Auditing and Assurance Services: Case Studies

Running head: AUDITING AND ASSURANCE SERVICES
Auditing and Assurance Services
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1AUDITING AND ASSURANCE SERVICES
Executive Summary:
The report would intend to evaluate the certification of audit risk as well as assertions from
the two provided case studies. The managements of both the provided organisations have
utilised a number of assertions that constitute of accuracy, valuation, existence and
classification in relation to their different classes of assets. Thus, the auditors of both the
organisations are needed to adhere to the guidelines laid down in ASA 701 for
communicating the key audit matters by taking into consideration a variety of requirements.
Moreover, the auditors need to design substantive audit procedures after they have identified
the significant assertions, which are at risk.

2AUDITING AND ASSURANCE SERVICES
Table of Contents
Introduction:...............................................................................................................................3
Question 1: Advanced Computer Solutions Limited.................................................................3
(a) Assertions at risk in relation to inventory:........................................................................3
(b) Substantive audit procedures to the identified risks:........................................................4
(c) ASA 701 Communicating Key Audit Matters:................................................................5
Question 2: Green Machine Limited..........................................................................................7
(a) Assertions at risk in relation to property, plant and equipment:.......................................7
(b) Substantive audit procedures to the identified risks:........................................................8
(c) ASA 701 Communicating Key Audit Matters:................................................................9
Conclusion:..............................................................................................................................12
References:...............................................................................................................................13

3AUDITING AND ASSURANCE SERVICES
Introduction:
The auditors have the obligation of verifying and evaluating the financial statements
of the organisations for assuring that material misstatements are not inherent in the same so
that the stakeholders could be provided with accurate information that would aid in their
decision-making process. When these financial reports are developed, it is necessary to make
a number of assertions (Bédard et al., 2016). The audit assertions are inherent proclamations
made by the organisations at the time of developing the financial statements. The primary
reason that these assertions are used includes assuring the suitability and accurate disclosure
of financial information with the help of the financial statements (Boolaky & Quick, 2016).
The auditors need to test the ways through which the organisations use the assertions, since it
might lead to audit risk owing to unsuitable use of audit assertions. If the assertions are found
to be at risk, they need to ascertain whether they could be categorised under key audit matters
in accordance with ASA 701 (Chambers & Odar, 2015). The report would intend to evaluate
the certification of audit risk as well as assertions from the two provided case studies.
Question 1: Advanced Computer Solutions Limited
According to the provided information, the financial statements of Advanced
Computer Solutions Limited contain material misstatements in inventory, which have
resulted in audit risk. The following two assertions are made in relation to inventory:
(a) Assertions at risk in relation to inventory:
Accuracy and valuation:
According to this assertion, it is the statement, in which all figures represented in a
financial statement are free from errors and they are based on appropriate valuation of assets,
liabilities and equity balances. In the provided scenario, Advanced Computer Solutions