Assessing Risk and Key Audit Matters in Auditing Theory and Practice: Case Study Analysis

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
Name of the Student
Name of the University
Authors Note
Course ID

1AUDITING THEORY AND PRACTICE
Executive Summary:
The current report is based on assessing the risk involved in the material misstatement of the
two case study given namely the Advance Computer Solutions and Green Machines Ltd. The
report would take into the account key audit matters that the auditors must consider while
forming an opinion on the financial statements. Throughout audit declarations, the auditors is
ought to keep an eye on detailed procedures and standards so that they can prearrange rules to
establish the presence of risks in the monetary misstatement and collaborating the same to the
administration. The report would be addressing the risks that are involved in the audit
assertions and implement necessary approach for audit disclosure.

2AUDITING THEORY AND PRACTICE
Table of Contents
Introduction:...............................................................................................................................3
Answer to Question 1: Advanced Computer Solutions.............................................................3
1.1 Significant declarations at risk associated to inventory:.............................................3
1.2 Practical audit procedures for each identified risk:..........................................................4
1.3 Necessity of ASA 701 Communicating Key Audit Matters:...........................................5
1.4 Rationale for selection of key audit matters:....................................................................6
1.5 Documentations relevant with ASA 701:........................................................................6
Answer to Question 2: Green Machine Limited........................................................................7
2.1 Significant declarations at risk associated to PPE:..........................................................7
2.2 Practical audit procedures for each identified risk:..........................................................8
2.3 Necessity of ASA 701 Communicating Key Audit Matters:...........................................9
2.4 Rationale for selection of key audit matters:....................................................................9
2.5 Documentations relevant with ASA 701:......................................................................10
References:...............................................................................................................................12

3AUDITING THEORY AND PRACTICE
Introduction:
As a general rule, audit is referred as the customary procedure based on which the
auditors accountability is dependent for implementing the analytical methods on the financial
statements to identify the material misstatements. The auditors are responsible for keeping
record of time taken to perform the work of audit and special focus should be placed on
assertions made by organizations in the financial reports (Sirois, Bédard and Bera 2018).
These audit assertions is further viewed as explicit or implicit claims for an organization’s
management while preparing financial statements.
There are occasions where auditors have responded to the assertions risks based on
material misstatement. The responsibility of the auditors include assessing the assertions to
determine the existence of any substantial risks (Cordoş and Fülöp 2015). During audit
assertions, the auditors should follow specific guidelines and standards so that they can
organised rules to ascertain the existence of risks in the financial misstatement and
communicating the same to the management. The report would be addressing the risks that
are involved in the audit assertions and implement necessary approach for audit disclosure.
Answer to Question 1: Advanced Computer Solutions
1.1 Significant declarations at risk associated to inventory:
The current scenario obtained from the case study states that the auditor can recognize the
two main assertions under risks namely the completeness and accuracy. The justification for
such risks is given below;
Completeness:
Every business is required to perform an appropriate valuation of inventory.
According to the audit assertion, the management is accountable for recognizing the material