Reference no: EM131229475 , Length:

This assignment has three parts: Part A, Part B and Part C.

Part A: Audit Planning

You are planning the audit of Bob's Bikes and have accessed the preliminary trial balance for the entity. This is presented below. You would like to use this trial balance to identify accounts that are likely to require significant audit attention

Your task: You must choose 5 accounts from the trial balance for audit testing. In doing so, you should:

Make a preliminary judgement of materiality, 

Complete an analytical review using the trial balance, 

Consider whether there are any accounts that should be selected regardless of their quantitative materiality, and Provide a brief rationale for your selection of each of the 5 accounts.

Part B: Sample Selection

You are now further into the audit process. You have finished your audit planning, including gaining an understanding of the entity's internal control structure. You have decided to adopt a predominantly substantive approach for the revenue accounts and are now in the substantive testing stage of the audit.

Your task:

Select 1 of the revenue accounts that you identified in Part A,

Access the General Ledger detail for that account from the file: GL extract for Part B.doc (Go to Blackboard: Assessment: Assignment),

Use one of the following sample selection techniques: random, systematic or haphazard, to select 5 transactions from the ledger account for further audit testing,

Explain/demonstrate how your chosen sampling technique resulted in the selection of these 5 transactions, and

Provide an explanation of the benefits of your selected technique (including the limitations of the 2 alternative techniques).

Part C: Considerations in Substantive Testing and Collecting Audit Evidence

Please provide an answer to the following questions:

1. What might be your reason for adopting a predominantly substantive approach in Part B?

2. Which of the following assertions are you likely to be more concerned about for the account used in Part B: occurrence or completeness? Why?

3. Which of the following audit procedures would be more appropriate: tracing or vouching? Why?

4. Please list 1 other assertion that might be relevant for this account.

5. What evidence could you seek for the assertion you identified in question 4? You should list at least 1 example of corroboratory evidence and/or a specific audit procedure.

6. Assume your further testing revealed an error with one of the transactions you selected in Part B, specifically a misstatement of $20,000.

a. Is this likely to be considered acceptable? Why/why not?

b. Would the magnitude of the misstatement be relevant if you were doing tests of control rather than substantive testing? Why/why not?

c. What other information would you need to know before projecting your results to the entire account balance?

7. Under which circumstances might it be considered acceptable to use a part-year trial balance, such as the one presented in Part A, for substantive testing?

1750 words

10 harvard references

Attachment:- Assignment.rar