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Inventory Turnover Ratio - Audit strategy - Auditing Assessment Answer
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Internal Code: 1AGEHF
DON LTD and RUMPT LTD are two companies engaged in the retail of sportswear. They have approached our audit firm Pran & Partners (Chartered Accountants) to audit their financial statements for the financial year ended 30 June 2018 and which we have accepted. You are the audit senior of Pran & Partners (Chartered Accountants) and are responsible to provide a report to the Audit Manager on the risks related to these two new clients. The data above is a summary of the preliminary analytical review results conducted by an audit trainee for the two client companies for four years. Some of these key ratios are important to identify and assess risk(s) related to the audits of these two clients.
Required:
Provide a detailed report to the Audit Manager covering the following questions:
(1) Discuss the importance of risk identification and assessment for both companies.
(2) State and explain which management assertion(s) are at risk.
(3) Advise on the audit strategy to be used in carrying out the audit of these two companies.
Auditing Assessment Answer
TASK:
DON LTD and RUMPT LTD are two companies engaged in the retail of sportswear. They have approached our audit firm Pran & Partners (Chartered Accountants) to audit their financial statements for the financial year ended 30 June 2018 and which we have accepted. You are the audit senior of Pran & Partners (Chartered Accountants) and are responsible to provide a report to the Audit Manager on the risks related to these two new clients. The data above is a summary of the preliminary analytical review results conducted by an audit trainee for the two client companies for four years. Some of these key ratios are important to identify and assess risk(s) related to the audits of these two clients.
Required:
Provide a detailed report to the Audit Manager covering the following questions:
(1) Discuss the importance of risk identification and assessment for both companies.
(2) State and explain which management assertion(s) are at risk.
(3) Advise on the audit strategy to be used in carrying out the audit of these two companies.
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