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Audit Plan and Internal Control Assignment

   

Added on  2020-10-05

14 Pages3531 Words459 Views
Audit Planning and Internal Control

Executive Summary In the present era, business units lay focus on conducting audit with the motive to assessfrauds and taking strategic measure for improvements. For this project, Big Machine Ltd (BML)has been considered which leases and offer mining machinery services to the gold mines in theregion. It can be summarized from the report that strategic actions need to be undertaken formaking improvement in the profitability aspect as it currently lower as compared to the industrybenchmark. Further, it can be presented that liquidity and solvency position of BML was good inthe respective years and in line with the benchmark. It can be depicted from the study that byapplying substantive and test of control process audit risk can be mitigated to a great extent.

TABLE OF CONTENTSINTRODUCTION ..........................................................................................................................4QUESTION 1 A .............................................................................................................................4Analyzing ratios and additional information associated the with four accounts for assessingpotential audit risks .....................................................................................................................4QUESTION 1 B...............................................................................................................................7Analyzing ratios and additional information to outline the business risks that BML faces........7QUESTION 2 A ..............................................................................................................................9Identifying internal controls in the system that are potentially effective and helps in controllingundesirable act ............................................................................................................................9QUESTION 2 B.............................................................................................................................11Identifying the weaknesses in internal control for contract payroll...........................................11CONCLUSION .............................................................................................................................12REFERENCES .............................................................................................................................13

INTRODUCTION Audit plan implies for specific guideline which need to be followed while evaluatingfinancial statements of the business unit. In the context of business organization, audit plan ishighly significant which in turn assists in identifying frauds and taking strategic measure forimprovements. Audited financial statements are prominent which provides suitable and accurateview of financial information. By taking into account audited financial statements stakeholderswould become able to take suitable decisions for the near future. The present report is based onthe case scenario of Big Machine Ltd (BML) which leases and offer mining machinery servicesto the gold mines in the region. In this, report will provide deeper insight about the potentialaudit risk associated with the plant & equipment, machinery finance liabilities, accountsreceivable and lease income. Further, report also depicts tests which can be used for alleviatingaudit risk. It also entails weaknesses which take place in the internal control system. QUESTION 1 A Analyzing ratios and additional information associated the with four accounts for assessingpotential audit risks Ratio2017 (Unaudited)2016 (Audited)Industry averageReturn on equity %152226Profit/lease income %812No dataReturn on total assets%141720Gross margin %252530Net profit margin%14.518.520.27Times interest earned1.903.514.10Days in accountsreceivable625345

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