[PDF] Audit Program Planning

Added on - 21 Feb 2021

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Developing an AuditProgram1
ContentsINTRODUCTION...............................................................................................................1TASK 1...............................................................................................................................1Overview of company.....................................................................................................1Key business risks.........................................................................................................2Four key ratios and brief explanation.............................................................................2Material Accounts...........................................................................................................3Ten different material account balances........................................................................4Explanation of selected assertion relevant to material account balance.......................5Comprehensive set of audit work steps for each material account balance.................7Sampling plan for each material account.......................................................................7CONCLUSION...................................................................................................................7REFERENCES..................................................................................................................82
INTRODUCTIONIn the present era, the concept of auditing is increasing as each and every firmwants to detect the error and frauds at the right time lowering their impact on the overallperformance of business (Austin and Carpenter, Cantore, 2017). This help anorganisation to get more advance loan from bank because the audited statement ismore faithful and reliable. In order to conduct an audit program there is need of properand accurate plan which gives detailed information regarding conducting an audit and itguide the auditor to maintain an ethics within company. The audit program might bedetermined as the plan of action of the auditor specifying the tasks to be performed, theaudit tests to be performed and the processes to be accompanied, the personsresponsible for performing the work as well as the time under which the work to beperformed. In this assignment Vmoto Ltd has been selected that support to betterunderstand the concept of audit program.In this report, difference between tests of controls, substantive tests oftransactions and substantive tests of balances, condition for auditor to undertakesubstantive audit procedures, relation of assertions to accounts balance, selection ofmost accurate and effective combination of audit procedure is discussed.TASK 1Overview of company.The company Vmoto Ltd is one of the leading electric vehicle manufacturing anddistributing company all over the world. The company was established in 29 October2001 and have its operation in Australia, America and New Zealand and the middle east(About Vmoto Limited,2019). The company have a mission to become the largestelectric vehicle product distributor and also to deliver EV solution to its user atinternational level. Vmoto Limited manufactures, markets and distributes motorcycles,scooters and all-terrain vehicles. The company is dealing in consumer discretionarysector within leisure product industry and recreational vehicles sub industry. Thecompany have a strategy to sell the high value and margin two wheeler electric productsuch as delivery scooter, police vehicle, food motorcycle etc. at international level whichsupport them to gain the well positioned and become a global topmost two-wheelelectrical vehicle provider and electric vehicle solution supplier. In recent financial year2018 the company sell around 10875 as a whole in which 10081 of electric vehicles aresold in international market.Key business risks.In the present there can be number of business risk that can be faced by theelectric vehicle manufacture company such as the introduction of rapidly developingdigital technologies, increased regulatory stress and worldwide financial instability areimportant considerations. It is observed that the key business risk to Vmoto Ltd isrelated with cost because battery innovation is costly and the use of batteries in electricvehicles must be sufficient to enable them to carry the vehicles practical for most driver,they must be constructed using costly equipment, most of which are difficult to procure.Audit risk3
The likelihood of an auditor expressing an inaccurate view on financial statements iscalled as audit risk (Lim, 2018). Audit risk is a risk of auditor providing on financialstatements an inaccurate or insufficient opinion. Following are cases of erroneous auditopinions, as follows:Issue an unqualified audit-report when there is reasonable justification for aqualification,Issue of a qualified audit-opinion unless no requirement of qualification,Failure to highlight an important issue in audit report,Expressing an opinion on 8a corporation's financial statements if no opinion canbe reasonably provided because of major limitation with respect of scope in auditperformanceFour key ratios and brief explanationProfitability Ratios201620172018Gross Margin %17.610.313.1Return on Equity %-50.1-48.46-6.51Interpretation: The profitability ratios are the financial measure that are used tofigure out the actual earning ability of company and also ascertain the financial positionand strength by comparing the revenue with several expenses and make sure theoptimum utilisation of different resources. From the above table gross margin of VmotoLtd has shown a high fluctuation such as in year 2016 it was 17.6% which reduces to10.3 in 2017 and 13.1 in 2018. The return on equity of company remain in negative forthe respective year because they are not able to make enough profit which can bedelivered to subsequent shareholder. In year 2018 the return on equity was-6.51 which shows that company have started making some profit but it was notsufficient at the moment(Annual Report Vmoto Ltd,2017). For year 2017 it was (48.46)and in year 2016 it was (50.1) this means the condition was adverse for Vmoto Ltd andcompany is continue to attain losses for its entire operation.Efficiency ratio201620172018Asset Turnover Ratio1.050.620.94Interpretation:Efficiency ratios are being used by evaluating how well acompany uses its funds to produce income to evaluate business efficiency. Theseproportions work with the business's functional element like how many moments thefirm transforms its receivable amount into money, the capacity of the business toproduce profit through the use of resources, and how well the business managesinventory size. From the above table it has been observed that assets turnover ratiowhich was 1.05 in year 2016 which shows that company is able to generate enoughsales from their assets. This ratio decreases to 0.62 in year 2017 and companymanagement keeps on increasing the sales due to which there is a slightly movement inthe assets turnover ratio 2018 to 0.94 (Annual Report Vmoto Ltd, 2018).Liquidity/FinancialHealth201620172018Current Ratio1.961.791.85Interpretation: The liquidity ratio assesses the capacity of the company to payits quick-term responsibilities, i.e. current liabilities or any other unwanted expenses(McEwen, Griffiths and Schultz,Shafritz, 2018). It demonstrates the degree of cash4
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