Audit and Assurance - Case Study
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Added on 2021-02-19
Audit and Assurance - Case Study
Added on 2021-02-19
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Audit and AssuranceCase Study
Table of ContentsINTRODUCTION...........................................................................................................................1QUESTION 1...................................................................................................................................1a. Identification and explanation of two key assertions at risk in relation to inventory..............1b. Identification and description of two substantive procedures that could be performed inresponse to each risk....................................................................................................................2c. Requirement of ASA 701 communicating key audit matters in the auditor's report...............2QUESTION 2...................................................................................................................................4a. Identification and explanation of two key assertions most at risk in relation to theintellectual property intangible asset...........................................................................................4b. Identification and description of a substantive audit procedure that could be performed inresponse to each risk identified....................................................................................................4c. Explanation of requirement of ASA 701 communicating key audit matters in the Auditor'sreport............................................................................................................................................5CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8
INTRODUCTIONAudit can be defined as the process which is conducted by an auditor for the purpose ofevaluating, monitoring and analysing financial statements of an organisation so that its actualposition could be determined. Assurance is an independent service which is provided by chartedaccountant of a company regarding the finance related information recorded in final accounts(Chiu, Liu and Vasarhelyi, 2014). This report is segregated in two parts in which differentorganisations are taken. First one is based upon Computing Solutions Limited which coversinformation regarding key assertions at risk, substantive audit procedures and requirement ofASA 701 in relation to key risks of stock. Second part is based upon Howard & Associateswhich is auditing the accounts of Beautiful Hair Ltd and two key assertions in relation tointellectual property, audit procedure for same and requirement of ASA 701 for communicationof such matters are also covered under this part.QUESTION 1a. Identification and explanation of two key assertions at risk in relation to inventoryThe auditor of Computing Solutions Limited analysed different information whileassessing risk of material misstatement and determining the appropriate response with regards tothe inventory of the organisation. By analysing all the information following risks at theassertions are analysed by the auditor:Valuation: This assertion states that the amount for the assets or the liabilities which isrecorded in the financial statements of the company are listed at appropriate amount or not.There is a risk at this assertion of Computing Solutions Limited because the information which isbeing analysed by the auditor is showing that inventory turnover ratio is decreased in 2019 ascompare to 2018. On the other hand percentage of stock on sales in being increased in currentyears. Both the information are contradictory which are creating the risk at the assertion ofvaluation. It shows that the accounting professionals may have made mistakes in the evaluationof the inventory while recording it in the final accounts (Cohen and Simnett, 2014).Occurrence: This assertion is related with the occurrence of different transactions whichare recorded in the financial statements. It states that all the figures which are listed in balancesheet or income statements should actually took place. The risk at this assertion is very high forComputing Solutions Limited because the moving expenses which may have taken place due to1
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