(Solved) Assignment on Auditing and Assurance
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Added on 2021-05-31
(Solved) Assignment on Auditing and Assurance
Added on 2021-05-31
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Running head: AUDITING AND ASSURANCEAuditing and AssuranceName of the universityStudent IDAuthor note
1AUDITING AND ASSURANCEThe ASA 315 is an Australian Accounting Standard that deals with the responsibilityof the auditor in the assessmentandidentification of the material misstatement risk in thefinancial report of the company. The mechanism is such that it understands the company andits environment that includesthe internal control of the organisation. On the other hand theASA 520 is an Australian accounting standard that deals with the auditor’s use of analyticalprocedures as substantive procedures at the end of the audit that assist the auditor whenforming an overall conclusion on the financial statements (Rezaee, et al., 2018).The two ways in which analytical procedure is used as risk assessment proceduresDuring the audit process, the risk assessment procedures as per the analytical procedureare to evaluate the risk that material misstatement exists. This is a very important stepbecause the whole point of a financial statement audit is finding out if the financialstatements are materially correct. The analytical procedure enables the process of riskassessment in the following ways:Analysis of the Ratio –It includes the comparison, across time or to a benchmark, ofrelationships between financial statement accounts and between an account and non-financial data.Testing of reasonableness – The mechanism takes place through the study ofaccounts, or changes in accounts within the accounting periods, that involves thedevelopment of a model to form an expectation based on financial data, non -financial data, or both (Brown-Liburd, Issa, & Lombardi, 2015).
2AUDITING AND ASSURANCEThe two ways in which analytical procedure is used as substantive procedures duringthe audit:There are manyways of analytical procedures can be used as substantive procedures and ithas an impact on the exactness of the expectation (William,Glover&Prawitt, 2016). Theauditor chooses among the two procedures based on his objectives for the mechanism:Inspection of the inventory: Inspection deals with the examination of the quality ofthe companies and details about the mechanism of enforcing company policies andprocedures to encourage that attitude throughout the organization. The evaluation ofthe management attitude can be done through the process ofinterviews(Chan&Vasarhelyi, 2018). Another means is noticing high employeeturnover, which can indicate employees are seeking other employment because uppermanagement fails to maintain a quality system of reportingObservation of the fixed assets: The observation is to observe the staffs andtake a count of physical inventory. It gives the opportunity to view the company’soperations that have been represented in the books and records and check thecompany’s internal controls. The various ratio and trend analysis are also done toassess the risk.In case the auditor needs a high level of assurance from a substantive analyticalprocedure, he should develop a relatively precise expectation by selecting an appropriateanalytical procedure. Thus, determining which type of substantive analytical procedure touse is a matter of professional judgment. Each of the types of mechanism uses a differenttechnique to form an expectation. They are ranked from lowest to highest in order of theirinherent precision(Arens, Elder, Beasley & Hogan, 2016). Scanning analytics aredifferent from the other types of analytical procedures in that scanning analytics search
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