Audit and Assurance Service

This document discusses the background information of Dalby logistics limited, the going concern concept, weakness of purchase, audit and accounts payable of Sweets R Us Pty Ltd, and internal control policies and procedures implemented by the company.

Running head: AUDIT AND ASSURANCE SERVICE
Audit and assurance service
Name of the student
Name of the university
Author’s note

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Executive summary:
The first topic deals with the background information of Dalby logistics limited
which is a big company focuses on je logistics business and providing good quality services
to its clients and other service organizations. Apart from thus the study also deals with the
going concern concept which is a highly important aspect of the current business perspective
and relates to the current business of the company along with some calculations regarding the
topic. In the second part the topic deals with the weakness of purchase, audit and accounts
payable of Sweets R Us Pty Ltd. The last part contains the internal control policies and
procedure which are been implemented by the company.

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Table of Contents
Question 1( topic 3 &4)..............................................................................................................3
Introduction:...........................................................................................................................3
Discussion:.................................................................................................................................3
Background information of Dalby logistics limited:.............................................................3
Going concern assumption:....................................................................................................3
Risk of material misstatement:...............................................................................................4
Comparison between the results of 2018 and 2017:..............................................................8
Question 2 : (topic5 )................................................................................................................10
Introduction:.........................................................................................................................10
Discussion:...............................................................................................................................10
Weaknesses of purchase, accounts payable and payment system:......................................10
Account balance assertion for raw material inventory:........................................................12
Recommendation and control:.............................................................................................13
Conclusion;..........................................................................................................................13
Question 3................................................................................................................................13
Introduction:.........................................................................................................................13
Discussion:...........................................................................................................................13
Conclusion:..............................................................................................................................14
References:...............................................................................................................................16

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Question 1( topic 3 &4)
Introduction:
The first part of the assignment topic discuses about the accounting theory as well as
the going concern concept which are been followed by the Dalby logistics limited as well as
analyses the possible risk management strategy of the company. Apart from this the company
also discuss about the key accounting areas which are been considered by the company for
identifying the risk management strategy along with two of the assertion strategy in the
accounting area based on the business.
Discussion:
Background information of Dalby logistics limited:
Dalby logistics limited is a conglomerate logistics company which is founded in the
year 2010 thorough the merger of two companies. Firstly the company have their focus on the
transportation of iron rods, mineral sands, forestry products, agricultural products, gas, oil,
coal, manganese and lithium. However the company also provides services like warehousing
and currently are thinking to built a new hub in Sydney, Australia. However the company
also provide some facilities like import and export services in the other countries. Apart from
this the company in order to expand their business and supply chain have opted to open
20new subsidiary companies and have made significant investment in five new countries.
Hence the company have their reach over largest port associates like Pilkington port of
Australia. However there are some further arrangement are made with the ports in New
Zealand, Malaysia and Singapore and different parts Australia.

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Going concern assumption:
This concept implies that the business entity will be continuing the future operation and it
will not be liquidated or forced to discontinue operations due to the changes in the reasons.
Hence a company will be considered as a going concern if there is no evidence is available
and to believe that it have to cease the operations in the forcible future. Hence an example
can be considered is this case which is related to the calculation of depreciation of fixed
assets and the economic value of it. However the calculation is made on the basis of the
current market value rather than the future value of assets. Hence it is also assumed that the
business will continue for an indefinite period and the assets will be considered in the
business based on the depreciation value. Similarly considering another example of
prepayment and accrual expenses. Therefore it is important for the company to believe in
themselves that they can control the business in the future. Similarly process is applicable for
Dalby logistics limited which is considered as a going concern company and the same could
be implemented in the business of the company. However the balance sheet and the
profitability statement of the organization and it could be also helpful for the company in this
case and hence it is well manageable theoretical concept for the company as a whole. Thus it
is applicable for the company business as a whole. Thus process implies a great importance in
the company accounting policy and procedures. Apart from this the financial statements are
prepared as per the GAAP principles off Australia in accordance to the digital frameworks
and as per the IFRS framework of USA. Thus it is seen that the company auditors have
evaluated ad analysed the going concern concept in relation to the company rules and
regulations.

