Auditing: Key Assertions, Substantive Audit Procedures, and ASA 701

Running head: AUDITING
AUDITING
Name of the Student
Name of the University
Author Note

1
AUDITING
Table of Contents
Introduction................................................................................................................................3
Question No 1............................................................................................................................4
Key Assertion at Risk in relation to Inventory.......................................................................4
Substantive Audit Procedure for above mentioned risk.........................................................4
Auditing Standard ASA 701, Communicating Key Audit Matter.........................................6
Question No 2............................................................................................................................7
Key assertions at risk in relation to the intellectual property intangible asset.......................7
Substantive audit procedure could perform in response to each risk.....................................8
ASA 701 Communicating Key Audit Matters in the Auditor’s Report.................................9
Conclusion................................................................................................................................10
Reference..................................................................................................................................11

2
AUDITING
Introduction
Auditing is the process from which the auditor able to check the company financial
statement and able to give its opinion whether the company financial report has true and fair
view or not. Each company should have auditor report in their annual report as it helps them
to gain confidence of company financial user (Alzeban and Gwilliam 2014). Auditor carries
many audit processes in the business which help it to gain proper amount of audit evidence in
the company business. Companies are working in a competitive world, so it has to show good
position of company financial statement, and for that it can have some material misstatement
in the balance sheet, so the auditor checks this materiality. The report shows the company
name Computer Solution and Shimmer pvy Ltd. Auditor has to ascertain the risk which is
associated with the company’s financial statement and able to base its opinion upon the audit
evidence (Chen et al., 2014). This report aims to know the amount of risk associated with the
company financial statement and how they can deal with the same in their business. Auditor
also provides assuring service to a different company after the completion of the audit
process in the company. Risk is a kind of situation which is faced by each kind of
organization so it is the auditor who checks how the company can manage the risk associated
in the business. The report also shows some aspects of ASA701, the risk in which the report
based is on the Inventory and Intellectual Property Intangible Asset. It also shows the
different audit procedure which is carried by the auditor on the company financial statements.
It also shows how the auditor can show and communicate essential audit matter in the
company annual report (De Simone, Ege and Stomberg 2014). It shows how the auditor can
give independent opinion on company financial statement.

3
AUDITING
Question No 1
Key Assertion at Risk about Inventory
 Existence in Financial Statement – Auditor, has to check that the company is having
proper amount of inventory in their business. It should ensure that the amount which
is reflecting as inventory is existing in the company business. As per AASB 102
company should give proper disclosure about the inventory in company financial
report. These will help the auditor to know the materiality in regards to the inventory
of company and help it to minimize the risk of fraud in the same.
 Right and Valuation Transfer – The company is offering an excellent and
affordable package for its customers. These help them to gain proper business in the
market, so how the company value their inventory is also a significant factor in
business (Ege 2014). The company strategies in regards to branding and promotional
package are for a minimum period. As the period end, the company will not able to
sell its product quickly in the market, so it will also put a question upon the valuation
of company inventory. This show that the item which listed in company report may
have some materiality in the same and the critical assertion which can make towards
the inventory is that whether it has transferred to the original owner or not.
Substantive Audit Procedure for the above mentioned risk
A) Existence in Company Financial Statement
 It should check the position of the inventory as if the company is holding the
inventory for a long time; then it should take detail about the inventory from
both parties (Furnham and Gunter 2015). The company should record the
allowance for obsolete inventory, but is unable to record the same; then
proper justification should be given by the company. The external