Auditing And Ethics | Assessment 1

Running head: AUDIT AND ETHICS
Auditing and Ethics
Name of the Student:
Name of the University:
Author’s Note

AUDITING AND ETHICS
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Table of Contents
Part 1................................................................................................................................................2
Materiality Principle in Audit......................................................................................................2
Draft Notes and Disclosures........................................................................................................4
Section 2......................................................................................................................................5
Analytical Procedures as a tool of Audit.....................................................................................5
Section 3..........................................................................................................................................9
Analysis of the Cash flow Statement...........................................................................................9
Analysis of Auditor’s Report.....................................................................................................10
Reference.......................................................................................................................................12

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Part 1
Principle of Materiality in Audit
The auditing process is considered to be a dynamic process which involves estimation
whether the annual report formulated by the top management is showing accurate view of
financial position for the period. The process of audit panning contains numerous segments, one
of the major aspect which is considered is materiality of the item or in other words how
important or significant is the item in the financial statements. The determination of materiality
is considered to be an important aspect and the same requires sound judgement on the part of the
auditor of the business. The assessment would be focusing on Treasury Wine Estates ltd which is
one of the leading wine producers and distributers in the country of Australia (Tweglobal.com.
2019). The annual report which would be considered for the purpose of audit would be that of
the current year.
The materiality concept in simple words reflect the significance of the elements reflected
in the financial reports and whether the same can be have an impact on the financial statement of
the business if the item is misstated (Carraher and Van Auken 2013). In terms of audit, the items
which are more repetitive in the financial statements are considered to be material. In a similar
manner figures which are intricate in nature are also deemed to be material for the business.
Likewise, any element which is of significant amount in the annual report of the business
(Christensen, Glover and Wood 2013). It is to be noted that materiality is two kinds which show
qualitative and quantitative estimates of materiality for the company. The elements which are
covered under qualitative materiality includes items such as sales, costs of sales, net profit while
quantitative materiality involves computation of planning materiality for assessing the
materiality of numerous items which are covered in the financial statement of the business.

AUDITING AND ETHICS
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The computation of planning materiality is usually conducted at the planning stage of an
audit and it is a fact that panning materiality of the business is considered to be the base for
computing performance materiality of a business. The performance materiality is the standards
which the item should be reflecting to be material (Goh, Krishnan and Li 2013). The technique
which is used for computing planning materiality is by considering a value which is greater than
every other value in the financial statements and at the same time a percentage is considered. The
percentage which is taken would be set as per the auditor’s judgement. In order to estimate the
materiality for the business of Treasury wine ltd, the auditor considers total assets as the base as
the figure is the most significant in the balance sheet of the company (Eilifsen and Messier Jr
2014). The value of the total asset is shown in the balance sheet of the business and the same is
shown to be $ 5,445.7 million. The percentage is considered by the auditor on his own
judgement and also referring to the estimate which was taken by the past auditor. The percentage
which is considered for estimation is 2% and the materiality computation is shown in equation
below:
Planning Materiality=Percentage estimated ×Total Assets of the Company
¿ $ 5445.7 million ×2 %
¿ $ 108.914 million
Therefore, the planning materiality which should be considered by the auditor is shown
above and it is on the basis of the same, performance materiality for the business needs to be
computed.