• Internal Code :
  • Subject Code :
  • University :
  • Subject Name : Auditing and Assurance

Auditing and Assurance

1.A) The auditor performs testing of controls so as find out that whether the controls that have been set up by the company on its processes are operating properly and the said controls would be able to prevent, detect and correct a material misstatement that could affect the credibility of financial statements of the company. At the time of planning the audit, the auditor is expected to obtain an initial understanding of the internal controls operating at the company; however, the auditor is not required to test every control. Auditor is required to mainly emphasize on hose internal controls that affect the financial reporting process as these controls would have an impact on the report of the organization that is being audited. Therefore, the auditor is not required to test every control, and the auditor can exercise his professional judgment to decide the extent of control testing that will be suitable for the audit.

2.B) The two main types of CAAT’s are explained below:

Audit Software

Audit software is used to check a large number of accounting records which are not feasible to be checked manually. The results provided by the audit software are subject to further analysis. Some of the functions performed by audit software are – extraction of samples, calculation of ratios, checking arithmetical accuracy, preparation of variance reports etc.

Test Data

Under this technique, the auditor enters a dummy data into the computer system of the entity so as to check whether the controls within the computer system are working properly.

The main advantage of using software to interrogate and examine client data files is that it enables the auditor to examine a large volume of data in a very short time which would otherwise require a lot of time and effort if done manually. However, the use of CAAT’s in performing the audit does not remove the need to test controls and auditor would still be required to carry out his audit procedures and testing of controls.

1.C) It is not practically possible to audit provisions by performing controls testing as provisions are not recorded based on any procedures set by the management but are usually formed based on estimates made by the management.

1.D) The examination of subsequent events helps the auditor to identify any fraud or errors that may have been carried out by the management of the company at the time of closing its books of accounts for the year under audit. The auditor’s examination of subsequent events helps the auditors to identify any earnings management technique that may have been adopted by the management of the entity. If an auditor uses this technique, they would evaluate whether the accounting estimates made by the management of the company were reasonable or not.

1.E) A limitation on scope arises when the auditor is not able to form his opinion on a particular matter or an item included in the financial statements of the entity as the auditor is not able to collect sufficient and relevant audit evidence in relation to that item. However, a disagreement with those charged with governance occurs when the auditor does not agree with the management and those governance charged with governance in relation to a particular matter (s) related to financial statements such as the selection of accounting policy, accounting treatment of a particular item or adequacy of disclosures etc. Hence, the main point of difference is that in case of limitation of scope the auditor does not have sufficient and appropriate audit evidence but in case of disagreement with those charged with governance, the auditor has enough audit evidence to believe that a particular accounting treatment or any other matter is not dealt with appropriately in the financial statements.

4.A) The sale of land and building by Shellharbour Ltd in July 2020 is a subsequent event as it took place after the date of the balance sheet (i.e. 30.06.2020) and the date of issuance of audited financial statements. It is a type 2 or a non-adjusting subsequent event because it does not provide information about a condition that existed on the date of balance sheet. The management had no plans of selling the land and building on the balance sheet date and sold it in July 2020 only because they received an unexpected offer, hence this is a non-adjusting event only.

4.B) I would issue an unqualified opinion with an emphasis of matter paragraph in relation to the sale of land and buildings by the company after the year-end date. The accounting treatment that has been applied by the company by presenting the land and buildings at their fair value ($ 20.8 million ) on the date of the balance sheet is correct and the company is not required to make any adjustments in the figures presented in its financial statements. Therefore, an unqualified opinion is justified in this case as the financial statements of the company are able to provide a true and correct view. An EOM paragraph is also required as it is significant to inform the users of financial significant ts regarding the sale of property by the company subsequent to balance sheet date.

S No.

Type of subsequent event

Treatment in financial report

i

Type 2 or Non-adjusting event

This does not require adjustment in financial statements and merely a disclosure should be made in the financial report through additional notes.

ii

Type 2 or Non-adjusting event

No adjustment is required and only a disclosure through notes should be made in the financial statements as the legal claim against the company in which the claimant has scientific evidence against the defence put forward by the company in previous legal proceedings was filed after the year-end.

iii

Type 1 or Adjusting event

An adjustment should be made to the figures presented in the financial statements to record the recovery of debts that were previously considered as doubtful as well as to record bad debt of the large debtor who was declared bankrupt on 30.06.2020

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Auditing and Assurance Assignment Help

Get It Done! Today

Applicable Time Zone is AEST [Sydney, NSW] (GMT+11)
Not Specific >5000
  • 1,212,718Orders

  • 4.9/5Rating

  • 5,063Experts

Highlights

  • 21 Step Quality Check
  • 2000+ Ph.D Experts
  • Live Expert Sessions
  • Dedicated App
  • Earn while you Learn with us
  • Confidentiality Agreement
  • Money Back Guarantee
  • Customer Feedback

Just Pay for your Assignment

  • Turnitin Report

    $10.00
  • Proofreading and Editing

    $9.00Per Page
  • Consultation with Expert

    $35.00Per Hour
  • Live Session 1-on-1

    $40.00Per 30 min.
  • Quality Check

    $25.00
  • Total

    Free
  • Let's Start

Get
500 Words Free
on your assignment today

Browse across 1 Million Assignment Samples for Free

Explore MASS
Order Now

Request Callback

Tap to ChatGet instant assignment help

Get 500 Words FREE
Ask your Question
Need Assistance on your
existing assignment order?