Auditing and Assurance in Australia

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
University Name
Student Name
Authors’ Note

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AUDITING AND ASSURANCE IN AUSTRALIA
Executive summary
The study elucidates about the audit risk that indicates towards the issue that is encountered
by the assessor while examining the material misstatement. This may perhaps occur by
reason of error or else fraud. The study presents ways to assess the business risks by
conducting thorough analysis of a ratio that can assist in acquiring a quick indication of the
health and financial of the firm. It also can help the management to identify the strength as
well as weaknesses of the firm and assist in taking a variety of initiatives and framing of
strategies. In the current case, the chosen firm TCW has been evaluated in the present report.

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AUDITING AND ASSURANCE IN AUSTRALIA
Table of Contents
Solution to Task 1A...................................................................................................................2
Solution to Task 1B....................................................................................................................6
Solution to Task 2A.................................................................................................................12
Solution to Task 2B..................................................................................................................16
References................................................................................................................................18

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AUDITING AND ASSURANCE IN AUSTRALIA
Solution to Task 1A
As suggested by Junior et al. (2014), analysis of financial ratio indicates towards evaluation
of financial assertion that is utilized to understand financial health of the business entity. For
the given case under consideration, Trunkey Creek Wines Limited’s accounts are to be
evaluated based on key financial ratios provided such as the marketing expense, accounts
receivables, property assets and investments. The current section of the study presents the
audit that the auditor may encounter while identifying material misstatement in financial
statements and mentions the steps of audit that need to be carried out to lessen risk of audit.
However, this might perhaps happen owing to error (intentional or unintentional). The table
mentioned below presents analysis of accounts of the firm TCW and identifies diverse risks
of audit related to the same together with steps to lessen the detected risk.
Account Analysis Audit Risk Audit Steps to reduce
risk
Receivables Account receivable
indicates towards the
specific amount that
the TCW owes to all its
clients. With the aim to
examine financial
condition of the firm,
the ratio that is to be
examined is the
account receivables
(Simpson et al.,
2016). Particularly, in
As the firm TCW
markets products on
credit, therefore, there
remains a risks that are
linked to this particular
account (Alles et al.,
2018). Essentially,
there are existence
risks otherwise
occurrence and risk
associated to
completeness. Again,
Particularly for
mitigating the
existence else wise
occurrence risk,
auditors need to track
different suspicious in
addition to unreturned
verifications of valid
documentation of
accounts (Bédard et
al., 2015). In essence,
in case of completeness

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AUDITING AND ASSURANCE IN AUSTRALIA
the business concern,
the ratio for accounts
receivable for the
particular division of
wine is necessarily
60.65 days and it is 36
days for beef.
Essentially, this
replicates the total
number of days for
which a standard
customer invoice stays
outstanding.
the existence risk
otherwise occurrence
risk indicates towards
the validity risk of the
firm’s debt (Arens et
al., 2014). Conversely,
the completeness risk
refers towards the risk
of incomplete
documentation
risk, the assessor might
consider checking all
the sales proceeds and
analyze the company’s
procedures of business
transactions.
Investment The investment
condition of the firm
can be appropriately
assessed by the ratio of
total number of times
firm earns interest from
its investment (Wong
& Millington, 2014).
During the period
2016, the interest
accepted by the firm
was registered to be
8.10. However, during
the period 2017, it was
If the level of risk is
high, then it is
important on the part of
financiers to make
planned disbursements.
In itself, this would
alarm the business
enterprise, since this
would exert impact on
firm’s working capital
(Marques, 2018).
Particularly, there
subsists an inherent
risk of occurrence of
In this case the assessor
might perhaps acquire
evidence regarding
investment undertaken
at cost value else wise
fair value as has been
divulged in the
financial assertion
(Louwers et al.,
2015). Also, they too
have the need to
identify diverse
approaches for
ascertainment of fair

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AUDITING AND ASSURANCE IN AUSTRALIA
recorded to be 7.51.
Therefore, it can be
hereby mentioned that
investment for the firm
TCW has enhanced
considerably.
Basically, debt to
equity ratio reflects
overall risk of
investment of the firm
and higher debt equity
ratio replicates risk
linked to investment
(Kocken & Hulstijn,
2017).
material misstatement. value according to
regulations of the
(Generally Accepted
Accounting Principles-
GAAP).
Property assets In a bid to assess audit
risk associated to
property assets, then
the ratio return on
firm’s assets of both
sections of both wine
as well as beef of the
firm is to be evaluated.
Based on the provided
information, it can be
recognized that return
The risk that is related
to registering of
property assets
comprises of accurate
cost basis registering
and intricacy in assets
valuation (Liao et al.,
2018).
It is the task of the
assessor to inspect
whether the firm TCW
has capitalized
different cost
associated to the
purchase of firm’s
assets together with
documentation of
preservation and
maintenance of firm’s