Audit Risks, Internal Control and Sampling Method of API

Running head: AUDITING
Auditing
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1AUDITING
Table of Contents
Audit risks from ratios and audit procedures:..................................................................................2
Inventory control loopholes, audit risk and audit procedures:......................................................10
Methods of sampling:....................................................................................................................14
References:....................................................................................................................................17

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Memorandum
To: Wayne Wiadrowski
From: The Audit Manager
Date: 10/05/2019
Subject: Audit Risks, Internal Control and Sampling Method of API
Scope and purpose:
In the current era, the auditors are needed to investigate and evaluate the financial reports
of the business organisations for finding any material misstatements owing to frauds and errors.
This is because such misstatements could have significant material impact on the financial
statements. As a result, the users of the financial reports could be misguided in terms of
undertaking decisions. The situation is similar for Always Precise Instruments Private Limited
(API). The memorandum intends to highlight the potential audit risks in the organisation via
analysis of the provided ratios and inventory-related internal control. Moreover, it explains the
sampling methods required for performing the audit of API. The considered aspects are
discussed in the below-stated sections:
Audit risks from ratios and audit procedures:
Ratio Analysis Audit Risk Audit Procedures
Current Ratio API has experienced
an increase in this
ratio; however, it is
lower than the
The misstatement in
current assets and
current liabilities is
identified as the likely
The auditor needs to
conduct document test
having connection
with payment as well

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industrial standard. It
might due to decline
in current liabilities or
increase in current
assets.
audit risk like rise or
fall in the above-
stated assets and
liabilities from
management
(Alzeban, 2015).
as acquisition of
current assets and
current liabilities.
This would help in
ascertaining thee
accurate values of the
same (Ball, Tyler &
Wells, 2015).
Quick asset ratio According to the
provided information,
this ratio has risen in
the present year
implying increased
ability of API in
converting its most
liquid assets into cash
that would help in
settling short-term
dues timely.
If there is material
misstatement in quick
assets or liabilities, it
would lead to audit
risk.
The auditor has to
conduct the detailed
test and controls
associated with quick
assets and liabilities.
For this, accounting
entries and books
have to be checked to
find out if there is any
misstatement in quick
assets or liabilities
(Brown, Preiato &
Tarca, 2014).
Return on equity The ratio has declined
in the current year by
Any misstatement in
equity capital could
The auditor has to
examine the