Auditing and Ethical Practices

Running head: AUDITING AND ETHICAL PRACTICES
Auditing and Ethical Practices
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ETHICAL PRACTICES
Table of Contents
Section 1.....................................................................................................................................2
I) Determination of the Level of Materiality in Origin Energy.............................................2
II) Areas that are Significant to the Audit and Required Audit Procedures...........................3
Section 2.....................................................................................................................................4
I) Preliminary Analytical Review..........................................................................................4
References..................................................................................................................................8

2AUDITING AND ETHICAL PRACTICES
Section 1
I) Determination of the Level of Materiality in Origin Energy
Determination of materiality is a major fundamental factor in the auditing profession
that every auditor is needed to undertake. In the audit planning stage, the auditors are needed
to apply the concept of materiality; and they are also needed to take into account the concept
of materiality at the time to assess material misstatements in the financial statements
(Legoria, Melendrez & Reynolds, 2013). In this same manner, the auditors of Origin Energy
is needed to undertake the determination of the level of materiality. There are three particular
steps which require to be followed by the auditor of the firm for the determination of
materiality.
1st Step – The auditors must select the relevant and appropriate benchmark for materiality.
2nd Step – The auditors needs to determine an appropriate percentage for determining
materiality.
3rd Step – The auditors are required to provide the appropriate explanation on the selection of
the above factors (Mio, 2013).
The following discussion involves in the determination of the level of materiality in
Origin Energy for the year 2018:
 The first step is the selection of appropriate benchmark for determining materiality
and this puts the obligation on the auditors of Origin Energy to take into consideration
some factors. They are the company’s nature and the industry’s nature in which the
company functions. Companies widely use certain benchmarks for the determination
of materiality; they are profit before tax, gross profit, total income, total expenses and
total assets (Emby & Pecchiari, 2013). Companies operate in the Australian energy
sector largely uses profit before tax for the determination of materiality level; and