Auditing and Assurance

Running head: AUDITING AND ASSURANCE
Auditing and assurance
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1AUDITING AND ASSURANCE
Table of Contents
Answer 5....................................................................................................................................2
Answer 6....................................................................................................................................5
Reference....................................................................................................................................6
Appendix....................................................................................................................................7

2AUDITING AND ASSURANCE
Answer 5
Materiality in audit is among the most important concepts for the auditors. Omissions
or misstatements are considered as material if in aggregate or individually they are expected
to impact economic decisions of the users on the basis of financial statements (Ruhnke,
Pronobis and Michel 2014). Based on the environment and understanding of Medibank’s
business following accounts are are at risks of the material misstatement –
Revenue –
Revenue reported in the income statement of the entity is comprised of the revenue
from health insurance premium amounted to $ 6,244.9 million and revenue from Medibank
Health amounted to $ 552.1 million. Revenue is an important item as the expenses for
business operation are paid from the revenues. Hence, it is always vulnerable to fraud,
misstatement or error. Sales revenue of the company over the years from 2016 to 2017 has
been increased by 0.82% However, irrespective of the amount involved with revenue account
revenues are always treated as a material item by its nature (Louwers et al. 2015).
Generally the revenues are misstated by – (i) recording revenues for the sales that has
not yet been taken place or for the goods those are not yet dispatched (ii) invoice not raised
for the goods delivered or sales made (iii) misstating the invoice amount at the time of
recording it in the books (iv) recording fictitious sales for fictitious customers.
Key assertions involved with the revenues are as follows –
 Accuracy – amount involved with the revenue generating sales transactions are not
recorded under appropriate account with appropriate amount (Ruhnke, Pronobis and
Michel 2014)