"Audit Australian standards also known as AAS.It considers requirementsand provide us theapplication and a statement that gives us the explanation onthe sameThe accounting methods that apply should be correct enough to present a good view. He also audit theaudit report and form an opinion about it The auditors responsibilities that he takes to complete theaudit of a financial report also called as financial statements and audit onany other financialinformation.. The auditor while conducting an audit should check the accounting policies adopted by theclient and test them inner and out with the audit Australian standards andguaidance of the Concernedinstitute .The Australian companies act as well as many governing bodies of law require that the profitand loss and balance sheetof an enterpriseshould give a fair and an accurateview of its financial reports and the working results . However reasonable assurance is not the accurate insurance .this isdue to the inherent limitations that exist, inherent limitations means the errors that wil always bepresent ass audit can’t be done with hundred percent accuracy. The auditor Is furtherrequired to see whether the relevant information I s required to be disclosed in the financial statements by consideringthe judgments the management has made in preparing the reports ,accordinglytheauditorassessesthe selection and consistent application of accounting standards.Theauditor should determine himselfor herself as to whether or not the treatment is very regular with accounting part .The view presented inthe statement s of an enterpriseof its state of affairs and of the profit and loss can be very muchaffected by the accounting policiesfollowed in the presentation and preparation of statements ofaccounts.The auditoris required tofulfill the following responsibilities1.Ethical requirements: He is required to comply with the code of ethics issued by the Institute.He isrequired to comply the integrity ,objectivity confidentiality and the professional behavior2.Professionally Responsible: He should recognize the conditions indicating the possible misstatements. Morever it requies critical assessmentof audit evidences gathered. by maintaining good professionalbehavior overall risk can be reduced. 3.Professional judgement:It is very much necessary to make proper decisions during audit period. Whilemaking professional judgment he considers level of consultation. It also needs proper documentation.4. Sufficient and appropriate audit evidence and audit risk: He should comply with ASA 500.Sufficiencyrefers to quantum of evidence whereas appropriateness refers to its quality. .It does not includebusiness risk.It consists risk of material misstatements and detection risk. .However due to inherentlimitations of audit risk can’t be reduced to zero.5. Conduct of audit in accordance with ASAs: He should comply with relevant ASAs .The auditor shouldcomply with the ASA properly .It is relevant if it is effective. He shall evaluate whether sufficientappropriate evidence has been obtained keeping in view the objectives stated inA SA.He shall complywith each requirement of a ASA unless the entire ASA is relevant.Forming an opinion:ASA 700 deals with forming an opinion and reporting on financial statements. Auditor shall form an opinion as to whether the financial reports and statements are prepared accordingto the relevant framework or not.To form such an opinion,he shall obtain reasonable assurance as towhether the financial statements are free from the material misstatements or not.In forming suchopinion he shall consider the following things in mind ,the sufficiency and appropriateness of auditevidence and the materiality of uncorrected misstatements and the reasonableness of audit evidencesand proper disclosures should be there.In considering the fair presentation framework he shall also consider the overall presentation structureand the content of the financial statements, whether the financial reports are showing a fair view or notThe expression on the opinion lies on the following :-There are two types of opinion:-Unmodified opinion: It defines thatwhen the audior says that the financial reports are preparedandaccording to the reporting framework that Iswe can say that with all the prescribed rules andregulations.Modified Opinion : When theauditor says that the financial statements or reports which are preparedby the client are not free from the material misstatementsand the auditor is unable to obtain proper orrather sufficient evidenceto conclude that the reports which are made by the management arefreefrom the material misstatement.The objective of the auditoris to express clearly and and appropriate modified opinion on the financialreports or statements when the auditor saysthat on the evidence that he has received from themanagement the statements issued are not free from material misstatements and he unable to getsufficient or ratherproper evidences from themanagement to conclude that the reports are feee frommaterial discrepancy.The types of modified opinion are A Qualified opinion AnAdverse opinionA disclaimer of opinionAnswer to question no. 1In the above questionthe assesseehas made less allowance fordoubtful debts an the management isnot willing to adjust it through and since for this the amount is incorrect in the accounts receivableledger .The misstatement is limited to the receivablesand it becomes easy to calculate. As per ASA 450 ‘Evolution of misstatement which are seen through the audit deals with theresponsibility of the auditor to consider andthe effect of identifies the statements which are mistatedan the concerned audit andmisstatements which are not correct if any on the financialstatements.The standards on auditingdefines the specific terms misstatements and uncorrectedmisstatements ,consideration of the statements that are identifiedas the audit comes in to action , andthe communications and the corrections of the statements that are misstated .and it then afterwardsevaluate