Materiality in the Audit of Financial Statements Assignment

Assignment Task

General Information for Assessment

Items 2 and 3 Assume you are part of the audit engagement team for your allocated listed company. The most recent annual report is the draft annual report for your company. Please check the list on Moodle and look up your Student ID to determine your company code. You are required to answer the following questions in this context.

This must be your own work and if questioned you should be able to explain your answers without your assignment in front of you. Please read the plagiarism and academic misconduct section at the top of the Moodle page. You should also click on the link for Plagiarism Awareness and watch the video. If I consider any assignment is not the student's own work I will refer that student for academic misconduct, therefore it is important that you read and listen to the plagiarism information provided to understand what is and is not acceptable behaviour. Please ensure you include citations and a reference list as appropriate.

You have been allocated an individual company for both Assessment Item 2 and Assessment Item 3. You MUST only use the annual report of the company that you have been allocated. You can find the annual report online on either the company's website or the ASX do Click on the company code you have been allocated. You should use the group annual report.

Questions

In addition to various calculations, the questions in Assessment Item 2 include a component for communication skills. Communication with clients is an imperative necessity for auditors and excellent writing skills are expected from professional accountants, therefore please write your answers carefully and clearly. You will lose marks for poor presentation, spelling mistakes or grammatical errors.

Question 1

Determine the level of materiality to be used for the audit of your allocated company's group accounts for the year ending 2022. Your answer should include a discussion of the nature of materiality, and a description of what materiality represents in terms of the audit of a set of financial statements and should discuss the different bases and considerations employed in arriving at materiality. Explain the rationale behind your choice of a certain level of materiality. You must also provide a quantitative estimate of materiality for your company.
Some Guidance to help answer Question 1

This question asks you to define and discuss the use of materiality in auditing. Please refer to Chapter 7 of the text and the relevant lecture slides. You are pretending to be the auditor of your designated company. The materiality figure must be set by you as a dollar amount. It is not in the Auditor's Report. You need to justify why you set this amount.

Question 2

Please refer to the recorded video in the assessment tile that shows how you can prepare an excel spreadsheet for this question.

The partner has requested that you prepare an excel spreadsheet of the balance sheet, the profit and loss statement, and the statement of comprehensive income for the three financial years between 2020 and 2022 for your allocated company. The partner suggests that, as a minimum, you address key balance sheet and profit and loss horizontal analysis, vertical analysis and ratios over the period 2020 to 2022.

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