Auditing: Scrutinizing and Estimating the Jeopardies Complex in the Auditing Process and Events

The aim of the project is to scrutinize and estimation the jeopardies complex in the auditing process and events. The experiments involved by the auditor is that of defining substantial misstatement and physical risk in the financial statement of the company. Examining of commercial risk along with the monetary risk of the company is the strategic ladders complicated in the audit process. There were numerous audit procedure and actions involved, that were conversed in the plan. The ratio analysis was executed on unlike accounting apparatuses of the company, which gave a fiscal indication of the company. Complete steps of audit procedure is explained in the report.

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

1AUDITING
Table of Contents
Introduction:....................................................................................................................................3
Discussion:.......................................................................................................................................4
Key Business Risk for Asia Pacific Digital Limited...................................................................4
Ratio Analysis:.............................................................................................................................6
Audit Model:....................................................................................................................................7
Overall Materiality.......................................................................................................................8
Key Material Accounts:...............................................................................................................9
Sampling........................................................................................................................................13
Conclusion:....................................................................................................................................15
Reference:......................................................................................................................................17

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Executive Summary:
The aim of the project is to scrutinize and estimation the jeopardies complex in the auditing
process and events. The experiments involved by the auditor is that of defining substantial
misstatement and physical risk in the financial statement of the company. Examining of
commercial risk along with the monetary risk of the company is the strategic ladders complicated
in the audit process. There were numerous audit procedure and actions involved, that were
conversed in the plan. The ratio analysis was executed on unlike accounting apparatuses of the
company, which gave a fiscal indication of the company. Complete steps of audit procedure is
explained in the report.

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Introduction:
Digital marketing and e-commerce services is provided by Asia Pacific Digital Limited
subsidiaries in Australia. The Company does it operations through consumer acquisition, plans
and solution, consumer management and segments related to e-commerce. Plans and solutions
stages suggests digital marketing services, technologies and creativity. The Customer
Acquisition division provides presentation based digital promotion amenities that concentrates
on consumer acquirement and lead compeers, such as search machine optimization, salaried
exploration, and associate marketing facilities. The Customer Management sector offers
electronic mail promotion, memo, and crusade administration amenities.
The e-commerce section delivers end-to-end ecommerce amenities. It serves leisure, auto, health
and beauty, media, financial services, FMCG, liquor, logistics, public sector, retail, technology,
Telco, and mobile industries. The company is founded in Pyrmont, Australia. Asia Pacific
Digital Limited is a subsidiary of Valuestream Investment Management Limited. (APD, 2018)

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Discussion:
Key Business Risk for Asia Pacific Digital Limited.
 Compliance Risk: The hazard for the company smears, when the company does not
follow to the ethics and guidelines laid by the leading body. The Asia Pacific Limited
Company fulfills with all of the core obedience moralities and the danger for the same is
insignificant.
Financial Risk: The risk related with the experience of debt and long term borrowings of the
company. The company experience to debt and long-term borrowing shows the inbred monetary
risk in the company. Main risks are interest rate, credit and liquid risk. Different measures are
used for monitoring the different risks.
The internal controls identified in the system, which are potentially effective, are mentioned
below:
Effective Control Risk Alleviated Test of Control
Environment Sustainability The risk assuaged due to non-
sustainability of environment
is the degrading reputational
and operational risk of the
company
The test or the actual way of
regulatory the same could be
by enhancing the skills and
growth of the employees in
preserving and safeguarding
sustainability of the similar.
Risk Analysis Risk recognized in the
corporation are that of
The test for regulator for the
same could be by

5AUDITING
commercial and monetary
risk. There should be proper
outline analysis of risks
involved in the company.
guaranteeing that the
appropriate risk investigation
along the risk outline of the
business must be done.
(Griffiths 2016).
Identifying Material
Information
The material given by the
business should be obviously
free from material
misstatement and mistake
free then, the company’s
goodwill and trustworthiness
will be hindered.
Internal checking of records
and information provided by
the employees should do the
audit procedure for the same.
Verification of statistics and
material must be done.
Monitoring The company’s processes and
financials of the business
must be well evaluated in
order to decrease the
commercial risk of the
company.
There should be actual
monitoring actions and
ladders laid depressed in
order to reduce the business
and monetary risk of the
company.
Physical monitoring and
controlling
The internal control of the
company should be such that
the risk assessed in assets like
theft, loss of goods, damage
are some of the internal risk
Verification and periodical
review of the assets of the
company shall be done in
order to avoid exploitation of
resources.

