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Audit Planning and Internal Control for Big Machine Limited

   

Added on  2021-06-14

15 Pages2832 Words247 Views
Big Machine LimitedMiller Yates HowarthAudit Planning and Internal Control2nd May, 20181

Executive Summary This report has basically referenced to the audit and assurance services provided by anauditor to a business organization. There are many parts of an audit and some part has beencovered in the below report. The report is for Big Machinery Limited whose audit has beenconducted and various things related to the audit has explained. There are different externalenvironment factors that affect the business operation of Big Machinery Limited. There are someissues like strong competition, downtime in mining industry and weak internal system that thecompany is facing. Various accounts related to audit has been demonstrated in the report andsteps are mentioned to reduce the same. There are four accounts that are considered- Plant andequipment, machinery accounts receivable, lease income and financial liabilities. An analysis hasbeen done and for the same audit risk, ratio analysis and current internal control system has beencalculated in order to find out the results. This organization is facing business risk and this hasbeen concluded in this report. This report also includes proposed internal control measures thatcan be easily implement and control the system to test them.2

ContentsExecutive Summary.........................................................................................................................2Introduction......................................................................................................................................4Question 1 A:...................................................................................................................................4Question 1 B: Analyse the ratios and additional information to outline the business risks thatBML faces........................................................................................................................................4Question 2 A:...................................................................................................................................5Question 2 B: List and identify the weaknesses in internal control for contract payroll.................5Conclusion.......................................................................................................................................6References........................................................................................................................................73

IntroductionThis was important to ensure the controlling of the management in the working of the companyand an internal analysis has been designed to know the same. By conducting audit of the internalcontrol, the effectiveness and efficiency of the control system has been judged. In this report, allthe internal control measures for of Big Machine Limited (BML) are done. Ration analysis andadditional information has been considered in order to do the analysis. It also includes the controlmeasures used by the company to minimize the risk and test the control.Question 1 A: AccountAnalysisAudit RiskAudit steps toreduce riskPlant andEquipmentThere must be an increase in theaccount for plant and equipment ina great extent. The main reasonbehind is the recent changes in thenature of the major businessoperations of the organization.They cannot use already owned orsecond hand machinery because itcannot fulfil the furtherrequirements due to change andimprovement in the technology. Inorder to overcome this issue, aninvestment has been done on plantand machinery. This resulted inthe return on total assets equal to14% (Porter, Hatherly and Simon,2008).Existence is reallyimportant to bechecked in detail.In this case, themajor issue wasthat the auditorwas unable tomeasure the valueof assets as theygot acquired oncontractual basis.There is a chanceof wrong valuationof assets and thisis the reason of theimportance ofvaluation process.These are thesteps that needsto be taken inorder to reducethe risk of audit:There should bea properexamination ofallthedocumentsrelated to theequipment likethe design, lifeof the asset andvalue of theasset. Physicalverification has4

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