Auditing & ASSURANCE SERVICES IN AUSTRALIA 7 AUDITING & ASSURANCE SERVICES IN AUSTRALIA

Running head: AUDITING & ASSURANCE SERVICES IN AUSTRALIA
Auditing & assurance services in Australia
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1AUDITING & ASSURANCE SERVICES IN AUSTRALIA
Memorandum
To: William Albanese, Engagement Partner, Bletchington
From: John Hestings, Audit manager
Subject: Audit advice
SBF (Samway Baker Fitzgerald) provides accounting services that has its offices at various
places of NSW and Victoria including Port Macqarie, Albury, Wagga Wagga, Orange,
Ballarat, Queens land and Toowoomba. This memo is regarding providing audit advice in
relation to one of the client of SBF named as Bletchington which is engaged in innovative
defence manufacturing industry and is one of the largest client in respect of revenues. This
memo will focus on the threats o the auditor’s independence and applicable safeguards
against them that can be suggested to William Albanese, the engagement partner of
Bletchington.
Question 1
Audit expectation gap is the difference between what general public feels that the auditors do
and what general public expects the auditors to do. It measures the concern of the public
regarding audit. generally the expectation gap is differentiated into – (i) liability gap that
signifies the misperception regarding auditor’s legal liability and (ii) performance gap that
signifies the difference between auditor’s work level required in accordance with the auditing
standards and public’s perception regarding what the auditor’s are required to do.
Users of the accounting statements include various people like investors, owners,
competitors, creditors, suppliers, customers, government and general public. Special users
Bletchington’s financial statements may be as follows –

2AUDITING & ASSURANCE SERVICES IN AUSTRALIA
 State government of NSW as well as Local government of Orange where the main
office of Bletchington is situated. They are interested in solvency of the organization
as it may have impact on the local employment and economic activities.
 Government agencies including the Foreign Affairs and Trade department that may
be interested in purchasing by self and purchasing by foreign governments and
individuals for the goods manufactured by the organization.
 Government and Bletchington’s competitors those are interested in sensitive
information related to manufacturing of the company’s product and the recognition of
purchase like who is purchasing, quantity of purchase and purpose of purchase.
 It is observed from the given information that the company’s main product that is a
light armoured vehicle is highly special by its nature and called as Bash-Basher.
Owing to its nature the company maintains high level of security as the design of the
product and its customers are sensitive. Further, the product is made with special
order and has inadequate numbers of alternative customers. In addition to that the
suppliers need to invest large amount to manufacture the special component. Hence,
the supplier will require its financial information to analyse whether the company
will be able to make timely payments.
 Company’s other prospective customers.
It shall therefore be considered how well Bletchington is providing required information to
the users through the financial statements taken into account the specialised, sensitive and
confidential nature of Bash-Basher and the manufacture process used by the organisation.
Further, though the managements preparers the financial reports, auditors are evaluated for
providing assurance that the information provided are true. Apart from that audit procedures
performed for satisfying the user’s needs shall also be taken into consideration.
Question 2