School of Accounting and Finance

ASSIGNMENT
BAO5524 PROFESSIONAL AUDITING
REPORT
Penalty
- Exceeding the 3000 words limit: TWO (2) marks deduction.
- Exceeding the 30% similarity index limit: FOUR (4) marks deduction.
- Late submission: TWO (2) marks deduction per day including weekend.
Plagiarism
Plagiarism is defined as presenting someone else’s work, including the work of
other students, as one’s own. Any ideas or materials taken from another source
for either written or oral use must be fully acknowledged, unless the
information is common knowledge. All students are strongly advised to do the
following:
- goto http://wcf.vu.edu.au/GovernancePolicy/PDF/POA040915000.PDF

- enter School of Accounting and Finance
- enter Student Resources
- read the PLAGIARISM POLICY.
Semester TRI3_ 2019
1. Executive summary
The assessment would be analysing the financial statements of Pro Medicus Ltd
which is engaged in imaging and medical management. The assessment would be
considering auditing aspect for the business and therefore would be identifying key
accounts which are shown in the financial statement of the company. The auditor
would be assessing the audit engagement by referring to the “ASA 210 Agreeing the
Terms of Audit Engagements” before accepting the audit of the business. The auditor
would be planning the audit procedures step by step considering the past trends and
this is done referring to “ASA 300 Planning an Audit of a Financial Report”. The
auditor would be assessing the risks which are associated with the business and also
point out steps which the auditor would be taking for collecting appropriate audit
evidences. The aspect of materiality would be considered for the purpose assessing
the risks which is associated with the business and therefore the provisions of “ASA
320 Materiality in Planning and Performing an Audit” would be followed. In
addition to this, the analysis would also be showing computation of planning
materiality for the business on the basis of which risk assessment would be done by
the auditor of the business. The assumptions which is considered by the senior
management for computing the planning materiality is also shown in the discussion
below. Furthermore, the analysis would also be presenting the impacts of the risks
accounts which have been identified earlier in the financial position of the business.

2. Introduction
The main purpose of the assessment is to conduct an analysis on Pro Medicus
Company which is engaged in providing radiology information systems (RIS), Picture
Archiving and Communication Systems (PACS). The analysis would be conducted
from the perspective of audit and therefore the annual report of the company would be
considered for 2018 to check if everything is reported fairly and also identify accounts
which can be subjected to risks (Mio 2013). The different accounts which are
susceptible to risks of material misstatement would be identified. The audit
procedures which can be undertaken by the business would also be stated in details in
the assessment. The analysis would also be showing the level of risks which the
auditor would be facing while formulating an opinion on the financial presentation of
the company. In accordance with the provisions of “Para 9 of ASA 210 Agreeing the
Terms of Audit Engagements”, the auditor needs to agree to the terms and conditions
of the audit engagement with the management of the company. In the case of Pro
Medicus, the external auditor is in agreement with those charged with governance in
regards to the audit fee which is to be charged by the auditor and the same is set to be
$ 130,000. The terms of audit engagement has also been made clear in the audit
engagement letter which is provided by the auditor.
In order to effectively conduct audit for the business, proper planning and
strategy formulation is an important step which needs to be undertaken by the external
auditor. As per “Para 7 of ASA 300 Planning an Audit of a Financial Report”, an
effective strategy needs to be formulated or planned beforehand regarding the
procedures which is to be applied by the auditor and which accounts needs to be
analysed in details (Auasb.gov.au. 2020). The standard also states the timing, extent
and nature of audit evidences which needs to be collected for identifying material
misstatements. The audit evidences would give an idea regarding the overall risks
which is faced by the business and accordingly the auditor would provide his opinion
on thee presented annual report. The analysis would also be showing the estimation of
planning materiality for the business and how the same would assist in collection of
audit evidences. Further the assessment would be showing the impacts of the
identified risks accounts for the business.

3. Key information
a) Our understanding of the client
The business of Pro Medicus is considered for the purpose of analysis and the
same would be conducted from the perspective of audit of a business. The
company is known to provide IT solutions and radiology information system. The
company has experience in assisting the clients perform medical care for patients
and the business also streamlined healthcare management practices for the benefit
of its customers. The strength of the business is client visualization and providing
useful information which is considered to be best provided service by the
company (Promed.com.au. 2020). The company has recently listed in ASX for the
purpose of expanding its market value and thereby achieving more growth in its
operations. In order to understand the reporting framework which is followed by
the business, the annual report of the company would be considered for the year
2018. The different items which are recorded would be analysed so that any risk
which may be present can be identified. It is important to know regarding the
nature of operations of the client mainly because of ensuring that the entity has
followed all legal regulations which is applicable to the business as per the
requirements of “ASA 250 Consideration of Laws and Regulations in an Audit
of a Financial Report”. This is one of the criteria which are followed by the
auditor before he accepts the audit of the company.
As per the provisions which are stated in ASA 315, the auditor needs to
appropriately consider the business environment and the nature of operations
before commencing the audit for the company. This is considered to be important
as the same gives insights to the auditor regarding the important matters which are
material (Auasb.gov.au. 2020). The auditor needs to gain ample knowledge of the
workings of the business and also in the process identifies key accounts which are
most susceptible to risks of misstatement. Furthermore, an understanding of the
nature of the operations of business also assists the auditor in documentation
process as per “ASA 230 Audit Documentation” which is considered to be
important for future reference.
b) Our assessment of significant accounts
The financial statements of Pro Medicus are considered for the identification
of key accounts which can have material misstatement affecting the financial
position of the business as a whole. In order to identify key items from the
financial statements, the concept of materiality should be given importance
(Baldacchino, Tabone and Demanuele 2017). As per “Para 5 of ASA 320
Materiality in Planning and Performing an Audit”, the concept of materiality is
not only important in the planning stage but also in the stage of performing the
audit as the same guides the auditor regarding which items are material and where
more audit procedures would be applicable (Auasb.gov.au. 2020). In order to
assess the materiality for any items, the professional judgement of the auditor is
applicable on the basis of which performance materiality would be computed.
The key accounts which are considered for the purpose of risk assessment
considering the provisions of ASA 320 are provided below in table format:
Account Name Movements Type of Risk
Cost of Sales Declined in comparison
to previous year
The auditor needs to
assess the reason for the