Auditing Theory and Practices Assignment

Added on - 30 Oct 2019

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Running head: AUDITING THEORY AND PRACTICEAuditing theory and practiceName of the UniversityName of the studentAuthors note
1AUDITING THEORY AND PRACTICEExecutive summary:The report is prepared to analyse the internal control effectiveness of GPSA in thepreparation of audit plan. Potential audit risks of organization have been analyzed andsufficient steps are taken for minimizations of such risks have been discussed in the report.Report also demonstrates the risks that can be alleviated due to the effective internal controlsystem of organization. Test of control has been adopted for making the internal controlefficient. Later part of report discusses the weakness that might arise in the trade receivablesand sales system of organization.
2AUDITING THEORY AND PRACTICETable of ContentsIntroduction:...............................................................................................................................4Discussion:.................................................................................................................................5Answer to question 1A:..............................................................................................................5Accounts-...................................................................................................................................5Analysis-....................................................................................................................................5Audit risk-..................................................................................................................................6Audit risk faced by GPSA can be reduced by performing following steps:..............................7Answer to question 1B:..............................................................................................................7Answer to question 2A:..............................................................................................................8Effective control-.......................................................................................................................8Risk alleviated-...........................................................................................................................9Test of control-...........................................................................................................................9Answer to question 2b:.............................................................................................................11Weakness identified in the internal control for trade receivables and sales of GPSA:............11Conclusion:..............................................................................................................................12
3AUDITING THEORY AND PRACTICEIntroduction:Auditing firm Miller Yates and Howarth is engaged in the preparation of audit plan.One of the most outstanding and significant clients of MYH is GPSA for which accountingrecords are audited. Internal control of organizations are placed great reliance by the auditingfirm derived from extensive test control. There are several area of concerns related to someaccounts of organization in preparation of audit plan. Analysis of ratio has been done thathelps in evaluation of the effectiveness of internal control systems (Bik et al., 2017).Discussion:Answer to question 1A:Accounts-The five types of accounts that is a concern for the auditors of GPSA while carryingout audit plan includes accounts receivables, current investment, property assets, intangibleassets and research and development capitalization. The audit partner of organization isconcerned about these areas of accounts prior to conducting the audit program (Pitt, 2014).Analysis-The reconciliation of trade receivable ledger in the general ledger to the debtor controlaccount is to be done by trade receivable clerk. All the receipt from debtors and preparationof bank slip is done by clerk. Payments made to debtors are recorded in the computer systemas debtor payment. Current investment is made by GPSA relating to research activities for thecommencement of new laser surgery device. Research activities of organization are financedby borrowing loan of amount of $ 5 million during a year. In addition to this, GPSA hasbranched out in the property market and acquired a number of properties relating to medical
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