Audit Planning and Related Issues for Alizarin Enterprises

University of .....................
BUSINESS REPORT – AUDIT PLANNING
BUS000, Tutor Name, Tutorial Time

EXECUTIVE SUMMARY
The purpose of the report is to assist the audit team members for the planning of audit in an
efficient manner for the small client – Alizarin Enterprises. Planning is required for every work
and in case of audit it is necessary to have the planning before the start of audit. For the effective
and efficient assistance in audit, method of preliminary assessment of materiality and the
analytical review have been used. These methods help in identification of the accounts which are
liable at the risk of having the material misstatement. Research for this report has been through
the articles and journals which describes the ways how to conduct the audit planning and the
books relating to the concept. The research has depicted that there is the strong requirement of
the planning of audit in the defined manner so as to ensure the reduction in the risk that have
been encountered in the planning stage. This will help the audit team to assess and value each
account in the true and fair manner and give the actual and true picture of the financial health and
condition of the company. On an overall basis, the planning of the audit has been identified as
the most important step in the auditing procedures because on that basis the procedures are
defined and accordingly the audit team members perform their audit. At the end it is
recommended that the methods adopted shall be done in the correct manner and the team
member shall at least stick to the findings in the planning stage and shall audit each and every
account in the thorough way utilizing their professional skills and knowledge.
2

Contents
EXECUTIVE SUMMARY.................................................................................................................................2
INTRODUCTION...........................................................................................................................................4
Authorization...........................................................................................................................................4
Limitations...............................................................................................................................................4
Scope.......................................................................................................................................................4
PRELIMINARY ASSESSMENT OF MATERIALITY.............................................................................................5
ANALYTICAL REVIEW...................................................................................................................................5
RISK OF MATERIAL MISSTATEMENT............................................................................................................5
Cost of Sales............................................................................................................................................6
Service Fees.............................................................................................................................................6
Other Income..........................................................................................................................................6
Expenses..................................................................................................................................................6
AUDIT PROCEDURE......................................................................................................................................7
Cost of Sales............................................................................................................................................7
Service Fees.............................................................................................................................................7
Other Income..........................................................................................................................................8
Expenses..................................................................................................................................................8
INDICATIONS OF FRAUD..............................................................................................................................8
CONCLUSION...............................................................................................................................................9
RECEOMMENDATIONS................................................................................................................................9
LIST OF REFERENCES....................................................................................................................................9
APPENDICES..............................................................................................................................................10
Appendix 1, Trend Analysis....................................................................................................................10
Appendix 2- Calculation of materiality..................................................................................................11
Appendix 3- Analytical review...............................................................................................................11
3

INTRODUCTION
Authorization
As the title of report is “Audit Planning and other Related Issues”, the report has focused on the
analysis that has been done before the start of the audit. Audit planning is the first process in the
audit and it shall be done with the utmost care. For the purpose of the report, the company that
has been made available to our team is Alizarin Enterprises and the trial balance for the last two
years ending 30th of June 2015 and 30th of June 2016 has been considered.
Limitations
The major limitation that has been encountered is that the trial balance for the last year is of
twelve months and for the current year is of 9 months and thus the total twelve months figure for
proper analysis has been obtained on proportionate basis. The report has then ended up with the
conclusion by stating the importance of the audit planning and the recommendation to have the
audit planning done in an efficient manner.
Scope
The report is being produced to enable the team of the audit to perform the audit in the pre-
defined manner by providing them with the audit plan ready with the detail of items having the
risk of material misstatement and the audit procedures which shall be undertaken so as to ensure
the completeness and the accuracy of the books of accounts.
PRELIMINARY ASSESSMENT OF MATERIALITY
Materiality has been defined as the information, which is either on alone basis or in group, which
in case misstated or gets omitted from the books of accounts then it will have the adverse effect
on the decision of the users of the financial statements of the company (Budescu, 2012). As per
the Auditing standards, the auditor shall define the materiality level for the accounts as whole
and for the particular types of transactions and accounts.
The overall materiality level that has been assumed amounting to $15000 is on the lower side. It
is inappropriate as per the financials of the company – Alizarin Enterprises.
4