HI-6026 - Audit, Assurance and Compliance - Reporting Requirements and Auditing Standards - Accounting & Finance Assignment Help

Assignment Task

Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit
1. Demonstrate an understanding of the reporting requirements and auditing standards.
2. Demonstrate an understanding of the auditor's professional, legal and ethical responsibilities to their clients and third parties.
3. Identify the elements of the financial report audit process.
4. Understand the audit planning procedures, evaluate the business risk and assess the internal control.
5. Prepare auditing procedures for transactions and balances by conducting control and substantive Tests.
6. Understand the auditor's reporting obligations.

Description: Each week students were provided with three tutorial questions of varying degrees of difficulty. The tutorial questions are available in the Tutorial Folder, for each week, on Blackboard. The Interactive Tutorials are designed to assist students with the process, skills and knowledge to answer the provided tutorial questions. Your task is to answer a selection of tutorial question for weeks 1 to 5 inclusive and submit these answers in a single document.

Submission Directions:
The assignment will be submitted via Blackboard. Each student will be permitted only ONE submission to Blackboard. You need to ensure that the document submitted is the correct one.

Question 1 

Section 301 of the Corporations Act requires companies to have their financial reports audited. Academic research suggests that Big-4 auditors charge higher fees than other auditors and their audit reports are more credible than those issued by other auditors.

Required:
In times of economic recession would you expect:
(a) the demand for audits to increase or decrease? 

(b) clients to shift from large (Big-4) auditors to smaller auditors, or from smaller auditors to Big- 4 auditors? Why or why not?

Question 2 

Godwin, Key & Associates is a small, but rapidly growing, audit firm. Its success is largely due to the growth of several clients that have been with the firm for more than five years. One of these clients, Carolina Company Ltd, is now listed on the ASX and must comply with additional reporting regulations. Carolina Company Ltd’s rapid growth has meant that it is financially stretched and its accounting systems are struggling to keep up with the growth in business. The client continuance decision is about to be made for the next financial year. The managing partner of Godwin, Key & Associates, Rebecca Sawyer, has recognised that the audit firm needs to make some changes to deal with the issues created by the changing circumstances of its major client and the audit firm’s overall growth. She is particularly concerned that the audit firm could be legally liable if Carolina Company Ltd’s financial situation worsens and it fails.

Required:
(a) Provide guidance to Rebecca about the steps she can take to avoid the threat of litigation if Carolina Company Ltd fails. (3 marks) (150 -200 words)
(b) What should Rebecca consider when making the client continuance decision for Carolina Company Ltd for the next financial year?

Question 3

(a) Audit tests include tests of controls and substantive procedures. Substantive procedures can be divided into substantive analytical procedures, tests of balances, tests of transactions and tests of disclosures.
 

Required:
For each test in the table below, select the type of audit test it represents.

(b) You are the audit senior on the audit of Marsa Ltd, a large manufacturing company, for the year ended 30 June 2020. It is now 16 July 2020 and you are reviewing the audit working papers prepared by the audit assistant, Trena Berk. You notice the following matters:
(i) As part of her work on subsequent events since balance date, Trena noted that there were a large number of returns in July of product XLP. However, as this product was first sold in June and represented only 1 per cent of sales for the year, she concluded that the amount was immaterial and that no further work was necessary.
(ii) Trena selected 20 invoices to test the control that the salesclerk checks that the prices agree with the authorised price list. She found three instances where the salesclerk had not signed the ‘prices checked’ box on the invoice. The sales manager explained that the salesclerk always checks the prices, but sometimes forgets to sign the box. As the prices on all the invoices agreed with the authorised price list, Trena concluded that the control was operating satisfactorily.

Required:
For each of the two scenarios presented above, indicate whether you believe that sufficient appropriate audit evidence was obtained to support the conclusions reached. Give reasons for your decision.

Question 4

Mighty Tools Hardware runs a network of small hardware retail outlets across the state. All sales are made for cash or on credit card and processed through electronic tills. A wide range of goods are stocked by the stores, meaning that the business deals with a large number of suppliers. All goods are purchased on credit with varying terms, depending on the supplier. Invoices are paid by cheque after a package of documents is collated and approved for payment. Ordering of goods and subsequent payments are processed by the central office with delivery direct from supplier to the stores — no central warehouse is used. Mighty Tools uses a perpetual stock system and conducts test counts at regular periods throughout the year.

Required:
(a) What controls should exist for inventory movements at the local store level and the central office?
(b) Explain how the stocktake for Mighty Tools Hardware should be audited. What details are most important?

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