Auditing: Risk Assertion and Internal Controls

Running head: AUDITING
Auditing
Name of the student
Name of the university
Author note

1
AUDITING
TO: Jek Porkins
FROM: Samway Baker Fitzgerald
CC:
DATE:
SUBJECT: Auditing
This memo has been written to the senior auditor of DHL to inform him about the risk
assertion of the business that the company owns. The solution has been provided in the form
of question and answers.
Answer to question 1
The Dudley health Limited has own three services, Pellegrino shores is one of them.
This is a village for the retired person which is located in Port Macquarie. There has been a
fraud identified at the Pellegrino shores. According to the case study, senior staff member at
Pellegrino shores has been working secretly with number of residents who all came to stay.
This has been identified that the senior staff member was decrease the fee in exchange of
some secret payments from the residents. The fraud was detected by a fellow employee who
you heard the senior staff discussing with the member about the scam. This will result in
impact of business, the profit of the company will get reduced. The information’s are not
getting recorded in the accounts for which a misstatement of goods appeared in the financial
statements. The information related to the payments of residents staying at the villages will
not be found latter. The staffs generally do not record all these type of scams in the account
so some information may not be there and the company will not get the proper information of
their low profit generation. Assertions relating to presentation and disclosures are,
completeness, classification and understand ability, accuracy and valuation, occurrence.

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AUDITING
According to the data provided in the question, there is a risk assertion of accuracy and
valuation, completeness that are related to presentation and party disclosures of the accounts.
Accuracy and valuation of risk assertion means that the transaction and events that occur at a
particular time in a year needed to be recorded in the financial statement of the entity (Titera
2013). The appropriate amount should be disclosed properly in the accounts. Assertion of
Completeness means that all the transaction that occurs and take place should be disclosed in
the accounts and in the financial statements of the company. According to the information,
the senior staff has the authority to update the location of the room and can reduce the time of
the residents that were staying (Skaife, Veenman & Wangerin 2013). This the reason why the
senior staff can perform such scam for many days. The required audit procedure needed to be
followed for the above risk identified is that the auditor should verify the financial records
with the guest list and the relevant fair that is allocated for every room. Physical verification
is required for the confirmation of the risk assertion related to the presentation and disclosure
of the related parties.
Answer to Question 2
The patient revenue system of St Neville’s has recently changed. The DHL “off the
shelf” is the revenue system that is being used for the revenue collection. The new system
will perform all the related function that was performed by the previous system. The previous
system of St Neville’s is used to do the billing of the patients produce the invoice to give the
patients and also have the formula that are needed to calculate the approximate amount that
needed to be charged from the patients (aasb.gov.au. 2019) The system maintain a database
of the patients and keep a record of the rates that shows all accommodation rates for billing,
discounts rebate and the benefits that are assist by the governments. The necessary risk that
are associated is that the occurrence of the transaction. This means that the related
transactions of St Neville’s that takes place during the year is disclosed in the financial

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AUDITING
statements and is related to the entity or not. The maintaining of the patient database and
keeping the records of all discount rates or not. The other risk that is associated is accuracy
and valuation (Glover & Prawitt 2014). This means that the invoices that are generated from
the machine is appropriate or not. The amount of the invoices are disclosed and calculated
properly or not. The two key question that could be ask to the internal audit is that is the
internal auditor is aware of any possible or true illegal or questionable payments? And the
other one is that is he aware of any related party transaction that is not being disclosed in the
financial report? The reason behind asking this will help the auditor to confirm all the risk
that are related with the presentation and disclosure of the new revenue system that has been
set up in St Neville’s. The auditor will get to know the information and the events that occurs
inside the organisation. The strategy of the auditor should include of a physical verification of
the revenue generation system. The auditor should fix a day for the visit. The auditor should
verify the discounts rates and other government subsidies with the records that the machine
has. The main strategy of the auditor is to verify and confirm the occurrence of transaction in
the financial reports of the company. The auditor should verify the accuracy and valuation of
the system that the bills and the invoice that are generating from the system are accurate or
not. Verification of the staff is also need to perform by the auditor as because it is required to
see that they know the exact process of using the system. Auditor should communicate with
the management and the patient to gather some additional information about the St Neville’s.
This will help the auditor to analyse and suggest a perfect solution for St Neville.
Answer to question 3
Acuity Vision is another business that is owned by (DHL) Dudley Health Limited.
This business includes a network of day surgery clinics in Australia. The sales team deliver
their own range of medical supplies that are sold from the direct marketing and by sales team
that was recently recruit by the business. The sales team has reported to the authority that