Advanced Auditing and Assurance

Advanced Auditing and Assurance
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Contents
Question 1........................................................................................................................................3
Question 2........................................................................................................................................5
Question 3........................................................................................................................................7
Question 4........................................................................................................................................8
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Question 1
Briefing notes
To: Audit engagement partner
From: Audit manager
Subject: Audit planning for Yates & Co
Introduction
These below briefing notes are written in support of client Yates Co's audit plans for the fiscal
year ended 30 June 20X5.
Notes start with an assessment of the major risks of content misstatement that should be taken
into account when planning audit. The audit protocols are then detailed in notes, and they cover
two topics: deterioration of land, factory, and machinery, and capitalised construction costs.
A discussion is provided on the use of an auditor’s expert in the audit of the company’s
biological assets. Finally, a member of the client’s staff has alerted us to some suspicious
behaviour, which could indicate a breach of law and regulations. The notes discuss this issue and
recommend actions to be taken by our firm (Wang, Zhao and Chang, 2021).
(a) Evaluation of significant risks of material misstatement
Preliminary analytical methods' results
Several possible risks of substance misstatement are being identified based on the restricted
analytical techniques that have been undertaken.
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First, the actual ratio has greatly improved, increasing from 14 in 20X5 to a forecast figure of 26
in 20X6. The current liabilities in 20X5 were $1564 million ($219 million/14) and thus are
expected to be around $1288 million in 20X5 ($335 million/26) based on the details presented.
Current assets expected to rise by 53%, while current liabilities expected to decrease by 176%.
Considering that cash flow seems to be reasonably stable in the management reports, there is a
possibility that other current-assets, such as stock and receivables may be overstated.
The addition of $450,000 prepayment related to rebuilding the destroyed plant, though, will at
least partially justify the rise in current assets; these are addressed in more depth later in briefing
notes.
There's also chance that current obligations are understated; which is particularly true
considering that current obligations provide $450,000 provision for repairing the destroyed plant,
according to finance officer.
Gearing ratio expected to change just slightly, from 32 percent to 28 percent. The making the
point that the firm has taken $375,000 debt to fund research and innovation contradicts this drop
in gearing ratio (RAJAPRASAD and PRASAD, 2021).
If there has been repayment of finance that we are uncertain of, gearing ratio is expected to rise.
Both the profit margin as well as return on capital invested have increased by small figure. Since
the corporation's offers including discounts to consumers could have a detrimental impact on
profit margins, increases in ratios may suggest a possible overstatement of operational
performance throughout the audit.
Another factor worth investigating is online purchases, which are expected to grow by 905% this
year. This is a substantial boost, and although the finance director claims that the rise in revenue
is due to promotional campaign's popularity, this would have to be verified.
There is chance of overstating revenue when it comes to internet transactions, which is discussed
more down There's also possibility that sales from other channels has been exaggerated.
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