Comprehensive Audit Project

Chapter 13:  Overall Audit Strategy and Audit Program The following are two situations, all involving non-public companies, in which the auditor is required to develop an audit strategy: 1.  The client has inventory at approximately 50 locations in a three state region.  This inventory is difficult to count and can be observed only by traveling by car. The internal controls over acquisitions, cash disbursements, and perpetual records are considered effective.  This is the fifth year that you have done the audit, and audit results in the past have always been excellent. 2.  This is the first year of an audit of a medium sized company that is considering selling its business because of severe under financing.  A review of the acquisition  and payment cycle indicates that controls over cash disbursements are excellent but controls over acquisitions cannot be considered effective. The client lacks receiving reports and a policy as to the proper timing to record acquisitions.  When you…

As the in-charge senior auditor on the audit engagement for JA Tire Manufacturing for the year ended December 31, 2019, you are responsible for performing risk assessment procedures related to the sales cycle. JA Tire has four sales divisions within Canada and sells primarily to large tire companies with regional warehouses that subsequently distribute to local retailers. Based on some of the risk assessment procedures already performed, you identified risks related to the fact that salespersons receive a commission on sales to distributors and the commission is calculated on a monthly basis. Your manager has asked you to perform analytical procedures as a part of audit planning to review sales information by sales division and by month to identify potential risk areas that might warrant further audit procedures related to sales.

Fast plz Star audit firm have started the annual audit of Carrefour Muscat. The auditors have a long meeting with their management. Their target is to conduct the audit during one week. The auditors have started their work. Identify which of the following is related to their audit process.      Conduct interviews     Discussing corrective action plan          Create audit procedure and plan      Identifying the risk

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CASE STUDY: HARRISONS LTD You are a new staff member of Monet & Associates, a mid-sized accounting firm and have been assigned to an engagement team that is conducting the financial report audit for Harrisons Ltd (Harrisons). The engagement team, under the guidance of the engagement partner, Vince Mater, is currently performing a preliminary risk assessment of the audit client. The following documents have been provided to you: Memo from audit partner, Vince Mater, dated 6thJanuary 2020 which includes a summary of the initial audit procedures undertaken by the engagement partner for the 31 December 2019 audit. A relevant industry outlook report provided by the Australian Construction Industry Forum published on 7 November 2019.   REQUIRED: You have been asked to assess the inherent risk of the client and perform preliminary analytical procedures as part of the audit planning process in obtaining an understanding about the client’s business and indicate where there is an increased…

Case Study: Auditor's Responsibility for Non-Financial Information As an experienced auditor at a reputable accounting firm, you've been assigned to audit a large manufacturing company's financial statements. In addition to financial data, the company also discloses non-financial information related to sustainability, environmental impact, and social responsibility in its annual report. Your audit team is tasked with evaluating the reliability and accuracy of both financial and non-financial information to provide stakeholders with a comprehensive understanding of the company's performance and operations. During the audit process, you implement various procedures to fulfill your responsibility for auditing non-financial information: 1. Understanding Non-Financial Reporting Frameworks: Begin by familiarizing yourself with relevant non-financial reporting frameworks and standards, such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). These…

Star audit firm have started the annual audit of Carrefour Muscat. The auditors have a long meeting with their management. Their target is to conduct the audit during one week. The auditors have started their work. Identify which of the following is related to their audit process. Identifying the risk Conduct interviews Create audit procedure and plan Discussing corrective action plan

Your Audit team is preparing to audit a new client in the electronic retail industry. The client imports items from manufacturers in several Asian countries and retails in a chain of shops located throughout the country.  You and your team members have access to the client's following information. ·         Prior period financial reports ·         Anticipated results for the current year ·         Industry Averages Required: Explain how you would use the information to understand your new client.

Describe SIX audit risks, and explain the auditor's response to each risk, in planning the audit of Blister Pharmaceuticals Co. Prepare your answer using two columns headed Audit risk and Auditor's response respectively.

i） Describe SIX (6) audit risks, and explain the auditor’s response to eachrisk, in planning the audit of Steel Wheel Bhd. ii)Explain the additional factors that the auditor should consider duringthe audit in relation to Steel Wheel Bhd’s in using the payroll serviceorganisation.

The  audit firm shall communicate the results of the monitoring of its system of quality control to engagement partners and other appropriate individuals within the firm: A. Quak Quarterly B. Occasionnally C. Every month D. At least annually

You've been assigned to the risk advisory department at the CPA firm of Debits & Credits. You are planning an annual IT Audit at your client. Which of the following will most influence the planning and scope of your engagement? 1) Applicable regulatory requirements 2) Applicable corporate standards 3) Applicable industry good practices 4) Organizational policies and procedures

Which of the following is true with respect to PCAOB inspections of accounting firms?a. All firms performing audits of public companies are required to have annual inspectionsconducted by the PCAOB.b. PCAOB inspections review a sample of audits conducted by firms as well as the firm’ssystems of quality control.c. All results of PCAOB inspections are made available to the public following the inspection.d. Firms performing audits of 100 or fewer public entities may elect to have a peer reviewconducted through the AICPA in lieu of a PCAOB inspection.

