Audit and Professional Ethics

Running head: AUDIT AND PROFESSIONAL ETHICS
Auditing and Professional Ethics
Name of the Student:
Name of the University:
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1AUDIT AND PROFESSIONAL ETHICS
Executive Summary:
In this document a detailed discussion shall be made on the audit procedures of certain account
balances and transactions after evaluating the balances provided in the Trial Balance of Chestnut
Enterprises. The Trial Balance of Chestnut Enterprises for the six months ended on December
2016 has been provided along with balances of previous year ending on June 30, 2016. Based on
the information provided about various account balances a brief discussion on important aspects
of auditing shall be made.

2AUDIT AND PROFESSIONAL ETHICS
Contents
Executive Summary:........................................................................................................................1
Introduction:....................................................................................................................................3
Part 1:...............................................................................................................................................3
Part 2:...............................................................................................................................................4
Part 3:...............................................................................................................................................6
Part 4:...............................................................................................................................................7
Part 5:...............................................................................................................................................8
Conclusion:......................................................................................................................................8
Recommendation:............................................................................................................................9
References:....................................................................................................................................10

3AUDIT AND PROFESSIONAL ETHICS
Introduction:
Considering the balances provided in Chestnut Trial Balance a detailed discussion on the
materiality level for the audit of the organization shall be made. Along with discussion on the
materiality level for the audit an elaborate audit plan for certain account balances will also be
made for the benefit of the readers in the document.
Part 1:
In Australia the auditing and assurance services are guided by the Auditing and Assurance
Standards issued by the Australian Auditing Standards Board (AAUSB). In order to determine
the materiality for class of transactions and account balances in financial statements an auditor
must refer to ASA 320 (Simon et. al. 2018). ASA 320 provides following benchmarks for
auditors to calculate materiality levels:
Class of transactions Benchmarks
Sales for revenue 5% to 10% of sales.
Cost of sales for expenditures 5% to 10% of cost of sales
(Junior, Best and Cotter, 2014)
Considering that the sales balance is provided for 6 months period ending on December 31, 2016
the auditor should use 10% of sales to determine materiality level in respect of items of revenue.
Thus, for a sales of $98,975 the materiality level would be (98975 x 10%) = $9,897.50. In
respect of expenditures again 10% benchmark can be used to determine materiality level for the
audit of items of expenditures. Hence, for amount of expenditures the materiality level would be
(30525 x 10%) = $3,053.