Audit and Assurance

This assignment discusses the auditing system and financial statements of Dalby Logistics Limited (DLL) and Sweets R Us Pty Ltd. It analyzes the internal control and risk management of the companies, along with ratios and trend analysis.

Running head: AUDIT AND ASSURANCE
Audit and Assurance
Name of the student:
Name of the university:
Author

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Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................3
Task – 1 Planning, Analyzing and Risk Management...............................................................3
Task 2 – Internal Control...........................................................................................................7
Answer to question.................................................................................................................7
Account balance assertion for raw material inventory:..........................................................9
Task 3 – Controls and Test of Control.....................................................................................10
Conclusion................................................................................................................................13

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Introduction:
The aim of the assignment deals with the Dalby Logistics Limited (DLL) and the
performance of the Sweets R Us Pty Ltd. The auditing system and the financial statement of
the companies have been analyzed in a detailed manner. The internal control and the risk of
the company have been ascertained in the conducted study along with the ratios and further
trend analysis have also been depicted in the conducted study.

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Discussion:
Task – 1 Planning, Analyzing and Risk Management
Answer to Question 1
Dalby Logistics Limited (DLL) is such an industry which deals with bulk cargo and
Logistics Corporation, founded in the year 2010 through the merger of two companies. One
of the company was involved with the transport of iron ore, mineral sands and forestry
products. The examples of the products which are transported by DLL is that Grain
(agricultural products), oil and gas, coal, manganese, and lithium and many more. The
services which are provided by DLL is that warehousing services and are currently building a
large ‘hub’ complex in Sydney. After the completion of this project, this facility will be
leased to several exporters and importers across the world. DLL has over 20 subsidiary
companies and substantial investment in five other companies for enhancing the growth of
the business in such circumstances (Cohen, & Simnett, 2014).
DLL has one of the largest associate is Pilkington Ports Limited which further gives
DLL entrance to 4 ports across Australia. This access further helped the company to enhance
the trading and supply of goods and services all over the world. The company have also some
of the major arrangements access to further 15 ports across Australia (including Darwin),

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New Zealand, and a port presence in Malaysia and Singapore. In those region there are about
15 logistic centers in metropolitan and regional areas in NSW, Victoria, South Australia,
Western Australia and Queensland. The operation of DLL has further been divided into three
divisions which are the Ports, Logistics, and Infrastructure & Property (Rahmina & Agoes,
2014).
The access to the ports and effective logistics system along with the supply chain
management helps the company to improve and further expand the current performance of
the business. The significance in the supply chain management of the company is to help the
suppliers of the company in fast mode of transportation. This will further help the employees
to improve the overall productivity by reducing the cost of freight in such a situation (Lenz &
Hahn, 2015).
Answer to Question 2
The going concern concept is one of the significant accounting principle which
implies that the entity of the organization will continue to be operated in the future and will
not liquidate or be trapped into dissolution due to the discontinuity in operation. Each and
every organization is operated on the basis of the going concern concept where further no
evidence is available to believe that it will or will have to cease its operations in the likely
future.
The going concern concept of accounting in an .organization is considered as one of
the significant aspect in the accounting prospect. The financial statement of the company is
based on certain principles and financial regulatory framework such as generally accepted
accounting principles which is relevant in United States of America (US-GAAP) and
international financial reporting standards (IFRS).

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Dalby logistics limited is also implied as the going concern concept within the
organization and the same is evaluated in the financial statements of the company. The
balance sheet and profitability statement of the organization could also be useful for the
company in this case. Hence it is a well manageable theoretical concept which is significant
for the organization.
Based on the background of the DLL and financial statement of the company it can be
interpreted that if the current financial performance of the company is satisfactory then in the
long run the company will be able further expand its business. The financial statement of the
company is quite satisfactory and further it is needed to be improved which signifies that the
company is operating going concern concept in this case. As per the current business status of
the company it can be clearly identified that the company will be able to sustain in the long
run.
Answer to Question 3
As per analyzing the balance sheet of the company it can be said that there lies a
chance or rather the risk of material misstatement in the area of unsecured non-current
borrowing of the company in the year 2017 and 2016. The non-current borrowings of the
company is further understated and accordingly there is a huge change in the balance sheet of
the company which is a matter of concern for the company. A sudden increase in the
borrowings of the company is a major concern which must further be speculated by the
internal audit system of the company.
In case of the gain on revaluation of the asset it can be interpreted that from the
financial year 2017 to 2018, there has been a sudden increase in the gain on revaluation
which is reflected in the balance sheet of the company. A sudden gain on the revaluation of
asset of the company needs to be speculated in a detailed manner which is currently

