Auditing and Assurance: Inventory and Intellectual Property Intangible Assets

AUDITING AND ASSURANCE 1
AUDITING AND ASSURANCE
By (Name)
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AUDITING AND ASSURANCE 2
Executive Summary
Audit assertions are claims or representations made either implicitly or explicitly by the
management of a company who are held responsible for the preparation of financial reports of
their company regarding the appropriateness of the various disclosures and elements of financial
statements. There are various categories under which audit assertions can be classified, such as
transactions, classifications, account balances, as well as disclosures. Auditors are required to
confirm whether or not each and every assertion is recorded appropriately in accurate account
with proper amount or valuation.
There are various assertions at risk in relation to inventory and intellectual property
intangible asset. Furthermore, it is set out by ISA 701 that auditors need to communicate or
disclose key maters of audit in their reports of audit. This standard gives a mandate to auditors to
disclose or communicate the key matters of audit in their audit reports with regard to audits of
financial statement listed entities or companies. This standard is also purposed for enabling
auditors of other companies which are not listed in determining and ascertaining whether or not
key matters of audit should be included in the audit opinions contained in their reports of audit.

AUDITING AND ASSURANCE 3
TABLE OF CONTENTS
CHAPTER PAGE
Introduction.................................................................................................................................................5
Question 1...................................................................................................................................................5
a. Two Key Assertions at Risk In Relation To Inventory..............................................................................5
i. Valuation of Inventory..................................................................................................................5
ii. Completeness of Inventory..........................................................................................................6
b. Substantive Audit Procedures that Could be Performed in Response to Each
Risk Identified Above..................................................................................................................................6
i. Valuation of Inventory .................................................................................................................7
ii. Completeness of Inventory .........................................................................................................8
c. The Requirement of ASA 701 Communicating Key Audit Matters in the Auditor’s
Report and the Rationale for This Auditing Standard......................................................................9
i. Why this standard was introduced.............................................................................................9
ii. How to determine key audit maters...........................................................................................9
iii. How to disclose or communicate key audit matters..............................................................10
Question 2................................................................................................................................................................11
a. Two Key Assertions at Risk In Relation To Intellectual Property Intangible assets..........................11
i. Existence.......................................................................................................................................11
ii. Rights and obligations................................................................................................................12
b. Substantive Audit Procedures that Could be Performed in Response to Each

AUDITING AND ASSURANCE 4
Risk Identified Above................................................................................................................................12
i. Existence.......................................................................................................................................12
ii. Rights and Obligations................................................................................................................13
c. The Requirement of ASA 701 Communicating Key Audit Matters in the Auditor’s
Report and the Rationale for This Auditing Standard....................................................................13
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17