL obtains its raw materials from a number of local growers and its own plantations. Logs are transported on large trucks that are weighed in on the company’s weighbridge and weighed out after dropping their loads in the storage area. Logs are then debarked and sawn to size in the cutting area of the mill. The various logs are then sent to other areas of the sawmill depending on what they will be used for.

During the planning stage of the audit, you perform analytical procedures. You discover that the average number of days taken by ATL to pay its creditors has declined significantly from the average recorded over the past three financial years.

Your investigation reveals that log suppliers represent more than 90 percent of the value of accounts payable. As an internal control, details of the goods received notes are matched against the supplier’s invoice. The accuracy of the invoice is checked, after which the invoice is authorised for payment by the mill accountant. Any discrepancy between what the supplier’s invoice amounts should be and the actual amount charged by the supplier is communicated to the supplier by way of a pre-numbered ‘request for credit’ form. This form provides reasons for the differences and the amount requested to be credited to the company by the supplier.
 

Required:

Prepare a memorandum to the audit manager, outlining your risk assessment relating to Australian Timber Limited (ATL). When making your risk assessment:

(a) Identify three (3) key account balances from the information provided that are subjected to an increase in audit risk. Briefly explain what factors increase the audit risk associated with the three (3) accounts identified. In your explanation, please mention the key assertion(s) at risk of material misstatement for each account identified.

(b) Identify how the audit plan will be affected and recommend specific audit procedures to address the risks associated with each account identified.

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