The Sarbanes-Oxley Act (SOX) requires that an auditor must issue an internal control report following the evaluation of internal controls. provide continuous consulting services to help prevent fraud. issue a sustainability report along with the internal control report. rotate who can lead an audit every three years.

You are the audit senior on the audit of Fit Pty Limited, a large manufacturer of clothing. Fit Pty Limited’s main market lies with 18 to 24 year olds.   This is the first year in which your firm has performed the audit. As part of the planning work, you have performed analytical procedures on an annualised basis and compared the results to industry averages and last year’s audited financial information. The results are given below:       Industry average Fit Pty Limited   Ratio 2021 2020 2021 2020 1 Current ratio 2.84 3.27 1.89 2.24 2 Receivables turnover ratio 4.9 4.6 6.3 7.0 3 Inventory turnover ratio 3.7 3.8 5.0 5.5 4 Return on total assets 7% 5% 13% 11% 5 Net profit ratio 0.06 0.06 0.04 0.04 6 Gross margin 0.20 0.26 0.20 0.18   Required:   Discuss the conclusions that you can draw about Fit’s financial position and identify potential audit risks to be investigated…

Diamond Medical Company manufactures nose maskand hand sanitizer. Its main customers are retailers who then sell to the general public. The company’s manufacturing is spread across five sites and goods are stored in its nine warehouses located across the country. You are an audit supervisor of Reynolds& Associateand in preparation for the forthcoming audit for the year ending 30 June 2019, you are reviewing the following notes your audit manager has provided you with in relation to the company’s internal controls. Diamond Medical Company has a small internal audit (IA) department. During the year, IA started a program of physically verifying the company’s assets and comparing the results to the non-current assets register, as this type of reconciliation had not occurred for some time. To date only 15% of assets have had their existence confirmed as IA has experienced significant staff shortages and several members of the current IA team are new to Diamond Medical Company. During…

Your client has enjoyed increasing brand recognition for some of its key products. This has positively affected the audit client’s profit growth, which has risen by 10% over the financial year. Required: Explain the impact of this issue on your assessment of a) audit risk, (by indicating the impact on the relevant components) and b) the audit strategy that would be adopted.

You are the senior in charge of the audit of Jewels Manufacturing Limited. The information below has been prepared to assess the going concern of the company at the planning stage of the audit and to identify other issues that may impact on audit risk.  Ratio Unaudited 2020 figures 2019 2018 2017 Inventory turnover 1.45 1.83 2.69 3.35 Quick asset ratio 0.97 1.4 1.81 1.8 Accounts Receivable turnover 3.8 5.5 4.1 5.4 Required: Identify issues that affect going concern and/or raise issues and explain the audit steps that you would undertake to minimise audit risk. Complete the table.

You are the senior in charge of the audit of Jewels Manufacturing Limited. The information below has been prepared to assess the going concern of the company at the planning stage of the audit and to identify other issues that may impact on audit risk.    Ratio Unaudited 2020 figures 2019 2018 2017 Inventory turnover 1.45 1.83 2.69 3.35 Quick asset ratio 0.97 1.4 1.81 1.8 Accounts Receivable turnover 3.8 5.5 4.1 5.4   Required: Identify issues that affect going concern and/or raise issues and explain the audit steps that you would undertake to minimise audit risk.

You are the senior in charge of the audit of Jewels Manufacturing Limited. The information below has been prepared to assess the going concern of the company at the planning stage of the audit and to identify other issues that may impact on audit risk.    Ratio Unaudited 2020 figures 2019 2018 2017 Inventory turnover 1.45 1.83 2.69 3.35 Quick asset ratio 0.97 1.4 1.81 1.8 Accounts Receivable turnover 3.8 5.5 4.1 5.4   Required: Identify issues that affect going concern and/or raise issues and explain the audit steps that you would undertake to minimise audit risk. Complete the table below in the answer box.