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associated with the company
Ratio Analysis:
Ratio analysis is an analytical tool, which supports us to evaluate the monetary of the company.
The gears aids us give an overall understanding of the fiscal of the corporation The business
selected for the auditing process is the Asia Pacific Digital Limited Business for which the
accounts investigated are Accounts Receivables of the company, Plant and property and
investments of the firm.
Ratio Analysis
Particulars
201
7 2016 2015
Current Ratio
Current Ratio 0.55 0.95 1.10
Quick Ratio 0.86 0.95 0.91
Activity Ratio
Debtor Turnover 5.88 4.78 4.52
Sales to Asset 1.88 1.80 1.79
Solvency Ratio
Equity Ratio 0.11 0.30 0.40
The current ratio is the amount of company’s current assets over the current liabilities of the
company. The current ratio signifies the liquidity ratio of the business. The ratio for the company
in the year 2016 is about 0.95 times, while it is 0.55 times in the year 2017 and it was 1.10 times
in 2015. The ratio is showing a downfall trend.
Quick Ratio: The acid test ratio or the quick ratio for the business is about 0.86 times in the
year 2017, 0.95 times in the year 2016 and 0.91 times in the year 2015.

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Debtors Turnover Ratio: The receivables turnover ratio is an secretarial amount used to count a
firm's efficacy in covering credit and in assembling debts on that credit. The receivables turnover
ratio is an activity ratio gauging how proficiently a firm uses its resources. The above table
shows that company has an upward trend in assembling the amount by debtors.
Sales to Asset: the ability of a company to generate revenue or sales is measured by sales to
total assets ratio. The higher the ratio is it indicates that the management is able to bring out a lot
out of the assets. The above table signifies that the company is on a medium track of rendering
services.
Equity ratio: The equity ratio is a solvency ratio that events the aggregate of assets that are
funded by proprietors’ reserves by relating the total equity in the business to the total assets.
The equity ratio highpoints two vital financial thoughts of a bankrupt and maintainable
occupational. The first constituent shows how much of the entire corporation assets are owned
absolute by the depositors. In other words, afterward all of the accountabilities are paid off; the
nominees will end up with the outstanding assets. The equity ratio of the company shows a
downtrend as it is 0.11 in 2017 as compared to 2015 it was 0.40.
Audit Model:
Audit Risk= 0.26*0.15*0.20= 0.0078
Inherent
Risk
Control
Risk
Planned
Detection
Risk
Amount of
Evidence
Required

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26% 15% 20% High
Overall Materiality
At the planning stage, overall materiality is set by the auditors for the inspection of the financial
statement of the company. The foremost reason for setting the base of overall materiality is to
recognize the performance of the materiality that helps auditors to construct the procedure for
audit and to get a clear view of the misstatement present in the statements. (Endaya and Hanefah,
2013). Assessing the overall materiality can be done through :
 Selecting the right benchmark
 Defining a part of the selected benchmark
 Support the selected benchmark.
Other challenges are also taken into consideration such as class of transaction and disclosures,
accounts that belongs to long and short period, and setting materiality for single balances. While
selecting the benchmark the nature and the industry in which the entity operates is taken into
account, even auditor may put stress in finding out that the company focuses on a specific item
of the financial statements. As per ISA 320.A8 are for a profit oriented manufacturing
occupational that is 5% of profit before tax from continuing operations and a not-for-profit entity
1% of total income or expenses. Asia Pacific Digital Limited overall materiality is ( 1%*
$45518000= $ 455180)
Key Material Accounts:
 Cash and Cash equivalents
 Trade and other receivables

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 Non-current assets and disposal groups held for sale or deemed discontinued operations
Provisions and employee benefits (APD, 2018)
Account
Balance
Amount
$`000
Assertion(s) Audit
Procedure
Audit Evidence
Cash and cash
equivalents
903 Existence-exists
in the balance
date.
Completeness-
all items related
to cash is
recorded as on
balance date.
Appeal and
scrutinize bank
confirmations
2. Assume tests
of bank
reconciliations,
trail-up
integration
article.
Bank
Confirmation
credential from
the Bank
(Document).
Obtain
duplicates of
client’s bank
reconciliations
(Document).
Enquiry and
proceedings of
integration item
(oral)
Accounts
Receivables
7742 Accuracy- the
item is recorded
correctly.
Request for the
invoices and
record of the
amounts from
Scrutinize the
receipts of the
debtors.
( Document and

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the management
of the company.
oral)
Crosschecked
the earlier
payment
received.
(Document and
oral)
Plant &
Equipment
748 Valuation- the
amount
recorded, as on
balance date is
appropriate.
Existence- the
item recorded in
the balance
sheet exists in
the period end.
Appealed for the
invoices of the
asset purchased
and documents
regarding the
valuation.
Physically
verified the
asset. Properly
scrutinize the
valuation
designed by the
management.
( Document)
Investment 651 Cut- off- the
transaction have
been identified
in the correct
accounting
period.
Request for the
valid documents
and the process
of determining
the fair value.
Examined the
documents and
the calculations
of the fair value(
Documented
and oral)

