Auditing Trunkey Creek Wines (TCW) Ltd: Analysis of Audit Risks, Effective Controls, and Internal Control Weaknesses

Running head: AUDITING 1
Auditing
Name
Professor
Institution
Date
Executive Summary

AUDITING 2
Trunkey Creek Wines (TCW) Ltd is among the most valuable clients of MYH. During
the planning of an audit for this client, there are certain audit risks that have been identified in
relation to specific accounts of TCW, which are account receivable, property assets, investments
and marketing expenses. In addition to this, TCW Limited is faced with other various risk with
regard to its business operations, which hinder may it from achieving its organizational
objectives. Furthermore, Trunkey Creek Wines (TCW) Limited has internal controls which are
potentially effective. These controls have helped the company in alleviating or reducing the
various risks that could have otherwise affected the company adversely. The company also has
certain weaknesses in its system of internal controls for purchases and payments. These have
been further discussed in the sections below.
Introduction
Being the audit division manager of MYH, it has been regarded necessary to gather data
and information regarding the financial audit of TCW Ltd. The main business operations of
TCW Ltd include growth of grapes for wine production, beef cattle rearing, surplus funds
investment and wine production as well. This report provides an analysis and discussion of
several areas and accounts of TCW Ltd which need to be given more attention in the audit.
Question 1A
There are various steps and procedures of audit that can be performed by the auditor in
alleviating the various risks associated with some accounts of TCW Ltd. These have been
summarized below.
Account Analysis Audit Risk Audit Steps or
Procedures
Account Receivable Days in accounts The existence The auditor must

AUDITING 3
receivable – wine
Current ratio,
Quick asset ratio
and Days in
accounts
receivable – beef
are the main
financial ratios
associated with
this account.
assertion of this
account is at risk
since TCW Ltd
account receivables
is comprised of
various debtors
whose amounts are
aggregated.
Completeness
assertion is also at
risk with regard to
accounts receivables
of TCW Ltd due to
the possibility that
the company may
not have recorded
these amounts
appropriately.
consider sending
confirmations to the
various customers of
Trunkey Creek Wines
(TCW) Limited with a
view to verifying the
terms of payment as
well as the debt’s
validity. With regard to
completeness, the
auditor must look at
transactions of Trunkey
Creek Wines (TCW)
Limited around the cut
off dates of its operating
period, since he cannot
test the records of the
company for what is not
there.
The risk of
completeness of
accounts receivables is
reduced by making an

AUDITING 4
assessment of the sales
process of the company.
It is a requirement for
the auditor to consider
determining and
evaluating whether
TCW Ltd has adopted
an appropriate approach
of determining the
allowance for accounts
which are doubtful.
Investments Investments ratios
are:
i. Return
on
equity
ii. Net
profit
margin
iii. Debt
to
equity
With regard to
investments, TCW
faces a risk of
existence since
Trunkey Creek
Wines (TCW)
Limited owns
numerous
investments which
need to be verified
by the auditor.
Additionally, there is
Regarding existence
assertion risks, the
auditor must consider
requesting a
confirmation from the
custodians used by the
company for
safeguarding the
securities. The
confirmation must seek
to address the types of
investments and