Audit and Assurance in PDF

Running head: AUDIT AND ASSURANCE
Audit and Assurance
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1
Contents
Part 1:...............................................................................................................................................2
Sub part (a):.................................................................................................................................2
Sub part (b):.................................................................................................................................4
Part 2:...............................................................................................................................................6
References:......................................................................................................................................8

2
Part 1:
Sub part (a):
Adopted by PCAOB and approved by Securities and Exchange Commission of the
United States of America AS 2110, identifying and assessing the risk of material misstatement in
financial statements must be followed by the qualified auditors during the course of auditing of
financial statements to ensure that the audit opinion in regards to material misstatements in
financial statements is appropriate and in accordance with the relevant auditing standard
applicable in the country.
Requirements in respect of processes to identify and assess the risk of material misstatements
have been established in AS 2110 and the auditors are under obligation to follow the standard of
auditing to conduct audit efficiently. Taking into consideration the processes necessary to
identify account fluctuations and assess the risk of material misstatements in AS 2110 a brief
discussion on the appropriateness of the account fluctuation analysis is made here (Amzelt,
2017).
As per the auditors, the following three accounts have been identified as highly risky:
I. Inventory for price fluctuation.
II. Revenue expected to be inflated by inclusion of fictitious sales.
III. Accounts receivable again expected to be inflated due to inclusion of fictitious sales
(Blay, Kizirian and Sneathen, 2017).
Now let us, take into consideration the information provided in financial statements to assess
whether the processes and procedures followed by the auditors are in accordance with AS 2110
to assess the account fluctuations (Cassell, Drake and Rasmussen, 2018).

3
Firstly, let us check the account fluctuations of few accounts from the financial statements to
assess whether the inventory has really been fluctuated to be included in the list of highly risky
accounts.
As of: 3/31/20x2 12/31/20x1 3/31/20x1 Fluctuation
(year wise)
Cash (Store front) 125,498.
76
135,135.
15
151,293.
51
(25,794.
75)
Cash (Corporate accounts) 293,728.
03
210,019.
06
57,069.
58
236,658.
45
Inventories:
Ingredients 25,190.
66
25,580.
09
26,779.
44
(1,588.
78)
Cake boxes and cupcake cups 1,423.
05
1,190.
10
434.
05
98
9.00
Beverages 3,340.
30
3,260.
80
2,348.
50
99
1.80
The above table containing few specific accounts and the changes in these accounts over a period
of 12 months, i.e. from 20x1 to 20x2. The inclusion of inventory in the above table is mainly due