Auditing Theory and Practice

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
Name of the Student
Name of the University
Author’s Note

AUDITING THEORY AND PRACTICE1
Executive Summary
This current report has focused on the identification of material misstatement along
with applying the principle and practice of auditing. The study includes the results
of analytical procedures that points out the simple comparison and ratio analysis
that includes the financial statement of the company. It include the risk of material
misstatement at the financial level which points out the integrity of the
management and knowledge. It also includes the risk of material misstatement at
the assertion level which includes the risk at certain account balances. The detailed
substantive audit procedure has been discussed along with pointing out the internal
control for mitigating the risk.

AUDITING THEORY AND PRACTICE2
Table of Contents
Introduction................................................................................................................ 3
Results of Analytical Procedures................................................................................3
Simple comparisons................................................................................................ 3
Ratio analysis.......................................................................................................... 4
Risk of Material Misstatement at Financial Report level.............................................5
Integrity of management........................................................................................ 5
Management experience, knowledge and changes during the period....................5
Unusual pressure on management.........................................................................6
Nature of entity’s business..................................................................................... 6
Factors affecting the industry in which the entity operates....................................6
Risk of Material Misstatement at Assertion level........................................................7
Conclusion.................................................................................................................. 8
References................................................................................................................. 9

AUDITING THEORY AND PRACTICE3
Introduction
The theory and practice of auditing is important for an organisation as it
includes the independent examination of the financial statement that has been
prepared by the appointed accountant of the company after every fiscal year. It
assist in increasing the values along with creditability of the prepared financial
statement that points out the effective management for reducing the risk. It also
helps in reducing the risk elevators along with reduction in the cost of capital that
are associated with the business of the company. In this study, Vicinity Centres has
been considered that seals with real estate business. This study includes the results
of analytical procedures and risk of material misstatement at financial report level
along with material misstatement at assertion level that points out the effectiveness
of auditing procedures and its practice.
Results of Analytical Procedures
Analytical procedures in auditing is the process by which the possible issues
and risk can be identified in the financial statement that has been prepared by the
company. The following are some of the results in analytical procedures which
includes the simple comparison and ratio analysis.
Simple comparisons
This particular analytical procedures is mainly applied by the auditors of the
company at the planning stage which act as a part of risk assessment procedures.
The financial report of the company has been disclosed which has been reported
from their pervious balances and amounts of budgets (Jans, Alles & Vasarhelyi,
2014). Vicinity Centres has disclosed their annual reports for the last three years
which points out three main financial statement that are income statement, balance
sheet and cash flow statement. Income statement of the company has been
analysed in which it can be seen that in the year 2016, the total amount of revenue
is $ 1259.5 million, $ 1235.8 million in the year 2017 and $ 1246.9 million in the
year 2018 (Vicinity.com.au, 2019). Therefore, the company has resulted in
reduction in total amount of revenue each year which signifies that the company
might face some extra expenses that results in lowering of revenue (Appelbaum,
Kogan & Vasarhelyi, 2017). On the other hand, net profit of the company has also
been analysed which has been recorded in their financial statement. In the year