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Intangible
Asset
500 Valuation- has
been
appropriately
valued as on
balance date.
Ask for the
result of internal
review
conducted.
Examined the
internal review
conducted by
the
management.
( Document and
oral)
Accounts
Payable
8009 Accuracy- the
item is recorded
correctly
Request for the
invoices and
record of the
amounts from
the management
of the company
Scrutinize the
receipts of the
creditors.
( Document and
oral)
Crosschecked
the earlier
payment made.
(Document and
oral)
Deferred
Income
1846 Existence-
appropriately
recorded as on
balance date.
Requests for
documents
relating to
recognize the
taxable
temporary
Examine
critically the
documents and
discussed the
transaction with
the

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differences. management.
( Document and
oral)
Provisions 1616 Completeness-
provision made
are as on
balance date.
Request to
present the basis
of provision
made by the
management.
Critically
examines the
basis of
provisions.
( document)
Interest and
loan bearing
borrowings
6389 Accuracy- the
amount
recorded is
accurate as on
the balance date.
Appeal for the
proofs of the
transaction
record made
against the item.
Critically
examines the
documents
presented.
( Document and
oral)
Provision for
Income Tax
308 Accuracy- the
amount
recorded, as on
the balance date
is correct.
Request to
present the
document
related to tax.
Examines the
tax statement of
the company
and the basis of
provisions.
(Document and
oral ) (Endaya
and Hanefah,
2013).

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Sampling
Sampling is the presentation of an audit procedure to a smaller amount than 100% of the items
within a justification balance or class of transactions for the determination of assessing some
typical of all the substances within the stability or period of connections. Much of the evidence
comprised in the guide was occupied from the Statement on Auditing Standards No. 39 on Audit
Sampling that delivers direction on the use of sampling in an audit of financial statements. This
evidence has been modified to fit the situations most often come across in tax auditing. (Elder
et.al. 2013).
Account
Head
Evaluation/ Analysis Auditing Risks Steps for Eliminating Risks
Accounts
Receivables
The quantity due to the
corporation by the
customers and clienteles of
the business. The amount
signify the quantity for
which imbursement is yet to
be established by the
company. The Days of
Accounts Receivable for
the company is around 30 -
60 Days and for debts.
The business
deal and goods
are sold below
the praise sales
tactic to its
clienteles. The
commercial risk
of the company
is high in this
case.
The commercial risk of the
corporation is in elevation, the
auditor need to prudently
reconsider the quantity of
sales and the quantity of
debtors it is able to realize.
The auditor requirements to
carefully identify different
components of the account
and provide materiality
regarding the same
Investments The analysis of the The equity ratio The auditor of the company

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investment done by the
company by the equity
ratio. The company had saw
an decrease in the equity
ratio from the year2016-17
from 0.30times to about
0.11
for the company
depends on the
investments done
by the company.
must reconsider the
investment assets class in
which the investment is done.
The assets class should be
well studied and the same
should be checked by the
investment policy of the
business. The key audit
technique would be to
checkered about the asset
assets class and the tendency
in the return from these funds.
Property
Assets
The ratio for sales to assets
shows the efficiency in the
utilization of the assets of
the company. The ratio for
the company in the year
2017 is around 1.88% that
has shown improvement
from the last year figures of
around 1.80%
The key risk
related with this
type of asset
period is
concerning the
estimate of
assets and
correctly
identification of
assets.
The key step complicated in
this type of auditing would be
to decrease the auditing
complexity by founding a
common financial skull and
reporting classification. The
auditor must also capitalize
all the leased assets of the
firm, which is confidential as
functioning leases. The
capitalization of the identical

15AUDITING
would give a true and fair
view of the financial records.
Marketing
Expenses
The marketing expenditure
is the total selling
expenditures for the
company. The proportion
and the benefit would be
calculated by the output the
expense is generating in the
form of the revenue.
The risk
associated with
such expenditure
would be
regarding proper
classification and
recording of
expenses by the
company.
The steps to decrease the risk
related with such type of
expense is to assess the record
for the overheads done and
analyze whether the
incidentals owed does not get
outstanding by the company
(Elder et.al. 2013).
Conclusion:
External audit plays important role in the business world. Particularly in the fast-altering and
instable financial environment, there is a continuous need for guarantee services of the
superiority and dependability for company’s financial statements, exclusively in companies
listed on stock exchange. Improvement and transparency of the company`s public image is
supremely ensured by the process of external audit. While performing audit many problem
regarding the internal control is recognized and is reported to the management of the company
with the belief of improvement within the company. Presently, the audit is principally based on
the audit risk approach consequently, from the audit company’s point of view, it is critical to
achieve the risk assessment measures adequately and suitably in planning phase because it will
decrease the efforts and wealth in the subsequent ladders. Fundamentally, audit firm needs to

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accomplish their planned fees to client in order to endure modest in the arcade. In other words,
the more comprehensive the audit risk assessment is, the improved the wealth such as time,
money and efforts are applied. The report states the audit procedure for Asia Pacific Digital
Limited.

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