Issues in Auditing Practices

Running head: ISSUES IN AUDITING PRACTICES
Issues in Auditing Practices
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ISSUES IN AUDITING PRACTICES
Executive Summary:
The report is prepared to conduct the audit procedure based on the unadjusted trial balance of
Amarnath Enterprises. It has been found that sales revenue, service fees, miscellaneous expenses
and depreciation are four items of the income statement, which are prone to different types of
risk and materiality. Hence, various management assertions as well as other assertions are
considered for the audit work. Lastly, these accounts contain fraud risk, even though the
employees of the organisation conduct fair practices. Therefore, the auditor is required to rake
into account professional scepticism.

2ISSUES IN AUDITING PRACTICES
Table of Contents
Introduction:....................................................................................................................................3
1. Suitability of materiality figure and impact of preliminary assessment on audit budget:...........3
2. Analytical review using the items of the income statement from the trial balance:....................4
3. Identification of three accounts of income statement at material misstatement risk, audit risk
and relevant assertions:....................................................................................................................7
4. Explanation of the audit procedures for the identified accounts and assertions:.......................10
5. Fraud risk according to the appropriateness of the suggestion of the audit partner:.................12
Conclusion:....................................................................................................................................13
References:....................................................................................................................................14

3ISSUES IN AUDITING PRACTICES
Introduction:
The report is prepared with the intent of assisting the planning stage of small audit client
from the viewpoint of an audit firm. The audit firm would be carrying out the audit work of
Amarnath Enterprises by using its preliminary trial balance. The first part would emphasise on
ascertaining whether the materiality amount of $15,500 is suitable along with the impact of
materiality assessment on audit budget. The next segment would conduct an analytical review of
the items in the income statement from trial balance by utilising trend analysis. After this, three
items from the income statement at risk would be detected based on which audit processes would
be recommended for each account. Finally, the report would focus on fraud risk and the
suitability of suggestion provided from the end of the audit partner.
1. Suitability of materiality figure and impact of preliminary assessment on audit budget:
As commented by Aobdia, Lin and Petacchi (2015), materiality could be explained as the
threshold beyond which missing or wrong information in the financial statements would affect
the decision-making procedures of the users. It is necessary for the auditors to modify three audit
risk components while making preliminary material evaluation. The components are described as
follows:
The users of the financial statements such as investors, suppliers, shareholders,
employees, creditors, regulators, customers and others
The size of the financial statement elements such as current assets, total revenues, current
liabilities, net profit and total assets