AUDITING AND ASSURANCE SERVICES Auditing and Assurance Services Name of the University Authors Note

Running head: AUDITING AND ASSURANCE SERVICES
Auditing and Assurance Services
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ASSURANCE SERVICES
Table of Contents
Introduction................................................................................................................................2
Answer to Question 1.................................................................................................................2
Requirement (a)......................................................................................................................2
Requirement (b).....................................................................................................................3
Requirement (c)......................................................................................................................4
Requirements of ASA 701.....................................................................................................4
Rationale for Determination...................................................................................................5
Disclosure of Key Audit Matters as per ASA 701.................................................................5
Answer to Question 2.................................................................................................................6
Requirement (a)......................................................................................................................6
Requirement (b).....................................................................................................................7
Requirement (c)......................................................................................................................8
Requirement of ASA 701.......................................................................................................8
Rationale for Determination...................................................................................................9
Disclosure of Key Audit Matters...........................................................................................9
Conclusion................................................................................................................................10
References................................................................................................................................11
Introduction

2AUDITING AND ASSURANCE SERVICES
Auditing is considered as the process to examine as well as insect the financial
statements of the business organizations with the aim to find any kind of material
misstatements in them that can hamper the decision making process of the key stakeholders
(Simnett, Carson and Vanstraelen 2016). At the time of the preparation of the financial
statements and reports, the managements of the audit clients utilize certain unspoken and
unambiguous claims and these claims are called the Audit Assertions. It is needed for the
auditors of the companies to take into consideration the analysis as well as examination of
these audit assertions as there are many instances where the auditors have found errors or
other issues in the used audit assertions (Burton et al. 2014). In case the auditors find any
kind of issue in the assertions, they need to declare that particular assertion or assertions at
risk. Then, with the aim to minimize this risk in audit assertions, the auditors are required to
perform the suitable substantive audit procedures. At the same time, it is on the auditors to
decide whether these issues can be considered as Key Audit Matters or not. In case they are
Key Audit Matters, the auditors are needed to ensure the proper communication of them with
description in the audit report so that the key stakeholders become aware of them (Simnett,
Carson and Vanstraelen 2016). The aim of this report is to consider the analysis of the audit
assertions related to inventory and property, plant and equipment for the companies in the
provided case studies.
Answer to Question 1
Requirement (a)
Accuracy or Valuation
This assertion ensures that there is not any error in the inventory transactions. At the
time to deal with this assertion, it is needed for the auditor to ensure the physical inventory
figures are accurate and to ensure the flow of appropriate inventory to the income statement

3AUDITING AND ASSURANCE SERVICES
as cost of goods sold from the balance sheet (Titera 2013). In case of Advanced Computer
Solutions, there was movement in inventory to six different warehouses on March 2018. For
this reason, physical inventory count of the company can be wrong as there can be error in
the inventory counting process. In addition, the suspected problem in software could be a
barrier in the correct inventory flow to the income statement from the balance sheet of the
company. These reasons lead to this particular assertion at risk (Kharisova and Kozlova
2014).
Cut Off
The use of this particular assertion ensures the correct reporting of the inventory
values in the correct accounting books. Hence, the need for the auditors is to undertake
examining the inventory shipping and receiving documents for ensuring the correct register
of inventory movement (Knechel and Salterio 2016). For example, the companies cannot
record the goods received of the last year in the current year’s book. According to the case of
Advanced Computer Solutions, 18 per cent sales of 2017 are included in the inventory for the
year 2018. By applying the principles of cut off assertion, it can be said that failure of the
company in properly calculates the inventory contributed towards the inclusion of 2017 sales
in the inventory of 2018. At the same time, it could also be happened due to the issues in
software (Finkbeiner 2014). Hence, the auditors of Advanced Computer Solutions can
consider this assertion at risk.
Requirement (b)
In response to the first assertion at risk, it is needed for the auditor of Advanced
Computer Solutions to thoroughly observe the physical inventory counting process of the
client (Feng et al. 2014). While doing this, the auditor need to discuss the methodical
physical inventory count process with the responsible staffs in order to be familiar with the