Auditing | Case Study | Assignment

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

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Auditing
Table of Contents
Introduction................................................................................................................................4
Case 1.........................................................................................................................................4
Requirement A.......................................................................................................................4
Requirement B.......................................................................................................................5
Case 2.........................................................................................................................................6
Requirement A.......................................................................................................................6
Requirement B.......................................................................................................................7
Case 3.........................................................................................................................................8
Requirement A.......................................................................................................................8
Requirement B.....................................................................................................................10
Requirement C.....................................................................................................................10
Reference..................................................................................................................................11

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Auditing
Introduction
Each company have to prepare their financial statement as per the rules and regulation
so that the individual can have proper access to company financial information. Auditing
process help the user to know that the company has made the financial report as per the
accounting standard and able to show true and fair view (Abdul Wahab, Mat Zain & Abdul
Rahman 2015). The auditing process is carried by auditor who know the detail of company
financial information, the auditor have to carry different procedure to ascertain the material
mis-statement in company financial report. The auditor have to ascertain the materiality
aspects in company so that it can acquire proper information of the company. It have check
all the details properly in the company information so that it can give its opinion on the
company financial statement, auditor is able to have proper independence so that it can give
proper opinion on the company financial statement (De Simone, Ege & Stomberg 2014).
Auditor report serves as an important information which help the user to take necessary
decision in regards of company financial position. The report deal with three situation which
is faced by company as in first section it show about the materiality aspects which is there in
company financial statement, second section show about the details of debtor confirmation in
the company and lastly it show about the issue in auditing process and some recommendation
in action of the same.
Case 1
Requirement A
Control risk and inherent risk are the one which is not be controlled by the company
activities, this are the activities which is not able to ascertain by any individual (DeFond &
Lennox 2017). The company Max Security is have some issue which indicate about the

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Auditing
inherent risk that is not controlled by the business activities. The points show about the
inherent risk in company financial statement is:
1. Company is carrying its business in an industry which is having high amount of
competitions, as it have to be proactive to get all the government and other company
tender in the business (DeFond & Zhang 2014). It show that the company have to
depend upon the external factor so this can lead to increase in the inherent risk of the
company. Each tender is given to company having a proper financial position so to
get the tender company can do so kind of material mis-statement in the business that
can lead to inherent risk in the financial report of company.
2. Company deal in high tech armour plated personal care, which is in high sector
manufacturing industry (Furnham & Gunter 2015). This signify that the company
have to make proper and quality design of its product and it have to make it a proper
system so that it can save the design from its competitors. This show that the business
model is very complex so it will result in high human error so this can affect the
company financial position. The complexity can directly increase the change of
inherent risk in the business. the company have to take many assumptions in regards
of business so this can increase the inherent risk in the business.
3. Company have shifted their system by adding a new technology in the business as it
is adding off-the -shelf cost system which can assist the company to manage the
business activities easily and effectively (Griffiths 2016). The costing system is
connected to the production of unit and it also connect with the main general ledger
so if any error occur in the production of unit that will directly impact the overall
ledger of the company. This rise some kind of materiality affect which is connected
to the inherent risk of business.