Assessing the Assumptions Used in Auditing and Assurance Services

Running head: AUDITING AND ASSURANCE SERVICES
Auditing and Assurance Services
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1AUDITING AND ASSURANCE SERVICES
Executive Summary:
The current report is prepared with the objective of assessing the assertions used in two case
studies for risk identification that would assist in ascertaining the key audit matters. The
auditors are required to carry out the investigation of the critical assertions of the financial
reports. This is because it would aid the auditors to find out the key audit matters. After this,
the auditors are expected to express their audit opinion depending on the ascertainment of key
audit matters. In compliance with the above discussion, the key assertions at risk for
Advanced Computer Solutions Limited include valuation/accuracy and cut off and for Green
Machine Limited, the risky assertions constitute of valuation and accuracy. Thus, it is
necessary for the auditors of the two organisations in forming substantive audit procedures
depending on the key assertions at risk from the auditing perspective. Along with this, the
auditors are expected to maintain compliance with the norms set out in ASA 701 so that key
audit matters could be ascertained along with communicating and disclosing the same.

2AUDITING AND ASSURANCE SERVICES
Table of Contents
Introduction:...............................................................................................................................3
Question 1: Advanced Computer Solutions Limited.................................................................3
(a) Key assertions at risk:.......................................................................................................3
(b) Substantive audit procedures:...........................................................................................5
(c) ASA 701 Communicating Key Audit Matters:................................................................5
Question 2: Green Machine Limited..........................................................................................8
(a) Key assertions at risk:.......................................................................................................8
(b) Substantive audit procedures:...........................................................................................8
(c) ASA 701 Communicating Key Audit Matters:................................................................9
Conclusion:..............................................................................................................................11
References:...............................................................................................................................13

3AUDITING AND ASSURANCE SERVICES
Introduction:
In auditing profession, the primary duty of the auditors is to carry out investigation of
the financial reports of the audit clients for uncovering any material misstatements, which
might take place due to frauds or errors, since the audited financial reports help the
stakeholders in making various decisions (Alzeban and Gwilliam 2014). It has been observed
that the business organisations often utilise various assertions at the time of developing the
financial statements. These assertions in audit are either explicit or implicit representations
and declarations, which the audit clients have used in order to prepare the financial
statements and such assertions are used so that suitability and disclosure of financial
information could be maintained adequately (Alzeban and Sawan 2015).
The assertions are utilised mainly for different liabilities and assets such as inventory,
property, plant and equipment and others. For instance, some of the types of assertions
include valuation, accuracy, cut off, existence, completeness and others (Shamsabadi, Min
and Chung 2016). The auditors are required to take into account the evaluation as well as
investigation of the audit assertions so that risks could be identified in them. After risk
identification, it is crucial for the auditors to find out whether the risks have the potential of
creating key audit matters (Badara and Saidin 2014). The current report is prepared with the
objective of assessing the assertions used in two case studies for risk identification that would
assist in ascertaining the key audit matters.
Question 1: Advanced Computer Solutions Limited
(a) Key assertions at risk:
Cut off: