Auditing and Ethics

Running head: AUDITING AND ETHICS
Auditing and ethics
Name of the Student
Name of the University
Author’s note

AUDITING AND ETHICS1
Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Section 1:....................................................................................................................................2
Determining the materiality in the audit plan for the year 2018:...............................................2
Reviewing various draft notes and disclosures in the annual report of the company:...............2
Section 2:....................................................................................................................................2
Identifying the key risk areas for audit:.....................................................................................2
Section 3:....................................................................................................................................3
Evaluating the going concern risk by reviewing the cash flow:................................................3
Reviewing the opinions and audit report of the auditors of company for financial year 2018:.3
Conclusion:................................................................................................................................3

AUDITING AND ETHICS2
Introduction:
In this report, the development of audit plan of the company has been demonstrated
and the first section addressing the requirement is to determine the materiality by evaluating
the factors. The chosen company for the assessment is STW which is an exchange traded
fund tracking the performance S & P/ASX 200 index. Investment is made by the fund is done
in the securities comprising the index in proportion to the relative weightings. Such index is
comprised of most liquid securities in Australia and 200 largest securities by market
capitalization. The analysis will be confined to SPDR S&P/ASX 200 Fund of the company.
The disclosures and the draft notes accompanying in the annual report of the company has
been examined. All the relevant information are retrieved from the financial report that is
used for preparing analytical review. Tool of ratio analysis is implemented for outlining the
changes in the ratio and apparent trend of the financials. For each of the identified ratio,
relevant assertions are determined along with the audit procedure. In addition to this, cash
flow statement of the company has been reviewed for evaluating the gong concern risk faced
by the company and recommendation is made by referring to ASA 700 (Bennett & Hatfield,
2017). Later section of the report conducts a review of the opinion and the auditor’s report for
addressing the audit issues.
Discussion:
Section 1:
Determining the materiality in the audit plan for the year 2018:
Auditors are provided with the reference frame when they discuss about the
materiality which is determined by the preparation and presentation of the financial
statements. Identification of performance materiality at the planning stage of audit is
primarily required for determining materiality. Materiality factor is considered to be crucial

AUDITING AND ETHICS3
in the audit procedure as the concept is applied by the auditors in determining the existing
material misstatement which leads to uncertainty. Materiality is determined by using three
steps that is selecting the appropriate benchmark, considering an appropriate percentage of
benchmark for determining materiality and choice justification. The concept of materiality is
applied by the auditors at the planning stage when evaluating the impact of any identified
material misstatements in the financial report of the organization. However, there exist some
of the practical issues associated with materiality such as accumulation of misstatements,
assessing materiality misstatement and categorization of the misstatements.
Auditors are required to make the preliminary assessment of the materiality in the
audit and selection strategies for the establishment of an appropriate level of quantitative
materiality. In the audit planning, the preliminary materiality is determined by accounting for
the financial results, budgets and year to year balances (Masiulevičius & Lakis, 2018).
Determination of materiality has been set by some accounting standard body such as IASB
and AASB which accounts for some specified percentage of assets, revenue, gross profit and
sales figure. The quantitative estimate of the level of materiality of STW Fund Company has
been computed by considering the level of operations.
(Amt in $)
STW
Quantitative estimate of materiality
Criterion Base Amount Materiality
level/range
1% to 2% of the total
assets
Total Assets 653,942,3
10
6539423.1 to
13078846.2
0.5% to 1% of interest
income
Interest income 416,538 2089.62 to 4165.38
5% to 10% of operating
profit
Operating profit 101,848,5
58
5092427.9
to 10184855.8
2% - 5% of the
shareholders’ equity
Equity 625,546,8
97
12510937.94 to
31277344.85
1% to 2% of the net Net interest 104,322,9 1043229.34 to