Professional Auditing: Audit Planning Memorandum and Analytical Procedures

Running head: PROFESSIONAL AUDITING
Professional Auditing
Name of the Student:
Name of the University:
Authors Note:

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PROFESSIONAL AUDITING
Contents
Part (a):............................................................................................................................................2
Audit Planning Memorandum:....................................................................................................2
Analytical procedures:.................................................................................................................7
Comparison between current ratios and ratios of previous year:..............................................10
Part (b):..........................................................................................................................................12
Six audit procedures for identified areas of risk:.......................................................................12
Part (c):..........................................................................................................................................15
Use of active data for CAAT purposes:.....................................................................................15
Conclusion:....................................................................................................................................18
References:....................................................................................................................................19

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PROFESSIONAL AUDITING
Part (a):
Audit Planning Memorandum:
The banks in Australia are governed by the Banking Act, 1959 and Reserve Bank Act,
1959. Apart from that the provisions of Corporations Act, 2001 is also applicable for established
entities. The objective of conducting an audit of a bank is different from the objectives of
auditing an ordinary entity under the Corporations Act, 2001. Apart from independent
verification of financial information auditor of a bank also requires to verify the operations and
activities of the bank to make a compliance report (Zhang, 2017).
The new auditor of a bank or for that matter any other entity must consider the legal and other
implications of accepting an audit engagement. In this case the auditor of Sustainable Bank
Limited, here in after to be mentioned as SBL in the document, must consider the following
factors before starting the audit:
 Firstly, the new auditor must communicate the appointment with the previous auditor. In case
the previous auditor questions that such appointment should not be accepted or is not valid
then the new auditor must ask his predecessor the reasons of his objection to the appointment.
 In case there is any reasonable justification behind the objection of the previous auditor the
same must be verified and dealt with (Furnham and Gunter, 2015).
 The auditor should not accept the appointment in case the remuneration of the previous
auditor is due and still unpaid or the previous auditor has been forced to resign from his
position due to undue pressure from the management.
 The different legislations that apply to the audit of the bank.
 The banking regulations that must be followed in auditing the SBL.

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PROFESSIONAL AUDITING
 The minimum Statutory and Time deposit that the bank must maintain as per the instruction
and guidelines of Reserve Bank of Australia (Ettredge, Xu and Yi, 2014).
 Other specific banking regulations that apply to the audit of SBL.
Taking into consideration the facts provided about the operations and functions SBL in the case
study it is amply clear that the bank mainly serves the small and medium businesses and clients
by providing them financial assistance as per their requirements. SBL has 100 retail branches in
all across the country with extended network of Automated Teller Machines (ATMs). The
money disbursements to 100 retail branches along with filling of ATMs involve significant
amount of risks. Thus, the auditor will have to carry out extensive substantial procedures on
processes and methods followed by the bank while disbursing cash to retail branches and ATMs
(Brown, Preiato and Tarca, 2014). Considering that the risk of defaults have increased
significantly subsequent to the downturn in Economy the auditor of SBL must also conduct a
thorough verification of the borrowers, both existing and potential, i.e. applicants who have
applied for loans. It is important to ensure that the management of bank has taken all necessary
precautions before approving loan applications of borrowers. Only those applicants that have
fulfilled the required criterions should be given loans. Thus, the area of loan disbursement should
also be scrutinized to ensure that a standard procedure has been followed by the bank. Use of IT
experts’ services to verify the risk in information and technological area of the bank. Since most
of the transactions are now a days are carried out on internet it is important that the system
within the bank is fully protected against the possible threats (Alles, 2015). The auditor must use
the services of an IT expert to ensure that the system is working properly and there is no apparent
risk of failure. However, since February 29, 2018 when a computer malfunction caused havoc in