Auditing Theory and Practice

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
Name of the Student:
Name of the University:
Author Note:

2AUDITING THEORY AND PRACTICE
Executive summary
In the p-resent report, detailed analysis of the various aspects of the business conducted by
BML Ltd. will be analysed. The purpose of this analysis is to determine the various
weaknesses in the internal control of the company and to determine the corrective measures
to be taken to check them. The primary job will be to analyse all of the information that is
being presented like the various financial ratios and the additional information

3AUDITING THEORY AND PRACTICE
Table of Contents
Introduction:...............................................................................................................................3
Analysis of the ratios and the additional information as listed out by audit partner, Ms.
Leanne Hopkins:........................................................................................................................3
Analysis of the ratios and the additional information to determine the risks faced by the
company:....................................................................................................................................6
Internal controls that are effective, risks that they alleviate and the test of control to check
them............................................................................................................................................8
Identification of the weaknesses in the internal control for contract payroll:..........................10
Conclusion:..............................................................................................................................10
Reference List..........................................................................................................................12

4AUDITING THEORY AND PRACTICE
Introduction:
An effort is being made through this report to ensure that all the financial and non-financial
information received in respect of the given company is objectively analysed. Through the
results obtained by the analysis conducted, an effort will be made to determine the
weaknesses that are prevalent in the internal control of the company. Subsequent to the
identification of the weaknesses, an effort is made to determine the audit procedure to
objectively identify the steps that will alleviate the risks of material misstatement in the
financial statement of the company (William Jr, Glover & Prawitt, 2016).
Analysis of the ratios and the additional information as listed out by audit partner, Ms.
Leanne Hopkins:
Account Analysis Audit risk Audit steps to reduce
risk
Plantand
equipment
From the information that has been
given for consideration, it is observed
that there has been significant amount of
obsolescence on the part of the
company’s plant and equipment. The
reason being that, the requirement of the
industry has changed substantially over
the period of last 18 months (Wang, Li
& Li, 2015). The new demand is for
computer-aided machinery. This
substantial shift of requirement of the
industry has affected the plant and
machinery requirement of the company
significantly. The company will have to
There is several audit risk that
are involved in respect of the
review of the company’s
financial statements. Some of
them include non-financial
factors like the obsolescence
of the equipment used by the
company. The reduction in
the growth of the market etc.
Someof the key audit risks
present in the project involve
the concept of depreciation.
The reason being that the
policy adopted for
Some of the steps that
can be taken up by the
auditor to minimise
the risks include
physical verification
of the assets. This will
enable the auditor to
determine the
usabilityof the asset in
the near future. Taking
the advice of an expert
for determining the
correctamountof
depreciation that must