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Risk of material misstatement:
The material misstatement is an important factor which is considered as a risk is a risk
considered at managerial degree. Thus the risk is assessed in the two managerial levels by the
auditors.
Recession level: It is further subdivided into two different risks such as inherent risks and
control risk. The internal risks are considered as the inherent risks. Hence these kind of risks
are in assertion to the misstatement due to fraudulence. Thus it is important that the material
misstatement will not be prevented or detected by Dalby logistics limited.
At financial level: This level relates to the financial statement as a whole, thus this risk is
likely to be considered as a fraud case. Thus when the risk management considers a high
level of detection and risk is lowered, hence the overall risk is mitigated.
However the company have considered three types of management considers three types of
management risk namely-
Financial statement level risk
Transaction level risk
Inherent risk
Financial statement level risk- Before peeking the audit team, it will be the responsibility of
the company to understand the general entity of the business. Thus the importance of the
company is to understand the business and its controlled environment to determine the risk
which is associated with the financial statement level. Thus the overall risk is detected at the
broader responsible in which the team will be beneficial. Thus it is assumed that the company
has the following procedures namely-
a. Complex transactions.

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b. Related party transactions.
c. New accounting pronouncements.
d. Profit pressures.
e. Problem vendor relationships.
f. Going concern concepts.
g. Potential debt covenants violations.
Cash flow statements
However the company is also in need of considering the risk of management override. Hence
the threat is a possibility if the management is playing the edges considering on how the
processes are to be added within the company audit team in order to perform the engagement.
Hence by keeping thus in mind the company can also consider the company financial level
risk assessment which great than the overall risk assessment calculations of the audit team of
this company.
Transaction level risks:
These risks are associated with the procedures such ass walk in , fraud detections , planning
inquiries and planning activities. Hence the information’s which are gained from these steps
which are calculated on the basis of the transactional level. Thus in order to assess the
premium risk conditions of material misstatements are higher payable assertions and thus the
company though not performing the audit procedures on the regular basis have to assess the
risk policy of the business. Hence it stated that the risks is high for all the assertions.
However an example can be considered regarding that the company have proposed some
important journal entries regarding the material misstatement in which the company assertion
is high for the business. Thus it is important that the company audit procedures will be
including some important risk assessment policy by maintaining the accounts payable

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process. Similarly the same could be implemented by the company with the use of some risk
inherent techniques within the organization so that the risk of material misstatements are
minimized and lowered to the extent .Inherent risks: These type of risks can be ascertained in
the complexity of transactions, nature of the financial statements, the experience and
acknowledgement of the client accounting personnel, past audit areas and the transactional
volumes. Thus the same policy could be adopted by management if Dalby logistics limited.
Thus it is seen from the financial report of the company that they could understand the sales
to make better tax payment procedure. Similarly the company could also understate the
liability as well as overstate the sales for the financial year to earn more amount of revenue in
the future. Thus the company could utilize the aspect of overstate and understate policy.
Inherent risks: these can be formed in the process of complexity of transactions , nature of
financial statements , the experience and acknowledge of the client accounting personnel,
past audit areas and lastly the transactions volumes. However in the case of Dalby logistics
limited it is seen from the company financial report that the company could understate the
sales in order to make the tax payment better. Similarly the company could also understate
the liability since it is another important factor. Again the company could overstate the sales
for the financial year since more sales will gain more revenue for the company. Thus the
company could utilize the aspect of overstate and understate policy.
Management level assertions:
Management assertions are the claims made by the members of management
regarding certain aspects of a business. Hence the concept is primarily to be used in regard to
the audit of a company’s financial statement. Hence the auditors could rely upon a variety of
assertions by conducting the business. The auditors test are validity of these assertions by

