Auditing and Assurance in Australia Auditing and Assurance in Australia Name of the University Author's Note

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. Two key assertions of audit risk related to inventory......................................................2
b. Describing the two important audit procedures pertaining to the risk identified in the
audit procedure................................................................................................................................3
c. Defining the requirement of including ASA 701 in the auditor’s report.........................4
Answer to Question 2..........................................................................................................5
a. Taking the relevant decision in explanation and assertion of the risk of intellectual
property intangible asset..................................................................................................................5
b. Description of the two appropriate procedure of audit which can be performed with
better response to the risk................................................................................................................6
c. Explanation of the requirement as per ASA 701 and its inclusion in the auditor’s report
.........................................................................................................................................................7
Conclusion...........................................................................................................................8
References............................................................................................................................9

2AUDITING AND ASSURANCE IN AUSTRALIA
Introduction
The board of AUSB has been seen to be making the auditing standard of ASA 701 in
compliance with “Australian securities and investment commission act of section 227B”. The
similar nature of the independent standard setting is seen to be associated with IFAC. Typically,
the auditors are inferred to depict the matters which are associated to auditing in company. The
significant consideration of escalating risk is based on risk as per ASA 315 and matters
pertaining to material misstatement. The study has evaluated the risk of material misstatement by
determining the risk of inventory connected to the decisions taken by the Computing Solutions.
The computing solutions has been seen to be winning a recent tender of large government
department however as per the findings of the closing balance there has been several instances of
discrepancies which are associated to pose significant risk in auditing. There are mainly inferred
due to reducing balance of closing inventory and the decision of the company to move its
inventory from central warehouse to six new regional warehouses. The assertions of the auditing
have also referred to the case of audit at Beautiful Hair. In this case the study has identified and
explained about the two main assertions which are at risk associated to the intellectual property
intangible asset. The second section of the questions has been able to explain about the
substantive audit procedure which may be performed for addressing the identified risk aspects
(Carson, Fargher and Zhang 2016).
Answer to Question 1
a. Two key assertions of audit risk related to inventory
The given case of computing solutions has shown that inventory has reduced from 5.4
times in 2017 to 3.8 times in 2018. Moreover, it can be further seen that computing solution took

3AUDITING AND ASSURANCE IN AUSTRALIA
the decision of transferring the inventory from the central warehouse to six new regional
warehouses. In this context, inventory at hand was depicted with 26% of sales in 2018 and 18%
sales in 2017. It needs to be also stated that the company had recently won tender pertaining to
the supply of government department and also agreed that the supply of the items was 10% lesser
than the cost price (Mohan and Rajgoli 2017). The two key assertions at risk associated to this
context are listed as follows:
1. Closing inventory value risk with reduced turnover: It was agreed by Computing Solutions
for supplying the items 10% lower than the cost price. This is seen to be relevant despite of the
significant reduction of inventory from 5.4 times in 2017 to 3.8 times in 2018. However, the
company had planned to shift the inventory from the central warehouse to additional warehouses
in March 2018. This is seen to increase the overall operating cost of the inventory. This is further
regarded to posing a serious threat on the going concern of the company (McKee 2015).
2. Minimized value of inventory at hand: Based on the depictions made for the inventory at
hand it needs to be realised that there has been a considerable decrease in its value from 26% of
sales in 2018 to only 18% sales in 2017. The reduced value of inventory at hand is also
considered with the threat of posing risk of going concern (Australia and Australia 2015).
b. Describing the two important audit procedures pertaining to the risk identified in the
audit procedure
The process of auditing in general applicable for inventory is considered with different
types of techniques. This is inclusive of the various types of the procedures which are related to
the physical inventory count, reconciling the counting of inventory, cut analysis, proceeding with
the test of high value items and testing the items for the inventory in transit. The application of
general procedure of audit needs to be determined with following the valuation system depicted