Audit of Advanced Computer Solutions Ltd and Green Machine Ltd

Running head: AUDIT
Audit
Name of the Student:
Name of the University:
Author’s Note

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AUDIT
Table of Contents
Introduction......................................................................................................................................2
Case Facts of Advanced Computer Solutions Ltd...........................................................................2
Key Assertions of Risks...............................................................................................................2
Substantive Audit Procedure.......................................................................................................4
Cost of Green Machine Ltd.............................................................................................................5
Key Assertions at Risks...............................................................................................................5
Substantive Audit Procedure.......................................................................................................6
Key Audit Matters (KAM) under ASA 701 Key Audit Matters.....................................................7
Objectives....................................................................................................................................7
Requirement of Determining Key Audit Matter..........................................................................8
Benefits of ASA 701 Key Audit Matters.........................................................................................8
Reasons for Selecting the Key Audit Matters..................................................................................9
The situation for Advanced Computer Solutions Ltd..................................................................9
The situation of Green Machines Ltd..........................................................................................9
Disclosure of Key Audit Matters under ASA 701 Key Audit Matters..........................................10
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

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Introduction
Auditing can be defined as independent examination of the financial records which is
prepared by the management of the company for establishing whether the reporting framework
which is used by the management of the company is appropriate and showing true and fair view.
Auditing is mandatorily required to be done by public ltd companies as per the regulations which
is applicable in the country. The management needs to support the process of audit by providing
all the relevant information in front of the auditor of the business (Bédard, Gonthier-Besacier and
Schatt 2014). The role of auditor is is ensure that the financial statements are showing true and
fair view and also to assess the risks which are faced by the business.
The auditor needs to follow the rules and provisions which are included in “ASA 701
Communicating Key Audit Matters in the Independent Auditor’s Report” while conducting a
audit of a business. The standard states the techniques which can be used by the auditor to deal
with the risks of assertions which are associated with the business and the auditor needs to report
the same in the annual report of the business (Brasel et al. 2014). The assessment also aims to
understand the key risk assertions and the key audit matters.
Case Facts of Advanced Computer Solutions Ltd
Key Assertions of Risks
The management assertions of risks which can be identified from Advanced Computer
Solutions ltd are listed below: Completeness: As per this assertion, the management of an organization needs to
consider the valuation of inventory of the business appropriately and it is the
responsibility of the management of the company to manage the inventory. In case the
inventory, the understatement of the same can result in risk of assertion. A risk assertion

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generally arise when a person fails to keep records of the inventory even though
purchase of stokc has been made by the business. The reason for such risk assertion
arises mainly due to the weakness of internal control of the business. As per the records
of advanced computer solutions, the inventory in hand balance which is shown for the
business is shown to be 26% of sales in 2018 while the same is shown to be 18% of
sales in 2017. The accounting professional should include the incorrect valuation of
inventory and the same resulted in the inclusion of previous year sales figure in the
current year. Therefore, it can be said that the same resulted in ineffective handlings of
the inventories of the business. Accuracy: The accuracy in the process of valuation is considered to be an important
assertion and the management of the company needs to consider the same. The accuracy
of the accounting process is considered to be important as errors in reporting framework
can be prevented with a certain level of accuracy. The assertion which is on the
management is to ensure that the correct count of inventory is available and correct
computation of the same. As per the information which is available for Advanced
Computer Solutions, the management of the company had separately transported
inventories of the business to six regional warehouses and the same was transported
from the main office during the month of March 2018. There is possibility that some
errors in counting of inventory might have taken place during the period or while the
inventory was being moved from one warehouse to the other. This is the reason due to
which the count of inventory had reduced and the same is shown to be 3.8 million in
2018 while the figure was 5.4 million in 2017. The risks which are associated with
Advanced Computer Solutions is quite genuine.