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overstated. It generally falls under the other income of the company and it is the
responsibility of the auditor in order to understand the reason behind such changes.
Answer to Question 4
Management level assertions:
Management assertions are certain claims which are ascertained by the members of
management regarding the main features of the business. Hence, the concept is generally
used in respect of the audit of a company’s financial statement and the auditors could rely
upon a variety of assertions by conducting the business. The test of the auditors are valid as
per the assertions by the process of conducting various number of audit tests. Hence, the
assertions made by the management fall into the two related categories which are the:
Transaction level assertions:
The transaction level assertions of the company falls under certain factors which are the
following items regarded from the income statement of the company:
Accuracy: In the transaction level, it is needed to maintain accuracy and transparency in the
each and every transaction which are passed by the company without any error.
Classification: All the transactions are recorded in the right accounts in the general ledger of
the company.
Completeness: The assertion is that all the business events which are recorded by the
company in that case.

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Cut-off: As per the assertion all the business events are to be shown in the financial report of
the company.
Occurrence: This assertion means that the number of times business transaction takes place
within a company.
Accounts balance assertions:
The assertions in the balances of the accounts and in order to narrate on the basic details in
the balance sheet of the company.
Completeness: The assertion gives details about the completion of the reported assets,
liability and equity balances have been fully reported.
Existence: The assertion deals with the balances of the accounts which exist in the assets,
liabilities and equity balances.
Rigid and obligations: the assertion deals with the entity have the rights to the assets which
is further owned and is indebted towards the reported liabilities.
Valuation: the assertion deals with 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.
Task 2 – Internal Control
Answer to question
The topic discuses about the weakness of purchase, accounts payable decisions and the
payment system which have been associated with the company and to improve the same

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business policy within the company by giving proper recommendation as well as accounts
balance assertion.
Weaknesses of purchase, accounts payable and payment system:
A purchasing department is very much responsible for the products and services of
the raw materials which is necessary for the company to produce the products and services
for being sold in the business. Thus the purchasing department must know about the company
inventory for maintaining the company product and services. Hence there are many aspects
which have been implemented by the company as well as the weaknesses have been seen
over the time. Hence the main areas are been implemented as follows-
1. Buying without a plan: The purchasing managers or employees are responsible
for searching the 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.
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. Hence the company could end up I
having the unnecessary for the production of goods (Baharud-din, Shokiyah &
Ibrahim, 2014).
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

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technique on the market before researching the other suppliers who might be
cheaper and offer some quality products to the company (Green, & Zhou, 2013).
Weakness of accounts payable:
1. Purchasing agent prepare the purchase Controller approves the liability and also
signs check.
2. Order, matching documents and record entities.
3. Checks are return to the accounts payable check.
4. Not all the invoices are recorded in the voucher register.
5. Debit distribution on the voucher are reviewed.
6. Monthly statements of the vendors are not reconciled to accounts payable ledger.
7. The invoices are not checked for proper pricing and extensions.
8. Claims are damaged merchandise are not proposed promptly.
9. Unmatched invoices, receiving reports, and open purchase orders are not reviewed
periodically.
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.
4. 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

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bouncing cheque since it cost the company very much (Farooq & De Villiers,
2017).
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.
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 (Chou, 2015).
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 (Burton et al., 2014). 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

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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 (Dai & Vasarhelyi, 2016).
Task 3 – Controls and Test of Control
Question 3
The below case topic discusses about the internal audit control policy and how the
same could be implemented within the organization as well as the relevance of the internal
audit control testing.
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.

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2 Required
The accounts payable vendor used the
old technologies in the company.
Therefore the company have changed
the business techniques in the
company and thus it needs to be
updated.
3 required
Since the sales system determines the
purchase order and accounting polices
changes the credit limit hence the
company needs to update the old
control system (Blackwell, Lucas &
Clarke 2014).
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 (Knechel, 2016).
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.

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Conclusion
From the above discussion it can be concluded that, the company could try to
implement the 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 policies and procedures could be at all helpful for the company or not. The
company could try to implement the business policy and procedures within the organization
in order to sustain and maintain the business development.

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