THE AUDITING AND ETHICS

Running head: AUDITING AND ETHICS
Auditing and ethics
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1AUDITING AND ETHICS
Table of Contents
Introduction......................................................................................................................................2
Section 1..........................................................................................................................................2
Materiality level...........................................................................................................................2
Significant amount for audit........................................................................................................4
Section 2..........................................................................................................................................6
Preliminary analytical review......................................................................................................6
Key ratio computation of CS Limited.........................................................................................7
Section 3........................................................................................................................................10
Statement of cash flow...............................................................................................................10
Audit report................................................................................................................................10
Conclusion.....................................................................................................................................11
Reference.......................................................................................................................................12

2AUDITING AND ETHICS
Introduction
In accordance with ASA 320 materiality is the misstatements that includes omissions and
are accounted for as material if the same in association with other or individually are likely to
have its influence on the economic decision taken by the users based on the annual report.
Judgments regarding the concept materiality are made depended on the contiguous
circumstances and are impacted by the nature or the size of misstatements or by both size as well
as nature (Eilifsen & Messier Jr, 2014). Major purpose of the task is to focus on the materiality
concept and analysing the financial report of ASX listed entity CSL Limited to estimate the
amount of materiality. Further the task will prepare the preliminary analytical review in
association with the information provided by the entity. In addition the report will go through the
cash flow statement and auditors report of CSL Limited for extracting various information.
Section 1
Materiality level
In accordance with AUS 202 objectives as well as general principles that administrates
the financial report audit is to allow the auditor in expressing the opinion in context of whether
the annual statement has been prepared in conformity with the framework of financial reporting
in all the material aspects. Relationship among materiality and audit risk indicates that with
higher level of risk level of materiality becomes lower. Thus, the auditor shall take into
consideration the association among audit risk and materiality while determining the nature,
timing and extent of audit procedure (Louwers et al., 2015).

3AUDITING AND ETHICS
Planning materiality is setting of the amount for misstatement by auditors at the stage of
planning dependent on the materiality in the annual statement. It is used by the auditor for
evaluating the impact of misstatement in aggregate or individually in context of the financial
statement. Once the materiality in annual statement is acknowledged as well as assessed by the
auditor, the auditor establishes the performance materiality that is the tolerable misstatement.
However, while establishing the level of materiality the auditor considers various factors
including the level of reliance that can be placed on the information provided by the management
and other factors if any that may signify any deviation from normal activities of the entity
(Glover & Prawitt, 2014). Quantitative factors considered for computing materiality level are as
follows –
 0.5% - 1% of the gross revenue
 1% - 2% of the total assets
 2% - 5% of the shareholder’s equity
 5% - 10% of the net profit
If the financial report of CSL Limited for the year ended 2019 is taken into consideration,
level of materiality shall be computed as below –
It can be recognized from above presented table that highest amount is 5% of
shareholder’s equity that is $262.57 million. However, the maximum level of misstatement that