Report on Auditing Theory and Practice | GPSA Limited

Running head: AUDIT 1
Auditing Theory and Practice
Name:
Institution:
Date:

AUDIT 2
Executive summary
In this report, as MYH partner we will report on the financial reports of GPSA Limited a
company that deals with manufacture, retail and sale of medical equipment in wholesale and
retail and has also ventured into property market in Australia. This report is a pre analysis of
the auditor’s report basing on the audit plan, the clients business, preliminary analytical
procedure and the clients business risks. In assessing all these, the main objective is to give a
briefing on whether the company is able to be audited by MYH partners without any audit
risk. For initial audit planning strategy, GPSA has to conduct preliminary investigations on
the audited accounts prior to the companies of auditor’s reports. In the planning phase of the
company audit, the attention will be on key areas of the audit and ensuring that there is
sufficient resources that are allocated for the audit engagement.. This is well articulated in
ISA300, planning and auditing of financial statements.
Table of Contents

AUDIT 3
Introduction......................................................................................................................................3
1a) Audit Accounts-.........................................................................................................................3
Accounts receivable.....................................................................................................................3
Current investments.....................................................................................................................3
Property Assets............................................................................................................................4
Intangible Assets..........................................................................................................................4
Research and development capitalization....................................................................................4
b) Analysis.......................................................................................................................................4
(c) Audit risk....................................................................................................................................5
d) Audit steps to reduce risk............................................................................................................5
1b) Analyze the ratios and additional information to outline business risks that GPSA faces.......6
Business risk faced by the company................................................................................................6
Internal controls- effective internal control.....................................................................................7
2B) List and justify the weaknesses in internal control for sales and trade receivables..................8
References........................................................................................................................................9

AUDIT 4
Introduction
GPSA Limited is a medical technology company that was incorporated in 1992 as the pioneer
in medical technological research and distribution of medical equipment. In previous years
from its inception, the company has relied on its internal control systems based on its results
satisfaction of extensive control tests (Shim, 2011). After discussions with the clients, the
company has made no changes in the internal controls systems while it also does not have an
audit control or internal audit department. Therefore extensive audit is required especially in
its internal controls to steer the company clear from wastages, theft and pilferages while out
rightly going to profitability (Corsi, Castellano, Lamboglia & Mancini, n.d.). This is the
auditable areas of concern;
1a) Audit Accounts-
Accounts receivable
These are the debtors that owe the company money. A bad debtor’s accounts means that the
company will have problems with their cash flows. According to the ratios of 2017 unaudited
report, the company’s days in accounts receivables stands at 83.06 days. To put it in
perspective, it will take roughly 84 days for a debtor to pay for the item that he or she took on
debt (Corsi, Castellano, Lamboglia & Mancini, n.d.). This is unacceptable, the higher the
number of days, the less the operating cash flows of the company. In fact, in the audited
reports of 2016, the days in accounts receivable stands at 60.65 days while the audited
financial ratios for 2015 stands at 53.24 days. This shows an increase in the number of days
the company is willing to let the debtors have its goods and services on credit. The company
should avoid extending the debt window as it will only hurt the company’s financial and cash
flow position.