Audit and Assurance | Assignment-1

Running head: AUDIT AND ASSURANCE
Audit and Assurance
Name of the Student
Name of the University
Author Note

AUDIT AND ASSURANCE1
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................2
Answer to Question 3.................................................................................................................3
Answer to Question 4.................................................................................................................4
Answer to Question 5.................................................................................................................6
References..................................................................................................................................8

AUDIT AND ASSURANCE2
Answer to Question 1
Auditing Standard ASA 315 is about Identifying and Assessing the Risks of Material
Misstatement through Understanding the Entity and Its Environment (Auasb.gov.au 2020).
Paragraph 6 of ASA 315 states the procedures of risk assessment that shall include enquiries
of management, analytical procedures as well as observation and inspection.
According to Paragraph A14 to A17 of ASA 315, the auditor performs analytical
procedures because it helps to know the facts or any misleading activity, which he/she is not
aware about. This includes both financial as well as non-financial information. Analytical
procedures help to identify the existence of unusual events or transactions and the matter
related to amounts, ratios and trends that indicate to have implications of audit (Richstein and
Farrenkopf 2015). Auditors may identify any unusual relationship within the process that
helps them to identify the risk of material misstatement, especially due to fraud.
As for example: In this case, Morris Ltd. has obtained a loan so that they can maintain
current ratio more than 1.3 and the audit analytical procedure may be done in the form of
ratio analysis to know the accurate figures. This will help the auditors to know the actual
truth so that to find any misrepresented figures and thus, maintains transparency.
Answer to Question 2
ASA 315 (paragraph 6) includes enquiries of management in the analytical
procedures which states the internal audit functions of individuals and others who can assist
the auditor with information to make a judgment of material misstatement because of fraud or
error. This includes involvement and two-way communication to identify hidden risks.
Professional skepticism refers to an attitude of the auditor, which consists of a
interrogative mind and being alert to all the circumstances that may indicate possible material
misstatement because of any error or fraud and a critical assessment of audit evidence (Wang