Auditing and Assurance in Australia

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
Name of the Student
Name of the University
Author’s Note
Table of Contents

1AUDITING AND ASSURANCE IN AUSTRALIA
Introduction..........................................................................................................................2
Answer to Question 1..........................................................................................................2
a. Explanation of the two key assertions connected to inventory........................................2
b. Description of two important audit procedure which may be performed in response to
the risk identified.............................................................................................................................4
c. Considering the ASA 701 KAM in the auditor’s report and providing the rationale for
the adulting standard........................................................................................................................4
Answer to Question 2..........................................................................................................5
a. Identification and explanation of the two main assertions at risk related to PPE........5
b. Description of the of the two functional audit procedures which will be able to
achieve better in reply to each risk..............................................................................................6
c. Description of the prerequisite of ASA 701 Communicating Key Audit Matters in
the Auditor’s Report and the justification for this auditing standard..........................................7
Conclusion...........................................................................................................................8
References............................................................................................................................9

2AUDITING AND ASSURANCE IN AUSTRALIA
Introduction
The application of the of the norms for AUASB is seen to be made in compliance with
the “Auditing Standard ASA 701” as per “section 227B of the Australian Securities and
Investments Commission Act 2001”. The equivalent consideration as per the independent
standard setting is inferred to be based on the standard of IFAC. Typically, an auditor depicts the
matters pertaining to audit. The areas of risk assessment may be inferred with material
misstatement and significant risk considered as per ASA 315. The inference of the study is based
on risk considered with “property, plant and equipment”. Secondly, the study will describe the
essential audit procedure which are referred with the individual risk. The report has enlightened
the requirements based on “ASA 701 Communicating Key Audit Matters”. This is considered
with the rationale of the auditing standard. The other aspects of the reporting can be inferred
based on providing a complete rationale of determining KAM. These indicators are used with
analytical procedures like inventory turnover ratio and associating the same with the auditing
procedures. The various aspects of the study relate to the explanation and identification of the
two important risk related assertions pertaining to PPE. Secondly, it can be also seen that
identification and description essential audit procedure are seen with performing response to the
individual risk (Stagg et al. 2018).
Answer to Question 1
a. Explanation of the two key assertions connected to inventory
The inventory turnover was seen to be reduced from 5.4 times in 2017 to 3.8 times in
2018. Moreover, the advanced computer solution was based on shifting the inventory from the
central warehouse to six regional warehouses. At the end of year, the inventory at hand was 26 %

3AUDITING AND ASSURANCE IN AUSTRALIA
of the sales in 2018 and 18% of the sales in 2017. It was also stated that company had recently
won a tender associated to supply several products in government department and at the same
time agreed to supply the items at 10% lower cost price. In this regard the two main types of the
audit risks are discussed with the inclusion of closing inventory and reducing value of inventory
at hand. Therefore, some of the main assertions associated to the study may be inferred in terms
of the computing solutions agreeing the terms of supplying the items lesser than 10% of the cost
price in spite of reducing inventory turnover (Rahim and Idowu 2015).
In this context the two risks of the inventory are listed as follows:
1. Decreasing value of the closing inventory- It needs to be seen that the computing
solutions was agreeing supplying the items 10% lesser than the inventory turnover. This
ratio was seen to be reducing from 5.4 times in 2017 to 3.8 times in 2018. Additionally, it
was also seen that there was an increasing scope of cost due to inventory. The serious risk
issues in the inventory was identified with going concern. The various types of the values
considered with the closing inventory may be understood with the plan of the company to
move the inventory to six new regional warehouses in the year March 2018. This is also
associated to pose additional risk of going concern for the company and risk of material
misstatement (Chevers et al. 2016).
2. Decreasing value of inventory at hand: The evaluation of the risk at hand have shown
that the total sales of the company was 26% and 18% in 2017. This reduction in the
inventory was considered to posing a threat of going concern. The overall problem of the
inventory was seen to be reduced from 5.4 times in 2017 to 3.8 times in 2018. Moreover,
the advanced computer solution was based on shifting the inventory from the central
warehouse to six regional warehouses. This is seen to pose a considerable threat
pertaining to the inventory on hand with the company (Lidbury et al. 2017).