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Good morning, ladies and gentlemen! As the CEO of the company, I would like to begin with discussing the specifics of our organization. We are a relatively new establishment based out of Australia and area part of a larger group located in Spain. Our company manufactures equipments and components for the auto industry. We are located in Melbourne and Sydney within Australia and currently constitute roughly 8 per cent in terms of the market share. I would like to introduce our CFO, as he briefs the table regarding the accounting function within our company.
CFO: Our accounting team is relatively small, comprising of 5 assistants and 2 managers. We also have a number of internal control measures aimed at improving our compliance and transparency. Our company separates the duties of the accounting team along with regularly engaging in asset audits. We also encourage reconciliation processes as well to a large extent and ensure that the financial reports and data sets are regularly backed up. Our financial accountant will brief you regarding our interim financial information and other specifications next.
Financial Accountant: Since we cater to the manufacturing industry and are based out of Australia, we follow the cost value to account for our property, plant and equipment using the directives and guidelines of GAAP. Our interim results were relatively satisfactory as we managed to post a 6 month growth in revenue of roughly 8%. The liquidity ratio of our assets also saw an improvement while our debt ratio went down marginally. It certainly depicts that out company is headed towards the right direction despite the growing levels of competition within the automotive equipment manufacturing sector.
CFO: Now that you have a fair understanding regarding our operations and financial specifications, we would like to know the details of the audit that would be performed. What are the major deliverables that we can expect from the audit? What would be the estimated timeline and the extent of the audit work? Furthermore, what information would your team require to perform the audit in an extensive manner?
Lead engagement partner: Good morning, ladies and gentlemen! I would be glad to answer all of your queries, but fist, I would like to start off with a little information regarding our firm. We have been in this industry for over 12 years and it has enabled us to gain a fair amount of expertise in dealing with clients and their various auditing requirements. We also have a number of reputed manufacturers under our clientele list, and also engage in bookkeeping and payroll management for a number of our clients. Now, addressing you query regarding the deliverables of the audit, we would provide a draft statement of accounts along with the necessary governance statements. Comprehensive income and expenditure statements would also be delivered along with any movements in the Reserves Statement, Cash flow statement and the Expenditure and Funding analysis. Additionally, a detailed balance sheet and the accompanying notes to the accounts would also be provided. Now, having addressed your queries, I would like to introduce you tour Manager 1, who would be briefing you about the audit team.
Manager 1: The audit team would comprise of four members, of whom three would be junior auditors who are headed by a senior auditor. In terms of the duration, the auditing process would approximately last for a period of three months. The auditing standards used would be based on GAAS, which typically comprise of three major segments. The first segment relates to the General Standards of auditing, which emphasize on the proficiency and the independence of the auditing members. The second segment relates to the Standards of Field Work and emphasizes on the planning procedure, while the third and the final segment relate to the Standards of Reporting, which focus on verification of the financial statements and the expressions o the audit team. Coming to the stages of the audit, it would include five major phases beginning with planning the audit process. This would be followed by assessment of the various risk factors, evaluating the internal controls, testing the audit and finally conclude with reporting of the audit results. I would now like to introduce you to our Manager 2, who would brief you regarding the scope of the work.
Manager 2: The services that would not be covered within the audit work include non-audit services such as personal consultancies and advisory services related to transactions. The audit team would also not engage in any lax quality review procedures as well. The audit tests would include a thorough evaluation of the risk assessment measures, analytical procedures, and transactional tests along with a test of the details of balances. We would require access to accurate financial information including check books, invoices, sales receipts, tax returns and the records of inventory. We would also like to be able to access your suppliers and distributors for a clearer picture of the financial statements, of course, with your prior consent.
Enquiries from the audit team
Q. How are the relations between the audit committee members and the internal audit teams?
Q. How does the internal audit process work?
Q. What financial documents and statements does your organization typically prepare?
Q. What are the enterprise risks and the internal control components considering your working operatives?
Questions from the new client’s team
Q. What are the criteria you would use to determine the materiality?
Q. What strategies would you use to identify the presence of related party transactions?
Q. Have you anticipated any specific problems or shortcomings that may come up during the auditing process?
Q. Do you have any doubts or queries regarding the ability of our organization to continue as a going concern?
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