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conducting a number of audit tests. Hence the management assertions fall into the three
related categories.
Transaction level assertions:
The following items are classified as assertions related to the transactions mostly regarded to
the income statement.
Accuracy: In this case the full amount of transactions are recorded without providing any
error.
Classification: Here the assertion is that all the transactions are recorded within the correct
accounts posted in the general ledger.
Completeness: The assertion is that the all the business events to which the company was
subjected were recorded and are made as per the business decisions.
Cut-off: As per this assertion all the business events are to be shown in the company
financial report.
Occurrence: The assertion is that the recorded business transactions are actually take place.
Accounts balance assertions: The following four items are been classified as assertions
related to the ending balances posed in the accounts and so relate on the primary details in the
balance sheet.
Completeness: The assertion shows that the all the reported assets, liability and equity
balances have been fully reported.
Existence: the assertion is all about the account balances which exist in the assets, liabilities
and equity balances

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Rigid and obligations: the assertion is that the entity have the rights to the assets which owns
and it is obliged under the reported liabilities.
Valuation: the assertion is set that all the liabilities and assets and equity balances could be
recorded with proper valuation. Similarly Dalby logistics limited company could also try to
improve the business by implementing the possible risk assertions related to the business and
similarly it could improve the overall business strategy of the company.
Comparison between the results of 2018 and 2017:
In order to see whether the company have gained any benefits in the current year from
the business through profitability and the business strategies. Hence the comparisons are been
made by the data analysis of the company and reviewing income statement and balance
sheets of the company. However it is seen that the company had made an impact on the
current business strategy and implementing the same within the organization. From the
consolidate income statement it is seen that the revenue from operation and revenue from the
sales and service have been increased in the year 2018 in $885 million which was previously
$756 million in the year 2017, hence it is seen the company had earned a good amount of
profit in the current year by increasing the net sales which lead the profitability increase.
However it is also seen that the additional expenditures have also increased in the financial
years which included the increase in the repair and maintenance cost, fuel and electricity cost
and other expenses. However the company have purchased new machineries, opened new
branches in Sydney which had led to increase in the profitability of the business. However the
total expenses have also increased in 2018. The company have paid more amount of tax than
the year 2017 in $143 million. Hence the total profit of the company have also increased in
the financial year 2018 approximately $100 million (Hamzah and Daud, 2014). Apart from
this the balance sheet have also improved due to the increase in the business aspect .The
company liability have decreased in the financial year to $122.5 billion and the assets

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valuations of the company have increased in the financial year due to opening of new
branches across Sydney and have taken new business decisions regarding the improvement of
the business profitability of the company. Thus it is seen that overall improvements have
caused improvements in the overall progress of the company. Thus the overall improvement
is important for the company shareholders prospect.
Conclusion;
Thus it can be concluded from the above detail is that the company could have implemented
possible business risk decisions and implement the same within the company. However the
going concern concept which have been positively implemented by the company within the
business. However the company could improve the business of the company.
Question 2 : (topic5 )
Introduction:
The second topic discusses about the weakness of the purchase, accounts payable and
the payment system and how the company could improve those business policy within the
organization by giving the proper recommendation as well as accounting balance assertions
of the raw materials.
Discussion:
Weaknesses of purchase, accounts payable and payment system:
A purchase department is responsible for products and services of raw materials
which is necessary for the company to produce the products and services and sale the same in
the market. Thus the purchasing department must know about how much the sit h companies
inventory at any given time hence the production of products and services does not come
across to a halt due to the lack of raw materials. However there are many aspects which have
some weakness ad addressed over time. Hence the main areas are as follows –

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1. Buying without a plan: The purchasing managers or employees are responsible
for purchasing necessary items or raw materials which are needed to create
products for sale. One of the major weakness is purchasing the products without
making any plan. Hence the company could end up with the items in the inventory
which are unnecessary for the production of goods (Maabuat, Morasa and
Saerang 2016).
2. Buying without checking inventory: some purchasing options for managers and
employees could create orders for supplier and raw materials without checking the
current inventory status of the company. Hence it is considered as a common
weakness for the company. If the items for inventory have expiration date, the
company may end up by throwing out the unused items or goods which is costly
rather than saving the money of the company (Pratomo 2017).
3. Falling to do research: Another weakness of purchasing is falling to do research
before selling a supplier. Hence the purchase managers could use the supplier
technique on the market before researching the other suppliers who might be
cheaper and offer some quality products to the company.
Weakness of accounts payable
 The controller approves the liability and sign check.
 Checks are returned to the accounts payable check.
 Not at all the invoices are recorded in the voucher earlier.
 Purchasing agent prepare for the purchase order, matching documents and record
entities.
 Vendor’s monthly statements are not concealed to the accounts payable ledger.
 Claims are damaged to the merchandise which are not proposed promptly.

