The paper requires you to prepare a document to assist your Audit Manager in developing an audit plan for the financial audit of an entity and must not exceed 3000 words in length. The assignment requires to prepare a document for the Audit Manager.
- You have recently been appointed external auditor of the entity. You are assisting your Audit Manager in planning for the audit of the entity’s financial statements.
- You have accepted the appointment and communicated your decision to the client in the engagement letter. The audit fee is $170,000.
- You are required to download the 2018 annual report published by the following entity:
– Konekt Limited (http://www.konekt.com.au)
- Using information from the relevant chapters of the textbook, prepare a document for your Audit Manager. Your document must include key information set out below. Gay, G., Simnett, R., 2015, Auditing & Assurance Services in Australia, 6e, McGraw-Hill.
Required
With reference to relevant chapters of the textbook, prepare a document for your Audit Manager. Your document must include the followings:
- Executive summary
- Introduction
- Key information:
- a) Gain an understanding the client
- b) Identify five (5) significant accounts most at risk of being materially misstated
- c) Set planning materiality
- d) Assess what can go wrong (audit risk assessment) for each of the five (5) accounts selected in (b)
- Conclusion
- Appendix
- References
Additional information
For the purposes of the assignment, the following auditing standards are relevant:
– ASA210 Terms of Audit Engagements
– ASA220 Quality Control for Audits of Historical Financial Information
– ASA230 Audit Documentation
– ASA250 Consideration of Laws and Regulations in an Audit of a Financial Report
– ASA300 Planning an Audit of a Financial Report
– ASA315 Understanding the Entity and its Environment and Assessing the Risks of – Material Misstatement
– ASA320 Materiality and Audit Adjustments
– ASA330 The Auditor’s Procedures in Response to Assessed Risks
ASA520 Analytical Procedures
Hints and Tips
- You are required to plan the audit using only information that is publicly available. That is, you only use the information that is published by the entity either on its website or printed materials.
- Use the pro-forma document.
- In identifying significant accounts, you are advised to use analytical procedure – simple comparison to identify five (5) accounts most at risk of being materially misstated.
- When making preliminary judgements about materiality levels and developing preliminary audit strategies for significant assertions, you are required to consider the Statement of Profit or Loss, Statement of Financial Position and the notes.
- To calculate materiality level for this audit assignment, you are advised to calculate 0.5% of total revenue, i.e. 0.5% of total revenue of $89.1 million = $89.1 million x 0.005 = $445,530.
- In considering what can go wrong for each of the five (5) accounts selected, you must assess the audit risk for each of those accounts using the audit risk model.
- Quoting directly from textbooks and reports will increase the similarity index. Quoting without proper referencing will also increase the similarity index. As this assignment requires you to use auditing theory to prepare a document for a real-life organisation, quoting from textbook does NOT meet the requirements.