ACCM4400 Auditing & Assurance: Risk Assessment of Two Companies

This report provides an analysis of auditing and assurance principles, focusing on risk assessment and audit procedures. It examines inherent risks, fair value considerations, and potential misstatements in the context of JB HiFi and Common Wealth Bank. For JB HiFi, the report discusses risks associated with non-routine transactions and business combinations, emphasizing the importance of thorough investigation and estimation techniques to reduce error margins. For Common Wealth Bank, the report identifies liquidity risks, credit risks, and operational risks, outlining necessary audit procedures to ensure sufficient cash balance, prevent human errors, and mitigate potential losses. The analysis draws upon various auditing standards and research to provide a comprehensive overview of risk management in auditing and assurance. Desklib offers a variety of resources, including past papers and solved assignments, to aid students in their studies.

Running head: AUDITING AND ASSURANCE
Auditing and Assurance
Name of the Student
Name of the University
Authors Note
Course ID

1AUDITING AND ASSURANCE
Table of Contents
Part 1..........................................................................................................................................2
Answer to Part 1A and 1B.........................................................................................................2
JB HiFi...................................................................................................................................2
Common Wealth Bank...........................................................................................................3
References list:...........................................................................................................................5

2AUDITING AND ASSURANCE
Part 1
Answer to Part 1A and 1B
JB HiFi
INHERENT RISK
The different kinds of the non routine transactions are found that they are present in
varied kinds of estimations which the management takes into consideration. The instance of
the non-routine transactions for JB HiFi are seen to be causing detrimental effect by acquiring
other enterprises inherent dangers which are caused by risks and chances during the process
of business combinations.
FAIR VALUE
The accounting estimations are assumed to be very difficult to be ascertained
including various kinds of fair value considerations needs to be unveiled in case of
accounting statements.
AUDIT PROCEDURE AND RISK
The solutions in case of such transactions is based on the use of various kinds of
different information’s which are obtained beforehand which are found to be conducive in
helping as well as a providing a guideline about the occurrence in case of any unforeseen or
uncertain events which might happen. The auditors also need to investigate of the firm’s
decision makers and also make estimation about the techniques and the way to which will be
ultimately reducing error margin. The process of audit is conducted in such a way which will
consequently reduce or eliminate the error margin (Chandler 2014). Again we can write down
from the above said statement that the process of audit is conducted in such a way that it will

3AUDITING AND ASSURANCE
gradually reduce the level of risks associated with the audit questions has further been
observed to be stated in case of detection and controlling of the same.
MATERIAL MISSTATEMENT
The term materially misstated basically explains the risks and dangers which are
associated with the audit and also expresses any kind of inappropriate audit opinion (Kinney
2015).
Inherent risk
The risks involved with the banks are mainly ascertained for these cases in which the
counter party is found to be defaulted responsibility as the terms and conditions are applied in
it. Some of the risk factors which are related to it are stated here as under
1) Low or poor credit store
2) Unsteady income
3) Collateral assets
4) Employment
AUDIT PROCEDURE/TASK
In order to prevent the occurrence of such risks and dangers the audit procedure is
required as there is growing increase in the overall interest for the borrowers.
Common Wealth Bank
LIQUIDITY RISKS
There are sometimes lack of market ability so there might be risks arising from these
marketability which occurs mainly in case of the day to day transactions which are done.

4AUDITING AND ASSURANCE
Such cases the bank may run out cash and it is concerned as the major or main liquidity risk
to the bank (Knechel and Salterio 2016).
AUDIT PROCEDURE/TASK
In order to prevent the occurrence of such risks and dangers the audit procedure is
required as there is growing increase in the overall interest for the borrowers. The procedure
of audit is needed to ensure that there is sufficient amount of cash balance deposited in the
bank as a depository before handing over the excess cash. The process of audit also is
inclusive of the potential securities which breaches beforehand so as to avoid or prevent the
instances of human risks like IT/system risks and processes risks (Moroney and Trotman
2016).
CREDIT RISK
There are other risks which are associated with the bank like in case of the credit risk
we can see that the risks involved with the banks are mainly ascertained in which the counter
party has defaulted in meeting up the responsibilities in terms and conditions of the
agreement (Simnett et al. 2016). Some of them have been stated here as under
1) Low or poor credit store
2) Unsteady income
3) Collateral assets
4) Employment
OPERATIONAL RISKS
These are mainly the risks which are associated with the potential losses because of
human error, occurring mainly in case of potential human error resulting consequently in

5AUDITING AND ASSURANCE
potential losses in the internal processes. This definition is considered to be legal attached
with legal risks but is excluding any kind of strategic and reputation risk.

6AUDITING AND ASSURANCE
References list:
Chan, D.Y., Chiu, V. and Vasarhelyi, M.A. eds., 2018. Continuous Auditing: Theory and
Application.
Chandler, R., 2014. Auditing and assurance. London School of Economics. London.
Kinney Jr, W.R., 2015. GAAS 1963-2012: The Global Foundation of Independent Audits and
Research in Auditing.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Moroney, R. and Trotman, K.T., 2016. Differences in Auditors' Materiality Assessments
When Auditing Financial Statements and Sustainability Reports. Contemporary Accounting
Research, 33(2), pp.551-575.
Simnett, R., Carson, E. and Vanstraelen, A., 2016. International archival auditing and
assurance research: Trends, methodological issues, and opportunities. Auditing: A Journal of
Practice & Theory, 35(3), pp.1-32.