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 Unmatched invoices, receiving reports and open purchase orders are not reviewed
periodically (Sianipar 2016).
Weakness of payment system: The weakness of payment systems are as follows –
1. Money in the drawer can be tempting for some employees to steal.
2. A safe needs to be on the site and frequent trips to be made to the banks for
deposits which must be made and deals with tome and money.
3. Money at the location increases the risk of theft not just of r employees but
for the criminals as well (Adiarni and Fortunella 2017).
4. In case of the check facilities there is no payment guarantee and bounced
checks could cost money for the company. Thus the checking points could be
frozen and even none exist. Hence a handful of NSF checks can be adjusted
as same as the bouncing checks since the same could cost very much.
5. In case of the check facilities there is no guarantee of payment and bounced
checks could cost money for the company. However the checking deposits
could be frozen and even none exist. A handful of NSF checks can be as same
as a bouncing cheque since it cost the company very much (Zalina, and oj
(2016)
Account balance assertion for raw material inventory:
The transactions are include in the sales, purchase and wages paid during the
accounting period. Hence the accounting balance includes the assets, liabilities and equity
interest which is included in the statement of the financial position at the year end. The
assertions are as follows-
1. Occurrence: The transactions and the events that have been recorded and
disclosed, have occurred and such transactions and events are pertained to entity.

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2. Completeness: All the events and transaction are to be recorded and have been
related to the company disclosures which should have been included in the
company financial statements.
3. Accuracy: Amounts and other data are relating to the recorded transactions and
events which have been recorded properly and the related disclosures have been
made appropriately (Putri 2016).
Recommendation and control:
The company should try to maintain the payment systems smoothly as well as the
purchasing policy properly in order to make up the business decisions. Since the purchase
decisions and the payment systems are two important factor of the business, hence it is
important that the company tries to make up the business policy effectively and meet the
company requirements. Firstly in case of the payment systems the company could go for
cashless transactions within the company. However it is important that the company could try
to complete every transactions though cards and digital payment platform. Hence the
company could implement proper business policies. Apart from this the company could try to
take proper purchase decisions based on the proper purchase decisions, closing of inventory
and maintenance of business decisions. Thus the company could implement the effective
business policies (Barokah 2017).
Conclusion;
Hence it can be concluded that the company could try to implement the same busies
policy and procedures within the company in order to sustain and maintain the business
development (Akinola, 2013).

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Question 3
Introduction:
The below case topic discusses about the internal control policy and how the same
could be implemented within the organization as well as the relevance of the internal audit
control testing (Marnet, Gwilliam and Teng 2014).
Discussion:
Control
number Testing required/not required Justification
1 Not required
The accounting software reconciles
the inventory control and subsidiary
master files in the company. However
the company had tested the changes in
the previous year and since no
changes are made to the current
software hence the software does not
need any further testing ( Febriana,
Wardayati, and Prasetyo 2018).

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2 Required
The accounts payable vendor had
used the old technologies in the
company. Since the company have
changed the business techniques in
the company and thus it needs to be
updated ( Pettersson, 2016).
3 required
Since the sales system determines the
purchase order and accounting polices
had changes the credit limit hence the
company needs to update the old
control system.
4 Required
Since the systems had been checked
two years before and the company
have evolved the inventory decisions,
hence the old technique needs to be
remodeled.
5 Not required
Since the company had updated the
software recently and the customers
are also happy with the proceedings,
thus there is no need for updating the
software again (GÖNEN and
KARAKELLEOĞLU 2016).

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Conclusion:
Thus it can be concluded from the above study that the company could try to
implement he above business policies and internal audit control method, hence the company
could try to cross check the business method within the organization to see whether these
new implemented polices procedures are at all going to be helpful for the company or not.
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