Auditing and Assurance: Case Study Analysis and Audit Planning Process

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AUDITNG AND ASSURANCE
Auditing and Assurance
Name of the Student:
Name of the University:
Author’s Note:

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AUDITNG AND ASSURANCE
Table of Contents
Question 1A.....................................................................................................................................2
Question 1B.....................................................................................................................................3
Question 2........................................................................................................................................4
Question 3........................................................................................................................................6
Reference.........................................................................................................................................9

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AUDITNG AND ASSURANCE
Question 1A
a. As per the Case Study provided in the question, Alexis Dunbar is a staff auditor who is
engaged in the audit of three companies which are given below in details:
1. As per the requirement the first situation matches with Audit 2. As per the situation the
auditor had placed extensive reliance on the internal control of the company and when the
test of control was performed it revealed that there was certain control risk which arise.
Therefore, the auditor increased the substantive tests for transactions like account payable
(Griffiths, 2016).
2. As per the case which is given, it matches with Audit 1 engagements. In this case
extensive tests of control were performed and fairly analytical procedure was also
conducted. The auditor does not require external confirmation to confirm account payable
balances (Messier, Glover & Prawitt, 2015). Hence, it can be said that the internal control
of the company in this case is very strong (Jali, Abas & Ariffin, 2017).
3. As per the case given in the question, it matches with the engagement which the auditor
enters in Audit 3. The auditor is certain that the company does not have an effective
internal control structure. Hence the reliance on the internal control of the company will
be minimum. The auditor applies substantive procedure test in order to establish the true
and fair view of the entries (Glover, Prawitt & Drake, 2014). The company is smaller in
size as compared to the other two audit engagements and yet the time taken on the audit
is more than the previous two engagements which suggests that there might be possibility
of fraud or error therefore the auditor has increased audit procedures on the account
payable area to confirm or dismiss the possibility of frauds (William Jr, Glover &
Prawitt, 2016).

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AUDITNG AND ASSURANCE
b. The other factors which likely affect the auditor’s approach towards the audit of
acquisition and payments and account payables for the three different audit engagements
are nature of the business, size of the business, complexity of the transactions and similar
other factors. In all cases the nature of the business will be determining the auditor’s
approach towards the audit and also affect his reliance on the internal control system. The
size of the business is also another factor as mention in the 3 audit engagements, two out
of three business are medium sized companies and one is small. It is quite natural that the
auditor will be conducting more audit procedures in medium size firms and not that much
in small sized business in normal circumstances (Yang & Jia, 2013). The complexity of
the transaction is also a case to be considered as depending from business to business the
complexity of transactions might differ.
c. The supervisors of Alexis can help her in better understanding of the financial statements
of the companies by providing the audit documentation or working paper of previous
year so that Alexis can understand the nature of the business as well as take assistance
from the work of the previous auditors of the company. Alternatively, they can also
advice Alexis to first obtain a basic understanding of the nature of the business and then
proceed with the audit planning process.
Question 1B
As per the question, during an audit planning process the auditor analyzes the nature of
the business, assess the potential risks involved in the business, perform preliminary analytical
procedures and also decide the source through which audit evidences are to be collected. The
audit planning process can be sub dividend into areas where specific activities are required which
are discussed below: