The effect of knowledge transfer

Running head: AUDITING
Auditing
Name of the Student
Name of the University
Author’s Note

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Audit Planning Memorandum
Date 27th March 27, 2020
To Senior Audit Partner
Prepared By Engagement Manager
1. Business Information
Corby is a leading Canadian company involves in manufacturing, marketing and importing of spirit and wines. The
main growth driver of the company is its diverse brand portfolio allowing it in ensuring profitable organic growth
with strong and consistent cash flows. As Corby is a publicly traded company, its shares are traded in Toronto Stock
Exchange under the name of “CSW.A” and “CSW.B”. Main source of revenue of Corby is sales of its owned-brands
and it also earns commission income from the non-owned brands in Canada.
2. Risk Assessment
Risk assessment of Corby is based on assessing the external and control environment of the client’s Board;
and the overall assessment of the inherent risk of Corby’s accounts is considered as high, medium or low based on
the assessment outcome. The significant audit risk areas are shown in below.
3. Review Risk Areas
Revenue – Since revenue is the main source of income of Corby, it could be materially overstated due to
demonstrate improved financial performance. This needs to be assessed.
Expenses (Marketing, Sales and Administration) – There is a specific risk that the expenditures incurred during
the year may surpass the budget; and thus, this needs to be checked.
Trade Receivables – Since sales is related to receivable, increase in sales leads to increase in receivables. However,
accounts receivables have decreased in Corby and this need to be checked.

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Inventories – Increase in sales reduces the amount of inventory due to the clearance of the same. However, Corby
has reported increase in inventory even after increase in sales. This should be checked.
4. Approach
The audit approach will be risk-based. As a part of audit, it will be determined to which extent the auditor will rely
on Corby’s internal control procedures and management activities for preventing or detecting the risk of material
misstatements and the potential audit risk areas will be addressed through necessary tests. In case internal control
areas are weak, substantive audit procedures will be undertaken.
5. Materiality
For the audit of Corby, the materiality base will be 2% (0.02) and the benchmark will be total assets. Therefore, the
materiality threshold will be 2% on total assets. It is demonstrated in below:
Total Assets × 0.02
$218,331,000 × 0.02
=$4366620.
6. Preliminary Analytics
There are two tasks that will be completed under preliminary audit procedures. First, there will be examination of
the internal control of Corby associated with the risk areas. Second, there will be preliminary analysis of the selected
account balances.
7. Suggested Procedures
For sales, the suggested procedure is creating comparative summarization of all major revenue accounts including
comparison of current year’s amount with historical data. For expenses, the suggested procedure is comparing the
expenses to the budget and assessing any unexpected variance. For trade receivables, the suggested procedure is to
confirm the accounts receivables, especially the large amounts. For inventory, the suggested procedure will be to
observe the physical inventory count process.

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