ASA 701 and Material Misstatements in Auditing: A Case Study

ACC 707 Auditing and Assurance Services

Audit
Executive Summary
ASA 701 was introduced to assist auditors in conducting audit processes effectively, and for
such purpose, essential audit matters must be duly communicated by them through the audit
report. Further, the management must supervise the overall process to facilitate material
disclosure, thereby allowing users to exert their trust upon the company. With the help of this
report, a case of material misstatement associated with Advanced Computer Solution and
another example of Green Machine Ltd about their assertions based on PPE has been
highlighted.
2

Audit
Contents
Introduction...........................................................................................................................................3
Material misstatements........................................................................................................................4
a. Major assertions............................................................................................................................4
b. Substantive audit processes..........................................................................................................4
c. Communicating key audit matters (ASA 701)................................................................................5
Green Machine Ltd................................................................................................................................6
a. Major assertions............................................................................................................................6
b. Two Substantive audit processes...................................................................................................6
c. Communicating key audit matters (ASA 701)................................................................................7
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10
3

Audit
Introduction
The reason behind the introduction of ASA 701 can be attributed to the fact that it facilitates
in enhancing the audit procedure. However, communication is essential from the auditor’s
part so that the audit judgement is professional and efficient. Also, the management must also
scrutinise this entire process so that an excellent overall scenario can be depicted (Tadros,
2017). Moreover, stakeholders can also make proper decisions based on such communication
strategy.
4