Audit: Materiality, Trend Analysis, Misstatement, Procedure, Fraud Risk

Running head: AUDIT
Audit
Name of the Student:
Name of the University:
Authors Note:

1AUDIT
Table of Contents
Introduction:...............................................................................................................................2
Task 1: materiality level.............................................................................................................2
2. Trend analysis:.......................................................................................................................3
3. Income statement account that appear to be at risk of misstatement.....................................4
4. Audit procedure......................................................................................................................7
5. Fraud risk...............................................................................................................................9
Conclusion:................................................................................................................................9
Reference..................................................................................................................................10

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Introduction:
In the given case various auditing standards and their implication procedure in the
process of audit have been disused. The report analyses the trial balance and sheet of the
company Ateneo Enterprise Trial Balance for the purpose of audit. The report highlights
auditing assumptions and their reasoning are also discussed. In addition to this, the trend
analysis is conducted to define the materiality, and to understand components of the financial
statement in which the auditor has identified material risks (Knechel & Salterio 2016). The
analytical review procedure are applied for identifying the material misstatement in the
financial statements. Further, the auditing procedures that are required to deal with the
misstatement is discussed in the contents of the report.
Task 1: materiality level
In the given case, the partner or the client suggested that for the primary assessment of
materiality for the financial statement as a whole is be set as $ 15000. In accordance with the
Auditing Standard 580, the management representations are one of the many sources of audit
evidences. In the given case the partner had suggested the auditor a materiality level of $
15000 so substantial audit procedure will be adopted for items above the materiality
(Groomer & Murthy 2018). This is not an obligation to the auditor but is an optional to the
auditor weather to exercise on them or not. In addition to that, in accordance with the ASA
540 Auditing accounting estimates provides guidance to the auditor to fix the materiality of
the statements and various components of the company. In accordance with the ASA, the
auditor must personally assess the materiality of the primary assessment task. The ASA 540
suggested the auditor to make the following procedure to understand the reliability
 The materiality concept is applicable and applied by the auditor in both the
audit planning and at the time of auditing.

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 The ASA 580 suggested the auditor to comply with the ISA 320 (revised) the
auditor will identify and assess the risk of materiality based on the nature and
environment of the entity. In addition to that, the auditor based on experience
will define in accordance with the AAS materiality.
 Further, the auditor will fixed the materiality in such a way so that there are
higher probabilities to identify any material misstatement.
 In the given case a majority of the components are very low there for the
materiality will be $5000 and above.
2. Trend analysis:
Ateneo Enterprises
TrendTrial Balance ($)
Jul 1, 2015 - Nov 30,
2015
Jul 1, 2014 - June 30,
2015
Debit Credit Debit Credit Debit Credit
Cash at Bank
99,25
1
102,50
3 103%
Accounts
receivable
121,82
0
112,00
0 92%
Inventory
189,00
0
175,00
0 93%
Machinery
65,00
0
65,00
0 100%
Accumulated
Depreciation
35,
258
2
4,375 69%
Motor Vehicles
65,00
0
65,00
0 100%
Accumulated
Depreciation
23,
400
2
0,150 86%
Furniture
7,50
0
7,50
0 100%
Accumulated
Depreciation
2,
625 2,250 86%
Bank Loan
216,
000
21
6,000 100%