ASA 701 Auditing and Assurance Services Individual Assignment

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ACC 707 Auditing and Assurance Services Individual Assignment

ASA 701
Executive Summary
The prime reason for the introduction of ASA 701 is to support the assistance of auditor
concerning the computation of the primary audit matters. Therefore, it is vital that the auditor
should do communication and to provide an independent audit report that helps in proper
understanding. It is the primary function of the management to provide material disclosure and
whether there is an issue concerning financial performance. Two cases have been discussed in
the case study that is the Advanced Computer Solution Ltd and Green Machine Ltd. The key
assertions are presented along with the substantive audit procedure.
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ASA 701
Contents
Introduction.................................................................................................................................................3
Material misstatement................................................................................................................................3
a. Two key assertion................................................................................................................................3
b. Two substantive audit procedures......................................................................................................4
c. ASA 701 communicating key audit matters.........................................................................................5
Green Machine Limited...............................................................................................................................6
a. Two key assertion................................................................................................................................6
b. Two substantive audit procedures......................................................................................................7
c. ASA 701-communicating key audit matters.........................................................................................8
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10
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ASA 701
Introduction
It has been observed that after the introduction of ASA 701, all the matters about the audit
process asserted and computed perfectly. Also, the decisions that are taken by the auditor should
be unbiased because the reports are taken into consideration by various parties and acted upon. In
the case of any discrepancy, it will impact the smooth flow of decision. Further, it is also noticed
that the management is having a proper disclosure of all the financial information of the
organisation in front of its shareholders. Disclosure should be done correctly as it has a strong
influence on the decision making capacity of the shareholders (Gay & Simnet, 2015). This has
not only helped the users of the financial documents to make their investment decision easily but
also has contributed to fulfilling the primary purpose of the communication strategy.
Material misstatement
a. Two key assertion
There are various types of claims made by the management for interesting the preparation and
presentation of the financial statements of the organization. All these claims are observed to be
true and fair. If any of these claims will be unfair or false in nature then the management will
face problems and will be answerable to the audit team. For this particular case, the advanced
computer solutions Limited are observed to have high returns because of the software issues.
This has not only led to an increase the returns but also the secondary sales and stocks are
increasing. Hence, the two key assertions at a risk for this particular case are as follows:
1. Correct valuation assertion:
The Increase returns of the software and the decreasing cells have led to stockpiling because of
which the company is losing its reputation and not getting tenders by any means. If any of the
illegal techniques like valuing the report at the cost lower than the actual cost will be used, then
the valuation of the inventory will not be done. It should also be noticed that if the cost is lower
than the net realizable value then the valuation will be done at NRV and not at the cost (Gay &
Simnet, 2015). Hence, it is very important for all the organizations to maintain the correct
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