Reference no: EM132371439 , Length: 3200 Words
Auditing Assignment and Presentation - "Developing an Audit Program for a selected publically listed Company"
Purpose of the assessment (with ULO Mapping) - Students are required to:
1.1- Identify and distinguish between tests of controls, substantive tests of transactions and substantive tests of balances.
1.2- Identify and understand when the auditor will undertake substantive audit procedures in response to specific assessed risks of material misstatement.
1.3- Understand how assertions relate to account balances.
1.4- Understand how to select the most efficient and effective combination of audit procedures that allows them to achieve the audit objective.
1.5- Active participation in an "audit team context" with professional group discussions.
1.6- Co-operation with fellow students to produce a joint assignment in a report format on time and to a high standard along with power-point slides.
Purpose: The aim of this group assignment is to provide you with an opportunity to design a "risk-based" audit program for a real world company and focus on the "Substantive tests of balances", which involves substantiating the ending balance of an account(s), which is comprised of multiple transactions, as at a certain year-end date.
Detail Assignment Tasks: Developing an Audit Program for a selected listed Company
1. Select a listed company from the current ASX List or this will be allocated to your group.
2. Gain an understanding of the nature of the entity and its industry and then identify key business risks. After this is completed, assess where the risks of material mis-statements could be in the financial report. Consider the factors affecting both Inherent Risk and Control Risk. Finally, apply the Audit Risk Model [AR = f ( IR , CR , DR )] to the selected company. Which risk rating would you apply (Low, Medium or High) to the company's inherent risk assessment and control risk assessment? How does this affect your assessment of Detection Risk and Audit Risk?
3. Perform analytical procedures of the Statement of Financial Position and of Financial Performance over the last three years using appropriate ratios and/or metrics. Select four key ratios and provide a brief explanation in the report. This should be presented in a table format.
4. Discuss with your group members which account balances are considered "material". Explain how you calculated materiality for planning purposes and provide appropriate justification for your decision-making. (Note - Use a table format to structure your answers to questions 5, 6, 7 & 8).
5. Select up to ten different material account balances, at least five assets and five liabilities.
6. For each material account balance selected, list the relevant financial report assertions and explain why the selected assertions are applicable to each account.
7. Design a comprehensive set of audit work steps for each material account balance, which addresses the selected assertions and which will result in sufficient and appropriate audit evidence being collected for your selected client company. (Assume that a predominantly substantive approach is being adopted)
8. Include a sampling plan, which details how you will use sampling for each material account balance to be tested. How many items will be tested for each test?