Audit of ABC Learning

This presentation discusses the relevant auditing standards applicable to the auditor conducting audit of ABC Learning. It also includes tools applied, analysis, findings, recommendations, and conclusion.

Audit of ABC Learning

INTRODUCTION
 The analysis of the financial statement of ABC limited is the ultimate purpose of this
presentation.
 The duties of the auditor is limited to comment on the financial statement. i.e. showing
true or fair view or not.
 The following presentation is based on the case study of ABC Learnings.
 The presentation will help in the understanding importance of the laws and regulations
laid down by the statute and to defend involvement in any malpractices.
 ASA 200, ASA220, ASA230, ASA 315, ASA 500 etc. are some relevant audit
standards, which has substantial relevance in this case.

LITERATURE REVIEW
 In this section of the lecture discussion will be made in respect of the relevant Auditing
standards that are applicable on the auditor conducting audit of the company under the
given circumstances
a) ASA 200(quality control for an audit of financial report and other historical
financial information)
b) ASA 220(quality control for an audit of financial report and other historical
financial information)
c) ASA 230 (Audit documentation)

LITERATURE REVIEW
d) ASA 315 (Identifying and assessing the risk of material misstatement through
understanding the environment and its environment)
e) ASA 500 (Audit Evidence)
f) ASA 240 (consideration of the laws and regulations in the audit of a financial
report)

Tools Applied
 In the course of analysis of the financial statement the entity needs
some tools. That are stated below:
Trend analysis:
 This enables the projection of the future performance using the present data (Barnes
2016).
Beneish M score:
This enables to find out whether the company has manipulated its data or not using
various financial ratios of the company (Bentley et al. 2017).

Tools Applied
DuPont analysis:
 This analysis helps us to determine whether the company is giving the returns that is
expected off its shareholders. this tool makes use of three ratio namely total asset
turnover ratio, net profit margin and financial leverage of the company (Bonevski et
al., 2015).
Common size statement:
the tool make use of a particular item of the financial statement as the base figure and
projects the other items as percentage of the base figure

Analysis
 ASA 500 ( Audit evidence):
the auditor needs to collect sufficient and appropriate audit evidences in
the auditing procedure.
 ASA 240 (consideration of the laws and regulations in the audit of a financial
report):
In this standard, the auditor needs to prescribe the knowledge of laws
and regulation that are attract by the clients business and the client has made
all the application of the applicable statues.
 ASA 315 (Identifying and assessing the risk of material misstatement through
understanding the environment and its environment):
The auditor must observe the internal and external environments of the
business activities of the client to find out any material misstatement in the
financial statement

Analysis
 ASA 220 (quality control for an audit of financial report and other historical
financial information):
This standard elaborates the required steps that the auditor is compel to
do in the course of audit to ensure the quality and appropriateness. (steps in the
notes)
 ASA 230 (Audit documentation):
This standard refers to the preparation and preservation of the audit
working paper. The evidences that are find in the auditing procedures .(steps in
the notes)
 ASA 200 (the overall objective of the auditor and the conduct of audit in
accordance with the Australian auditing standards):
The auditor is only liable to form an opinion on the financial statements
of the client weather they are showing true or fair view or not

Summary of Findings
The result of the analysis can be summarized in the points provided
below:
 The expenses of the company has increased at a higher rate than
the operating income. Therefore the overall EBITDA and EBIT has
reduced.
 The company has not been able to generate higher return for the
shareholders.
 The cash and reserve along with the reserve and surplus of the
company has shown significant decline.
 The company has been engaged in the manipulation of the data.
 The banish M score of the company is -2.22 it is a very negative sign
for the company.

Recommendation
The following recommendation can be given after the overall analysis:
 In order to increase the profit the company should reduce take
appropriate for reduction in the operating cost.
 The company should avoid manipulation of accounts.
 The company should bring the reserve and surplus to the normal
level.
 The fresh capital should be utilized properly by the company.

Conclusion
 After conducting the overall analysis of the company the following recommendations
can be made to the company with relation to its conduct of business activities.
 The company should not relay on the auditor the find fraud and
errors.
 The auditor must aware that the company must have obey the
applicable laws and obligation.

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