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Auditing and Ethics Assignment Sample

   

Added on  2021-04-21

16 Pages3106 Words44 Views
Running head: Auditing and EthicsAuditing and Ethics

Auditing and Ethics 1ContentsIntroduction.................................................................................................................................................2Section 1......................................................................................................................................................2Level of materiality used in the audit of group accounts in Genworth Mortgage Insurance Australia Limited....................................................................................................................................................2Section 2......................................................................................................................................................5Analysis of the financial position of the company and relevant auditing procedures for assertions.........5Section 3....................................................................................................................................................10Analysis of the statement of cash flows.................................................................................................10Conclusion.................................................................................................................................................12References.................................................................................................................................................13

Auditing and Ethics 2IntroductionAudit materiality is amongst the most important concepts for auditors. Misstatements areconsidered material if they influence the decision making of the users based on the financialstatements. Materiality encompasses qualitative and quantitative aspects of auditing. Whiledealing with materiality in the aspects of quantity, the points to be considered are setting up ofthe preliminary judgment of materiality which is done at the planning stage of audit (ICAEW,2017). In this context, there are certain phrases in relation to materiality such as misstatements includingomissions which can impact the decision making of the users of financial statements. It is alsobased on the judgment which is based upon the surrounding circumstances comprising of sizeand nature if misstatements (CFI Education Inc, 2015). .So, in this article, the concept ofmateriality would be discussed in the context of Genworth Mortgage Insurance AustraliaLimited.The draft annual report and its financial statements would also be analyzed along with thevarious ratios over the period of 2014-2017. The key risk areas will be assessed and auditprocedures would be advised to mitigate those risks.

Auditing and Ethics 3Section 1Level of materiality used in the audit of group accounts in Genworth Mortgage InsuranceAustralia LimitedThe auditors set the materiality regarding the financial statements at the stage of planning. Theprimary purpose is to use it to identify the performance of materiality and clarifying thethresholds for accumulating misstatements. The concept of materiality pertains to misstatementsand omissions which are considered to be material if they individually or collectively affect thedecision making of the stakeholders on the basis of financial statements. It comprises ofqualitative and quantitative aspects. As per ASA 320 Materiality in Planning and Performing an Audit, the quantitativeconsiderations consider the aspects such as setting preliminary judgment for materiality.It isdone at the planning stage of audit and the performance materiality is considered .i.e. materialityon a line item basis for example inventory and accounts receivable. The materiality should beestimated in a cycle or a particular account(AASB Standard, 2013).As per AASB 1031, the qualitative considerations pertain to the non-disclosers made by thecompany such as contingent liability and transactions of a related party. There are variousmethods which the group auditors use to determine the level of component materialitycomprising of setting up the limit of aggregate of component materiality which is relative to thegroup materiality. Their limits would increase proportionately to the increase in the number ofcomponents. Factors influencing the level of component materiality comprise the fact thatcomponent materiality is lower than the group materiality.

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