Audit Reporting for Reserved Retail

This assignment delves into the world of audit reporting focusing on Reserved Retail, a clothing company. Students will examine various aspects of audit reporting, such as memorandum format, quality control audits, and specific recommendations for enhancing the company's financial reporting practices. The assignment emphasizes a practical understanding of audit procedures and their application in a real-world business context.

Running head: AUDIT REPORTING
AUDIT REPORTING
Name of the Student:
Name of the University:
Author’s Note:

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AUDIT REPORTING
Table of Contents
XI. Memorandum.......................................................................................................................2
XII. Opinion of the Auditor.......................................................................................................3
XIII. Letter of the Auditor to Board...........................................................................................3
XIV. Quality Control Audit Report...........................................................................................5
Reference....................................................................................................................................6

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XI. Memorandum
Prepared By: ____ Date: _____
Reviewed by: _____Date: _____
The main purpose of this audit memorandum is to make the audit process more effective and
efficient. The main purpose of conducting the audit is ensure that the financial statements of
Reserved retail is showing true and fair view and the financial statements is free from any
discrepancies. This memorandum is subdivided into four main categories:
1. Introduction: The audit is being conducted on Reserved Retail Company which
operates in Poland and operates polish clothing store and has a number of branches in
several countries.
2. Management concerns: As per the audit process the main concern of the company is
the internal control system of the business. The management is conducting an audit is
to ensure that there is no frauds occurring and the financial statements is showing true
and fair view.
3. Risk Assessment: The risks which arise as per the complexity of audit procedures is
audit risks which depends on the nature of the audit and materiality risk and various
business risks which arises in business (Johnstone, Gramling and Rittenberg 2013).
4. Nature and Scope of Audit: The audit will be conducted while taking into
considerations the nature of the business which is clothing industry. The auditor will
also be considering the internal control and management policies and representations
while collecting audit evidences (Knechel and Salterio 2016). The scope of audit
means the timing and collections of evidences in the process of audit.

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XII. Opinion of the Auditor
The purpose for which an audit is conducted by an auditor is to form an opinion on
the financial statements on the basis of which it is decided whether the financial statements
are showing true and fair view or not (Banimahd, HASAS and Yazdanian 2014). The
financial statement of the company shows the company has fairly depicted the items of the
profit and loss account and balance sheet (Budescu, Peecher and Solomon 2012). The
financial statements is showing all the relevant information and the company has followed all
the relevant accounting principles and standards. The auditor will consider whether there
were any misstatements in the financial statements while conducting the audit and whether
these misstatements were material or not. Before making an opinion the auditor will consider
whether there was any limitation on the part of management while the process of audit was
being conducted (Carson et al. 2012). The auditor of Reserved Retail will also be checking
the values of inventory and other assets and liabilities to ensure whether they are correctly
depicted or not. The financial statement of Reserved retail company shows that all the aspects
are proper and their respective values are properly depicted. In such a case the auditor will be
issuing an unqualified report. An unqualified report states that there is no material
misstatement in the financial statement of Reserved Company. In other words the company’s
financial statements are showing true and fair view. However the auditor can add comments
on the weakness which was identified in the internal control or presentations of financial
statements during the course of audit in his report.
XIII. Letter of the Auditor to Board
The auditor has suggested the following recommendations to Reserve company in
order to overcome the weakness which are given below:

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1. During the course of audit, while conducting test control procedures and compliance
test the internal control depicted certain weakness such as outdated technology,
improper recording of transactions and other minor weakness. The auditor has to plan
his whole audit process before starting the process of audit (King 2014). The company
needs to overcome this weakness by installing a new technology with use of
computers and digital software. The company can install such recording system of
transactions such that it is useful in creating an audit trail which can be followed even
by the management in case a scrutiny is required.
2. The company needs to install a proper inventory control system where proper records
are kept for all types of stock such as raw materials, finished products or Work in
progess (WIP). The company needs to ensure that the credit sales are recorded and the
when the debt are realised the same is recorded. This is an area where most likely
frauds can take place (Vona 2012).
3. Regular internal check should be conducted by the management which will ensure
that no fraud takes place in the business.
4. The board should appoint supervisors at different levels such as sales, administrations,
production and such individuals should look after this one job in order to promote
efficiency. This way the accountant will only be responsible for the financial aspects
of the business and for the same he will be accountable.
5. The cash records and bank records should be checked with in a span of a month or
two to ensure the cash flows and to deny any presences of manipulations in these
statements.

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XIV. Quality Control Audit Report
The quality control audit report focuses on the quality aspects of the business
(Carcello 2012). The quality aspects of the Reserved Company are the production area, sales
area, marketing area of the clothing company. The company’s production area is crucial as
the inventory of raw materials is converted in finished products. This is then sold to
customers from where cash is generated. The auditor needs to identify the crucial areas of
quality of the business and suggest to the management of the business if any improvements
can be done in that particular area.

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Reference
Banimahd, B., HASAS, Y.Y. and Yazdanian, N., 2014. EARNINGS MANAGEMENT AND
AUDIT OPINION: EVIDENCES OF PRIVATE AUDIT FIRMS.
Budescu, D.V., Peecher, M.E. and Solomon, I., 2012. The joint influence of the extent and
nature of audit evidence, materiality thresholds, and misstatement type on achieved audit
risk. Auditing: A Journal of Practice & Theory, 31(2), pp.19-41.
Carcello, J.V., 2012. What do investors want from the standard audit report?. The CPA
Journal, 82(1), p.22.
Carson, E., Fargher, N.L., Geiger, M.A., Lennox, C.S., Raghunandan, K. and Willekens, M.,
2012. Audit reporting for going-concern uncertainty: A research synthesis. Auditing: A
Journal of Practice & Theory, 32(sp1), pp.353-384.
Johnstone, K., Gramling, A. and Rittenberg, L.E., 2013. Auditing: a risk-based approach to
conducting a quality audit. Cengage learning.
King, N., Oracle International Corp, 2014. Audit planning. U.S. Patent 8712813B2.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Vona, L.W., 2012. Fraud risk assessment: building a fraud audit program. John Wiley &
Sons.