logo

Audit of books of accounts of an entity

   

Added on  2020-12-29

15 Pages3477 Words394 Views
Political Science
 | 
 | 
 | 
AUDITING
Audit of books of accounts of an entity_1

Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3TASK 2............................................................................................................................................4TASK 3............................................................................................................................................5TASK 4............................................................................................................................................7TASK 5............................................................................................................................................9TASK 6..........................................................................................................................................12CONCLUSION..............................................................................................................................13REFERECNES..............................................................................................................................15
Audit of books of accounts of an entity_2

INTRODUCTIONAudit is an inspection of various books of accounts of an entity with a view to ascertain afair and true picture of financial position. It is conducted by an auditor and he can be an externalparty or an employee of the company. It helps in finding the material risk or error that couldaffect the company to a great extent. The investors rely on the audited annual report for makinginvestment decisions (Chen and et. al., 2012). Therefore, it is important to conduct audit. Auditcan be compulsory or voluntary. There are two types of audit i.e. financial audit and managementaudit. The chosen company in the project report is SECOS Group. The report covers, thematerial account balances that may affect the company, audit work for addressing such balancesalong with its respective assertions for gathering evidence to prove the materiality. TASK 1SECOS Group Limited is a manufacturer and distributor of packaging material across theworld. Its headquarters are situated at Mount Waverley, Australia. It was a result of merger ofCardia Bioplastic and Stellar Films Group in April 2015. it produces and sells its high qualitycast films and provides renewable sustainable plastic materials for packaging and plasticproducts industries. The company holds a robust patent portfolio and it is following a businesstrend by going global through sustainable packaging. It has a Product Development Centre andmanufacturing plant of its own finished products and resins in China and the manufacturing unitof cast films is located in Australia and Malaysia. Along with this, it has sales and distributionchannels in across the globe.
Audit of books of accounts of an entity_3

TASK 2Business Risk- are non-financial risk, that assesses company's industry, its applicableregulations and use of technology. An entity may have lower profits than the estimated profitsfor the year. The factors included in this risk are input costs, competition, sales-volume, per unitcost, climate affecting the economic stability and government regulations. Further, it includes aninternal review of company's survival in the future. The auditor will form an understandingabout the SECOS' business, the environment that is it operating in and its internal control.SECOS Group Ltd. Is a small capital stock company that has a market capitalization of USD $8Million. Since the company does not have huge market capitalization, there is a threat on itssurvival because of its financial viability. The ownership structure of the company may affect itsshort- term and long-term performance. Risk of material misstatement- The risk that occurs due to the errors in financialstatements of an organization. Such situation arise when there is a difference between the figuresrecorded and the estimated figures that will be included in financial statement to provide a fairview of the company. It calculate the degree of material risk and is calculated at the assertionlevel. It is subdivided into two categories viz. Inherent risk and control risk. Inherent risk- refers to the possibility of incorrect or misleading data in accountingrecords due to reasons other than failure of controls. It is the risk involved in the criticaltransactions of the company. The inherent risk of SECOS Group limited is low, as the companyhas been established in 2015 only, therefore it review and manages its internal controleffectively. Also, the auditors conduct the audit of the company, which reduces this risk as thereare low chances of errors in the transactions done during the year. Control risk-occurs when there is material misstatement in the financial statements andthe reason for such misstatement is due to the failure of controls and practices used by the entity.The factors affecting these risks range from industry practices, non-routine transactions, previousaudit results, audit decision regarding the recorded balances and transactions, related partiestransactions, misappropriation of assets etc. Detection risk- It is the risk that assumes that auditor will not be able to assess or detecta misstatement that subsist in an assertion of financial statements that could materially affect thecompany. This means there are very high chances that the auditor will fail to find material
Audit of books of accounts of an entity_4

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Audit of Green Machine Ltd: Significant Assertions and Substantive Audit Procedures
|5
|1156
|112

Assertion Test and Audit for Schrole Group Ltd
|12
|814
|366

Report on the Audit of MFG
|12
|2850
|72

Auditing and Assurance Assignment on Woolworths Company
|11
|1925
|305

Auditing and Ethics: Analysis of Materiality, Performance Review, and Going Concern Risk
|16
|2907
|298

VINTAGE ENERGY LTD. Introduction.
|15
|453
|70