the effect of uncorrectedmisstatements . and then the representations that are written andthen document the same.The audit documentation shall include the amount below whichmisstatements should be regarded as normal, all the misstatementsthat has been accumulated duringthe audit and whether all have been corrected.As per ASA 540 , Auditing Accounting estimate , we can define accounting estimate as a approximationof a monetaryamount because of a absence of a precise means of measurement.This term is used for aa amount being measured at the value where there is estimation uncertainity.the object of an auditor isto obtain sufficient audit evidence whether accounting fair estimate are reasonable and relateddisclosure regarding the estimate are reasonable or not. The auditor shall taken in to proper andaccurate understanding of the following in order so that he can provide a basis for the identification anhe can assess the risk of material misstatement for the same.The auditor in this case should issue a modified opinionAnswer to question 2As per Accounting standard 2 value of an inventory should be valued as cost or market price whicheveris lower.Inventories are the financial assetsWhich are to be sold in the ordinary business period. It is available in the form of supplies and materialoffered for sale. The cost of the inventories shall take in to consideration the cost of the purchase of thematerial or anything ,the applicable costs of converting the material in to finished goods ,and it alsotakes other valauable costs that brings the available material to the present condition.The financial reports should disclose the policies of accountingusedin measurement of inventories with the costand the total cost ofinventories and all its classificationthat is made available to theenterprise.The auditor should give and modified opinion as the inventory shouldn’t be valued at sales priceAnswer to question no.3Accordingto ASA570 Going concern shall be applied .The auditor is reponsible to say whetherthe conditions are existing on the balance sheet date that the company can cease to be a goingconcern.He will have to check all the conditions and give a clause regarding going concernissues A qualified opinion shall be issued as the company is not be able to continue itsoperations. An emphasis of matter paragraph needs to be added .In case if the if the financialreports are not prepared according to reporting framework the client and the audiors after thediscussion needs to disclose.The audiots responsibility is to see that proper evidences have been gatheredto show that the concernis not going concern .If there is absence of any going concern clause or anything realated to that itdosent mean that the auditor has given a guarantee that the entity is a going concern.Thereare three types of indicatorsto see whether theentity is goin concern or notFinancial indicatorsNegative working capital presentAdverse financial ratio is thereIf the payments are nit done to creditors on due dateIf there are negative cash flowsOperating indicatorsIf there is a loss of key management and there is no replacement If there is loss of major franchiseIf there is labour strikesOther IndicatorsIF there is any pending litigationsIf the client has been non compliant with all the statutory requirementsIf there is change in government policyAnswer to 4 The company has been valuing its building at market price. The company is correct in his view to show itas market value .only the difference amount shall be shown as revaluation reserve .The auditor shouldgive a clean report .Answer 5The kaycee company values the inventory at lifo and wants to apply fifo.The auditor needs to disclosethat if the company does that and if it will result in better presentations of financial statements . Answer to question 6According to ASA 550 related parties disclosures is very necessary for better presentation o ffinancial statements .It gives the auditor the responsibilities to deal with reports regarding theissues of related party, thus auditor can give a modified opinion. The objectives of the auditor areirrespective of whether the financial reporting procedure establishes related party requirementsand toobtain a proper understanding of the related partie relationshipsQuestion 2The office two company sells stationary through the stores .It sells online and through other methodsalso .All sales are made through cash. Customer pays cash and takes the invoice against the same. andthe customer who order online were made to e paid cash on delivery and two copies of invoice are beenmade and given to the customer and the delivery boy. The driver while returning collects the cash agives the invoice and money to the staff member in the store .Later on In the end the staff membergives cash to the store manager and the store manager deposits in to the bank.In all this there are major chances of cash falsification. Fake invoices can be made .Shower of larger cash discount than actually allowedAdjusting a fake credit in the account of the customer for the value of goods returned by himHe can write a good debt as badHe can have a fake third party and adjust accounts accordinglyThere can be a possibility of dummy workmen and it is high in some industries There can be alterations made in the payment recordsThere can be discrepancy in goods inward bookThere can be falsification when the goods are sold to a related party Any scrap can be sold without recording the cash receivedThere can be fake copies of receipts distributedIf the Receipts are not serially numbered there can be falsification in books and cash can be misplacedHe can adjust a cash sale as credit sale and he can raise a debit in the account of customerThere should be proper internal controls on cash payments shouul be carefully and properly examinedto ensure thatall the payments are properly authorized and sanctioned by the designated authority. Soby bad internal control they can adjust lot of cash and there can be cash discrepancy. "