Auditing and Professional Practices

Running head: AUDITING AND PROFESSIONAL PRACTICES
Auditing and Professional Practices
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1AUDITING AND PROFESSIONAL PRACTICES
Executive Summary:
The current report aims to evaluate three income statement accounts subject to risk and
materiality in the context of Chamoisee Enterprises. It has been found that these accounts include
revenue, consultancy fees and depreciation. Therefore, the different relevant assertions and
management assertions are taken into consideration. Finally, these three accounts are subject to
fraud risk as well despite the fact that the staffs of the organisation are honest and diligent, as the
auditor needs to consider professional scepticism.

2AUDITING AND PROFESSIONAL PRACTICES
Table of Contents
Introduction:....................................................................................................................................3
1. Appropriateness of materiality figure and effect of preliminary assessment on audit budget:...3
2. Analytical review using the income statement items from the trial balance:..............................4
3. Identification of three income statement accounts at risk of material misstatement, audit risk
and relevant assertions:....................................................................................................................7
4. Description of audit procedures for each account and assertion identified:................................9
5. Fraud risk as per the appropriateness of the audit partner’s suggestion:...................................11
Conclusion:....................................................................................................................................12
References:....................................................................................................................................13

3AUDITING AND PROFESSIONAL PRACTICES
Introduction:
The current report aims to provide assistance in the planning stage of a small audit client
from the perspective of an audit organisation. The audit firm has to conduct the audit operations
of Chamoisee Enterprises based on its preliminary trial balance. The first section would provide
a brief highlight on whether the materiality amount of $15,500 is appropriate and the effect of
the materiality assessment on the audit budget. The second section would involve an analytical
review of the income statement items from the trial balance by using trend analysis. The next
sections would focus on identifying three income statements at risk and accordingly, audit
procedures would be suggested for each of them. Finally, the report would shed light on fraud
risk and the appropriateness of the suggestion provided by the audit partner.
1. Appropriateness of materiality figure and effect of preliminary assessment on audit
budget:
According to Baldauf, Steller and Steckel (2015), materiality is defined as the threshold
above which incorrect or missing information in the financial reports would have an effect on the
decision making process of the users. The auditors need to consider three components of audit
risk at the time of undertaking preliminary material assessment. These mainly include the
following:
 Financial statement users like shareholders, investors, suppliers, creditors, staffs,
customers, regulators and others
 The size of the components of the financial statements like current liabilities, current
assets, total revenues, total assets and net income (Bowlin, Hobson and Piercey 2015)