PLAGIARISM POLICY | ASSIGNMENT1

ASSIGNMENT
BAO3306 AUDITING
REPORT
Penalty
- Exceeding the 3000 words limit: TWO (2) marks deduction.
- Exceeding the 30% similarity index limit: FOUR (4) marks deduction.
- Late submission: TWO (2) marks deduction per day including weekends.
Plagiarism
Plagiarism is defined as presenting someone else’s work, including the
work of other students, as one’s own. Any ideas or materials taken from
another source for either written or oral use must be fully acknowledged, unless
the information is common knowledge. All students are strongly advised to do
the following:

- goto http://wcf.vu.edu.au/GovernancePolicy/PDF/POA040915000.PDF
- enter School of Accounting and Finance
- enter Student Resources
- read the PLAGIARISM POLICY.
Semester TRI_3 , 2019
Executive summary
The auditors have the responsibility to develop the audit plan by considering all related
aspects like understanding the client, identification of accounts with high risk of material
misstatements, setting planning materiality level and assessment of the audit risks. First part
of this report obtains understanding on the business of the client that is Reece Group Limited.
The second part identifies the five accounts which are prone to high material misstatements.
The third part of the report discuses about different aspects that need to be taken into
consideration for the determination of planning materiality level. The last part of the report
assesses what can go wrong with the identified accounts in relation to the assessment of audit
risks.

Table of Contents
Introduction................................................................................................................................3
Key information.........................................................................................................................4
Our understanding of the client..............................................................................................4
Our assessment of significant accounts..................................................................................5
Our planning materiality........................................................................................................6
Our assessment of what can go wrong...................................................................................6
Conclusion..................................................................................................................................8
Appendix....................................................................................................................................9
References................................................................................................................................11

Introduction
Audit and assurance is a major aspect for the investors and other stakeholders in order
to enhance the credibility of the disclosed financial information of the firms. In an assurance
engagement, the main aim of an auditor is to gain adequate evidence for expressing a
conclusion in order to improve the intended users’ level of confidence on the disclosed
financial information on different financial reports. ASA 200 indicates that the main
objective of the auditors in the audit of financial reports is expressing an opinion on whether
the client has prepared the financial statements in accordance with the required financial
reporting framework and whether there is any material misstatement in the financial
statements (auasb.gov.au 2020). It requires to be mentioned that the responsibility of the
auditors is to take into account all the required aspects while planning and carrying out the
audit of any client. In order to proceed with the audit of a client, an auditor must gain
adequate understating of the client as this is required for the determination of inherent risk of
audit. After that, the auditor needs to identify the key accounts that can be at the risk of
material misstatements. The next step is to determine the level of planning materiality in
order to ascertain whether there is material misstatement or not. Lastly, it is required for the
auditor to undertake risk assessment for assessing what can go wrong with the selected
accounts. The main aim of this report is to undertake all the above-mentioned steps for
undertaking the audit of Reece Group Limited.
Key information
Our understanding of the client
According to ASA 315 Identifying and Assessing the Risks of Material Misstatement
through Understanding the Entity and Its Environment, Para 3, an auditor’s objective is the
recognition of material misstatements risks by understanding the audit client and its
environment that consists of internal control (Fontaine, Letaifa & Herda 2013). This
particular standard is also applicable for the audit of Reece Group Limited where the external
auditor is required to gain understanding of different aspects of Reece Group Limited.
According to ASA 315, there are five specific components of the internal control of Reece
Group Limited that the external auditor needs to assess; they are control environment, risk
assessment process of the entity, information system, control activities and monitoring the
controls (auasb.gov.au 2020). The external auditor of Reece Group Limited is required to
assess these five components for gaining understating on the company.
Control Environment – Control environment consists of the culture, structure and discipline
of a company. Reece Group Limited has a clearly defined organizational structure where the
responsibilities of the management are clearly defined. The company has effectively
segregated the duties while delegating the limits of the authority. As mentioned in the
Corporate Governance statement of Reece Group Limited, the board of the company has put
key emphasis on the ethical aspects like honesty and integrity in all the business dealings.
The company has its own Code of Conduct and Code of Business Ethics for over viewing the
business activities (reecegroup.com.au 2020).
Risk Assessment Process –Reece Group Limited has an effective risk management
mechanism where the company does not only aim to eliminate the risks, but identify, monitor
and manage the material risk of business (reecegroup.com.au 2020). The Board of Directors
of the firm has developed a Risk and Compliance Committee in order to determine and
implement the risk management controls in the daily business conducts. This risk