Key Assertions and Substantive Audit at Risk for Inventory | Advanced Computer Solutions Limited & Green Machine Limited

Running head: AUDITING AND ASSURANCE SERVICES
Auditing and Assurance Services
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1AUDITING AND ASSURANCE SERVICES
Executive Summary:
The current report has laid stress on analysing the audit risk assertion from the two provided
scenarios. In case of both Advanced Computer Solutions Limited and Green Machine Limited,
certain auditing assertions have been used. These assertions mainly constitute of accuracy and
valuation and cut off for Advanced Computer Solutions and valuation and existence for Green
Machine Limited. The above analysis clearly makes it apparent that the auditors could gather the
necessary auditing principles for ascertaining the key audit matters from ASA 701, which is the
standard designed for communication of key audit matters to the needed parties. In addition, this
standard has laid down certain guidelines, which the auditors have to comply while carrying out
the audit of the financial statements of the business organisations. Finally, substantive audit
procedures are required to be developed by the auditors after the identification of the significant
audit assertions at risk.

2AUDITING AND ASSURANCE SERVICES
Table of Contents
Introduction:....................................................................................................................................3
Question 1: Advanced Computer Solutions Limited.......................................................................3
(a) Two key assertions at risk for inventory:...............................................................................4
(b) Two substantive audit procedures:.........................................................................................4
(c) ASA 701 Communicating Key Audit Matters:......................................................................5
Question 2: Green Machine Limited...............................................................................................7
(a) Two key assertions at risk for property, plant and equipment:..............................................7
(b) Two substantive audit procedures:.........................................................................................8
(c) ASA 701 Communicating Key Audit Matters:......................................................................8
Conclusion:....................................................................................................................................11
References:....................................................................................................................................12

3AUDITING AND ASSURANCE SERVICES
Introduction:
When auditing and assurance services are provided to the audit clients, it is the obligation
of the auditors to scrutinise the accounting information and books of accounts of the latter for
assuring that there are no material misstatements in financial information that would affect the
decision-making process of the stakeholders like shareholders, investors, suppliers and others
(Bachlechner, Thalmann and Manhart 2014). The auditors bear the responsibility of examining
certain assertions that the companies for preparing and presenting their financial statements. The
audit assertions are those inherent declarations undertaken by the management of a business
organisation in order to develop and publish the financial statements. The reason behind the
utilisation of assertions is to assure the accurate and fair disclosure of financial information via
the financial statements (Power and Gendron 2015).
The auditors of the audit clients need to verify whether the latter parties have used the
assertions in the right manner, since audit risks could be developed because of wrong use of
audit assertions. If the assertions are found to be at risk, it is necessary to determine whether they
fall under key audit matters in compliance with ASA 701 (Westermann, Bedard and Earley
2015). The current report would emphasise on analysing the audit risk assertion from the two
provided scenarios.
Question 1: Advanced Computer Solutions Limited
From the provided information, it could be observed that Advanced Computer Solutions
Limited has inventory-related problems, which put the assertions of accuracy and valuation and
cut off at risk.