Audit Report of Resource Mining Limited: Analytical Procedures and Materiality

HA3032 Auditing
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Table of Contents
INTRODUCTION.................................................................................................................................3
DETAILS ABOUT THE COMPANY AND THE INDUSTRY...........................................................3
Nature of company................................................................................................................................3
AUDIT RISK MODE............................................................................................................................4
ANALYTICAL PROCEDURES...........................................................................................................5
QUANTIFYING THE PLANNING MATERIALITY..........................................................................8
MATERIAL ACCOUNT BALANCE LIST.........................................................................................9
FINANCIAL REPORTING ASSERTIONS RELATING TO ACCOUNT BALANCES THAT ARE
CONSIDERED MATERIAL..............................................................................................................10
USE OF SAMPLING TECHNIQUE...................................................................................................15
CONCLUSION...................................................................................................................................16
REFERENCES....................................................................................................................................17
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INTRODUCTION
The audit report of any organisation can be prepared by the auditor only when he is
able to gather sufficient and appropriate audit evidence. It is not possible to gather these
evidences without a proper audit planning. Proper audit plan envisages in it several kinds of
audit procedures. These range from simple trend analysis done with the help of analytical
procedures to complex financial assertion analysis that the management gives. All this
requires the auditor to define the scope of his work and get a clear understanding regarding
the operations of the entity. The report presented in the current phase deals with the same
issue of Resource Mining Limited (Byrnes, et. al 2018). A research has been made on the
company Resource Mining Corporation Limited. The basic concept relating to audit is
understood using the data and information available about the company from the annual
report published. The materiality for the audit purposes is established for the Resource
Mining Limited and the material account balances are identified. On the basis of this
identification further analysis is done for the assertions that the management has given
regarding those balances. The audit procedures required to remove any risk that lies in these
account balances are figured out with the relevant documentation purpose.
DETAILS ABOUT THE COMPANY AND THE INDUSTRY
The company Resource Mining Limited is listed on Australian Stock Exchange. The
industry in which the company is working is materials industry. The company is currently
listed with a market capitalisation of $2.96 million. It is an independently registered company
having operations related to mineral resources (Resource Mining Limited, (2017).
Nature of company
Resource Mining Limited is striving in the competition due to its innovative
marketing, technical and financial skills. The long term goal of the company lies on
construction of a strong business model lying on the development of minerals. The
sustainability of the company’ mission is in the use of the skills for creation of long lasting
wealth. Scientific innovation turns out to be the key strategy for the success of the company
(Resource Mining Limited, (2016).
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AUDIT RISK MODE
This audit risk model analysis the risk associated with the particular audit activities.
Due to the complex business nature of Resource Mining Limited, this company will have
high detention, audit and control risk in its business functioning. It is analysed that company
audit risk would be high due to the high detention and control risk. This Resource Mining
Limited has high risk due to the increased business compliance program and strict regulatory
listing requirements. The audit risk may arise due to the increased complexity of the
undertaken work. The detention risk arise due to misstatement and manipulation made by
company in its financial statement. The control risk arise due to the error and fraud made by
the accountant while managing the business process of organization (Noreen, Brewer, and
Garrison, 2014).
Practical implication of the audit risk model in Resource Mining Limited
The practical implication of the audit risk in the Resource Mining Limited could be
done by implementing the audit risk model. The increased business compliance program and
strict regulatory listing requirements has forced company to set high detention and control
risk which will also eventually result to increased audit risk in the audit assessment program.
This has shown that there would be chances that material recorded in the books of account
may be wrong and misleading (Resource Mining Limited, (2017).
This could be determined on the basis of the audit risk model undertaken in this research
The control risk is high as company does not have any internal control department
which could assess the discrepancies and issues in its audit reporting frameworks.
The control risk could be set to .20 and in order to have to 10% audit risk, company would set
its detention risk 10%. It reflects that company could only have 10% audit risk in its audit
reporting frameworks due to its high control and detention risk
Audit Risk = Inherent Risk x Control Risk x Detection Risk
10% = 20% x .5%
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