Audit Approach

Also another risk factor that will increase the company’s inherent audit risk is the situation of its cash flow. If a retail company has a negative cash flow which means it not generating enough cash to maintain its operations, the risk of misstatement will accordingly increase. As stated in Q1, auditors should spend more efforts on examine the cash accounts if the cash flow of the company shows some abnormal signals.

Using computer-based accounting systems does have its disadvantages, such as certain laws pertaining to confidentiality, the requirement to protect against the loss of data through power failures, the

Audit risk is the risk that the auditor gives the wrong opinion – this can either be stating errors when there are none or when there are errors stating that there are none. This risk cannot be eliminated as auditors can only provide a reasonable assurance and not absolute, but instead this can only be managed and reduced to a minimum.

CAS 300 requires auditors to their audit using a risk based model where the nature, timing and extent of audit procedures are based on the assessed risk of material misstatement. Pickett (2006) argues that for audits to be effective and efficient, much of the audit effort should be focused on areas that are considered to pose the highest audit risk. Additional audit procedures should be linked to individual audit assertions whereas other audit procedures need to be performed as and when needed. Thus, for an audit plan to be put in place, it is necessary for an auditor to come up with a risk profile of the client comprising an understanding of the business operating by the audit client, assess business risk and also perform its preliminary analytical review.

Describe how you would conduct the audit process, incorporating the analytical procedures you would use to investigate selected business transactions?

#3. Inherent Risk Factors; audit planning decisions. Businesses that face extreme competition are susceptible to many inherent risk factors – the measurement of the auditor’s assessment of the likelihood that there are material misstatements in an account balance before considering the effectiveness of internal control. Complex valuation issues and related party transactions are two such factors that would affect audit planning decisions. Valuation issues may lead the audit team to request more evidence, if they choose to accept the audit at all. Risks such as inventory turnover leading to potential misstatements of inventory, costs of goods sold, or obsolescence of inventory may influence the audit firm’s decision to hire outside specialists to assist in the audit. Another inherent risk factor, client business risk (competitive

To illustrate the linkage of management assertions to audit evidence in the context of auditing Notes Payable.

The auditor also obtained an understanding of the business and its environment in order to assess the risk of material misstatement. ISA 310 requires a reasonable understanding of the client’s business and industry. The nature of the client’s business and industry affects the client business risk and the risk of material misstatements in the financial statements. The auditor used the knowledge of these risks to determine the appropriate amount of audit evidence gathered. The auditor through experience is aware of the exposure to problems resulting from the auditor’s failure to understand comprehensively the nature of transactions in the client’s business. The understanding helped the auditor to evaluate the design and implementation of specific controls that could stop or discover and rectify material

Also another risk factor that will increase the company’s inherent audit risk is the situation of its cash flow. If a retail company has a negative cash flow which means it not generating enough cash to maintain its operations, the risk of misstatement will accordingly increase. As stated in Q1, auditors should spend more efforts on examine the cash accounts if the cash flow of the company shows some abnormal signals.

The purpose of this memo is to address the topics of inherent risk, control risk, and detection risk. We will do this by addressing an accounting policy stated in the company’s 10-K report. We will discuss risks associated with the accounting policy, recognize company controls, and test those controls. Substantive analytics and tests of details will follow. Lastly, we will discuss fraud and extended procedures to detect fraud. To end, we will conclude by outlining the main points and emphasizing our audit plan.

The audit evidence should include test on controls and inquiry for how these issues are handled, and possible external confirmation of the firm’s lawyers as to the potential settlement and court costs as well as possible duration of the

It is the susceptibility of an account balance or a class of transactions to a material misstatement, assuming that there were no internal controls. The inherent risk at Telstra is that there may be certain types of misstatements that may not be identified during the course of audit. The inherent risk associated with the audit of Telstra is ascertained based on the nature of the business. Telstra Corporation Limited have these kinds of risks:- inventory valuation risk, intangible assets valuation risk, foreign currency risk, interest rate risk, tax risk, amendment risk and compliance risk. All the above stated risks pose potential material misstatements on the financial statements and thus need to be addressed (Telstra

When engaged in auditing a public firm, such as Apollo Shoe Inc., an auditor must determine when to trust in the company’s internal controls and when to ascertain auxiliary testing methods are obligatory to analyze control risks. The sales and collection cycle is rather a substantial fraction of the audit because this unique segment employs a multitude of documentation and records ranging anywhere from customer and sales orders, shipping documents, credit memos, and general journal entries; therefore, a working

Business risks that plague today’s businesses can be far reaching and varied. The greatest business risk any company failing to continue as a going concern. The fundamental accounting principle of continuing as a going concern is a top consideration when conducting an Information

This article initiates with the introduction on what is audit planning. It basically addresses the audit plan strategy of K & S Corporation limited’s Financial Statements. Being an external auditor of the company, key factors to be considered in auditing the financials of the subject company have been discussed in the article. The most significant accounts at risk being materially misstated have been critically examined citing the possible risks associated with such accounts. Last but not the least, the article concludes with recommendations with respect to audit assessment plan of the company. Hence, this article seeks to act as a ready reckoner guide for an audit manager in audit planning of K & S Corporation Limited.