A120 Identifying Risks through Understanding the Entity - Audit Programme

Scenario
Brien& Associates Chartered Accountants (BA) is a registered audit firm based in Auckland.
Five of the sixpartners in the firm are licensed auditors in accordance with the Auditor
Regulation Act 2011.
As the Managing Partner, Mr. Brien wants to grow the firm’s audit and assurance
practice.Considering the partners’ extensive experience in auditing FMC reporting entities,
Brien has identifieda potential audit client; Comvita Limited, which is listed on the New
Zealand Stock Exchange (Note: the entity and its auditoris unaware of Brien’s interest in
acquiring the audit).
Independence confirmations from all the audit partners of Brien &Associates showed that
there are no independence threats in existence between the partners, their families and related
entities, and the aboveentity.
Brien’s instructions to the audit teams are to evaluate the engagement risk of acquiring the
audit of the Comvita Limitedfor the 2018 financial year end. In addition, the audit team is to
identify risk factors and assess inherent risk, through performing risk assessment procedures
and gaining an understanding of the group. Each audit team will prepare power point slides
highlighting the inherent risks. The audit procedures are to be performed in accordance with
the requirements of New Zealand auditing standards (ISA(NZ)).
BA audit methodology for calculation of planning materiality is shown below. The base
selected is the one determined to be the driver of value to the business.
Base Base Base
Profit before tax 5% Gross profit 2% Equity 1%
Revenue 0.5% Total assets 0.5%
Instructions
Audit teams of 3-4 students are to be selected as set out inthe Audit Team Selection and
Operation section on the following page.
Each audit team is required to complete audit programmes (A100, A110 and A120) and work
papers for three sections of the audit file for one entity. The audit team may utilise the
group’s annual and interim financial statements and other publicly available information in
completing the audit programmes.

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Required
1. You are required to complete the audit programme :
A120 Identifying Risks through Understanding the Entity (40 Marks)
For the audit programme, you must:
i. Document the audit work done in the format of audit workpapers. Cross
reference each workpaper to the audit programme in the W/P ref
column.
ii. Sign off each procedure in the audit programme to show that it has been
successfully completed. Enter Yes or No and the auditor’s initials in
the PSC?/(Y/N)Initials column.
iii. Complete the conclusion, with reasons, based on the audit procedures
completed.
Notes
1. Marks will be awarded for correct identification and analysis, interpretation of
standards and application to the audit of the entity; do not just repeat the organisation’s
information.
2. Use the APA referencing system to acknowledge all information from other sources,
includingannual and half year reports, financial statements and website. Refer to:
http://libguides.unitec.ac.nz/apareferencing.
Confidentiality
For the purposes of this assignment, you are to utilise publicly available information
ONLYon Comvita Ltd. You are NOT to approach the company, auditors or any of their
personnel directly.
McKnight & Associates Chartered Accountants
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