Your client portfolio as an audit manager at CC & Co also includes TT Co which is a listed financial institution offering loans and credit facilities to both commercial and retail customers. You have received an email from the audit supervisor who is currently supervising interim testing on systems and controls in relation to the audit for the year ending 31 October 2018. The email gives the following details for your consideration: One of the audit team members, Jones, has provisionally agreed to take out a loan with Thomas Co to finance the purchase of a domestic residence. The loan will be secured on the property and the client’s business manager has promised Jones that he will ensure that she gets ‘the very best deal which the bank can offer.’ The payroll manager at TT Co has asked the audit supervisor if it would be possible for CC & Co to provide a member of staff on secondment to work in the payroll department. The payroll manager has struggled to recruit a new…

QUESTION: Using the information below, propose and elaborate on control measures that Carico should adopt to minimize the likelihood of recurring fraud, while also outlining how each control would mitigate the associated risk. Carico Ltd, a manufacturer of construction blocks, operates with a fiscal year-end of June30th, 2021. With a trading history spanning over 25 years, Carico caters to a diverse range ofcustomers, including both large and small hardware stores nationwide.The company's operations encompass a manufacturing plant, five warehouses, and a centralhead office. Following the manufacturing process, the blocks are stored in one of thewarehouses until they are dispatched to customers. It is important to note that Caricocurrently does not possess an internal audit department.The following is a reflection of the sales system: Each customer is assigned a distinct customer account number, which is utilized toinput sales orders upon receiving written requests from customers. The…

Which of the following BEST (select one) describes why auditing can be viewed as a continuous cyclical process? a) The audit plan is used to develop the audit schedule. b) Many audit departments review the same areas each year as part of the audit plan. c) Historical and current information from audits should be incorporated into the risk assessment. d) Businesses go through economic cycles, so audit plans must go through cycles.

The following are various activities an auditor doesduring audit planning.1. Determine the likely users of the financial statements.2. Identify whether any specialists are required for the engagement.3. Send an engagement letter to the client.4. Tour the client’s plant and offices.5. Compare key ratios for the company to those for industry competitors.6. Review management’s risk management controls and procedures.7. Review accounting principles unique to the client’s industry.8. Identify potential related parties that may require disclosure.For each procedure, indicate which of the first four parts of audit planning the procedureprimarily relates to: (1) accept client and perform initial audit planning; (2) understandthe client’s business and industry; (3) assess client business risk; (4) perform preliminaryanalytical procedures.

Describe any 4 (Four) substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to the matters identified regarding the inventory valuation of Polobalancing Dog products.

25 As the process of auditing is involves many stages as per ISA, the auditor after setting up a closing meeting submits the final audit report to ___________in___________ a. Owners, AGM b. The chief Accountant, AGM c. The chief Executive Officer, AGM d. The Chief Financial Officer, AGM

The audit of Fruitful Hill Ventures’ financial statements for the year ended 30 November 2017 is nearing completion and the auditor’s report is due to be signed next week. Fruitful Hill Ventures manufactures parts and components for the aviation industry. You are conducting an engagement quality control review on the audit of Fruitful Hill Ventures which is a listed entity and a significant new client of your firm. The draft financial statements recognise revenue of $8.7 million, assets of $15.2 million and profit before tax of $1.8 million. You have identified the following issues as a result of your review:(i) The planned audit approach to trade payables was to place reliance on purchasing controls and keep substantive tests to a minimum. During controls testing on trade payables, from a random statistical sample, the audit team identified three purchase orders which had not been authorized by the procurement manager. On review of the supporting documentation, the audit team…

27 As a student of Auditing subject, you are expected to be fully aware of the different types of audits and their purposes. Choose the type of audit which builds confidence in the integrity of corporate reporting for the benefit of stakeholders and society at large. a. Environmental Auditing b. Value for Money c. Internal Auditing d. External Auditing

You are a new staff member of Monet & Associates, a mid-sized accounting firm and have been assigned to an engagement team that is conducting the financial report audit for Harrisons Ltd (Harrisons). The engagement team, under the guidance of the engagement partner, Vince Mater, is currently performing a preliminary risk assessment of the audit client. The following documents have been provided to you: Memo from audit partner, Vince Mater, dated 6th January 2020 which includes a summary of the initial audit procedures undertaken by the engagement partner for the 31 December 2019 audit. A relevant industry outlook report provided by the Australian Construction Industry Forum published on 7 November 2019.   REQUIRED: You have been asked to assess the inherent risk of the client and perform preliminary analytical procedures as part of the audit planning process in obtaining an understanding about the client’s business and indicate where there is an increased likelihood of…

Case study     The audit of Megatron plc is under consideration by the executive directors. The group has been audited by one of the international audit firms, Tickitt & Run, for the last fourteen years. Tickitt & Run also carry out certain internal audit functions, have advised Megatron on several major acquisitions and also provide computer consultancy services and finance consultancy. The senior partner of Tickitt & Run is a regular guest at several Megatron corporate events and Tickitt & Run were joint sponsors with Megatron of a tennis tournament in Antigua where they entertained the board of Megatron at an end of tournament party, at which several major tennis stars were present.     After the corruption scandal that caused the downfall of previous CEO Sir ‘Billy’ Bustler and Chairman Lord Footler, the new CEO, a Scottish chartered accountant called McTavish, is reviewing all professional relationships with a view to enhancing the corporate governance in the…