Audit, Assurance and Services Report: Materiality and Going Concern

This report presents an analysis of an audit, assurance, and services assignment. It begins with an introduction to audit and assurance services, including reasonable assurance and professional skepticism. The report then delves into an ethical problem involving unpaid audit fees, proposing solutions. It explains the concept of materiality, both qualitative and quantitative, and discusses how information impacts preliminary materiality assessments. The report further examines the auditor's responsibilities regarding going concern assumptions, identifying events that may cast doubt on a company's ability to continue as a going concern. Finally, it provides an overview of audit procedures related to client accounting treatments. The report provides valuable insights into the complexities of auditing, ethical considerations, and the importance of assessing financial statements accurately. The report includes references to academic journals and books.

Audit, Assurance and
Services

Contents
INTRODUCTION.......................................................................................................................................3
QUESTION 1..............................................................................................................................................3
(a) Concept of reasonable assurance, and how reasonable assurance is determined. Explain why an
auditor cannot offer absolute assurance...................................................................................................3
(b) Concept of 'professional scepticism' and how it is not the same as assuming that managers are
always trying to deceive auditors.............................................................................................................4
QUESTION 2..............................................................................................................................................4
Explain the ethical problem in this case. Why is it a problem?................................................................4
What can be done about it?......................................................................................................................5
QUESTION 3..............................................................................................................................................5
Explain why determination of materiality is a matter of auditor judgment. Refer to both qualitative and
quantitative materiality assessments........................................................................................................5
Explain whether (and, if so, how) the information provided impacts on the auditor's assessment of
preliminary materiality............................................................................................................................5
QUESTION 4..............................................................................................................................................6
(a) What are the auditor's responsibilities for 'going concern assumptions?............................................6
Identify any significant events or conditions that individually or collectively may cast significant doubt
on SS's ability to continue as a going concern.........................................................................................7
QUESTION 5..............................................................................................................................................7
REFERENCES............................................................................................................................................9

INTRODUCTION
An audit is an assurance service of a kind. Assurance programmers can be compliance-based or
legislative. They focus on ensuring that protocols, rules and regulations are followed by a
corporation or agency, and have both internally and externally confidence in government reports.
Assurance services are audit operations which provide income reports or enforcement initiatives
with an impartial, objective review (Axén, 2018). The aims of these audits are to ensure that
financial reports are correct and activities are conducted in compliance with relevant laws and
regulations by management, the Board, and regulatory.
QUESTION 1
(a) Concept of reasonable assurance, and how reasonable assurance is determined. Explain why
an auditor cannot offer absolute assurance
Reasonable assurance requires recognizing that there is a remote possibility of not
avoiding or identifying material errors on a periodic manner. While not complete certainty, fair
certainty is a good threshold of certainty, nonetheless. A difference exists between the standards
of Nga and the performance levels of the auditor. Fair verification is given by an audit, not total
assurance. The audit improves the validity and integrity of the details used in the financial
statement, but does not ensure that the financial statement will not collapse or be free from errors
or corruption. In addition, this is attributable to the meaning of financial reporting. Judgments on
financial accounting and the selection and implementation of various forms of reporting are
needed. In the context of organisation benefit, there is generally not one 'correct' response
(Bradbury, 2017). The auditor does not confirm that the corporation's purchasing stage is
'correct,' but only offer evidence of the suitability of the formulation and application of the
income statement and the significant accounting. The essence of the assessment process is yet
another explanation the guarantee is not complete. Auditors are unable to evaluate every
expenditure and payment history, so they use filtering (which may imply that relevant objects for
evaluation are not chosen). It is difficult to obtain accurate information regarding certain
financial statements, customers can obstruct justice, and auditors have a short time period upon
which to execute the audit.

(b) Concept of 'professional scepticism' and how it is not the same as assuming that managers are
always trying to deceive auditors
Professional scepticism is a behavior involving an expanded hazard, being alert to
circumstances which might suggest potential misrepresentation due to mistake or cheating, and a
detailed evaluation of audit proof. These examples of professional scepticism illustrate the issues
of the supervisor and help internal auditors react to these problems. An auditor needs
professional scepticism. It is an attitude which needs the accountant to stay separate of the
customer and his employees. The auditor has an expanded hazard and reviews all facts provided
by his company extensively. This will not indicate that they consider the customer a fraud, but
also that they ought to do something other than accept the opinion of the customer on something.
Usually, documentation supporting the assertions of the client ( e.g. copies of agreements, policy
documents, etc.) can be checked. Data obtained from neutral third sources is normally considered
to be more accurate than that obtained from the consumer. Supervisors would not necessarily
seek to cheat auditors, but auditors should assume accountability for obtaining evidence to
demonstrate the claims of managers. The auditor ought to be sensitive to the possibility that
certain executives often try to mislead inspectors (Cohen and Rozario, 2019).
QUESTION 2
Explain the ethical problem in this case. Why is it a problem?
A given action, situation or behavior causes a dispute with the moral values of a
community, ethical concerns arise. These disputes will affect both people and institutions, as all
of their actions may be challenged from an ethical perspective. As per the case it is analyzed that
ethical issue client does not pay fees on time and delay for the auditing. It is considering as
ethical problem because with amount an auditor cannot publish auditor report that impact on
client business in direct manner. Most law says it before counseling starts, payments have to be
negotiated so that consumers know what is required of them. And, this would include the fact
that if the payment is not charged, you have the option to end (Denisov, Khachaturyan and
Umnova, 2018) .

What can be done about it?
To sort out this problem require to give warning t client that if he does not pay on time so
do not publish auditor report that impact on his business in inverse manner. As a result clients
pressurizes for the payment and communicate with that person who have power and control to
handle this situation appropriately.
QUESTION 3
Explain why determination of materiality is a matter of auditor judgment. Refer to both
qualitative and quantitative materiality assessments
Auditors rely on rules of thumb and highly qualified judgment to maintain an amount of
materiality. The number and sort of mistake is also considered by them. The level of materiality
is usually specified as a particular amount of a budget item of a particular financial report. Data
is material if this might impact decisions taken by users in terms of monetary knowledge about a
single financial statement by ignoring or misrepresenting it. In other terms, in the context of a
particular organization's financial report, materiality is an object-specific feature of importance
based on the existence or significance, or both, of the objects to whom the policy applies.
Subsequently, the Board can not define a standard quantitative standard for materiality or, in a
specific case, predetermine what could be content. The MMM chartered accountants paid their
suppliers late, well in excess of the supplier’s normal credit terms. As a resulted it impact on the
suppliers and requesting from the cash on delivery from the business. When analyzing the
business, it is assessing that company have cash flow problem from last two years. Thus, it
impact on the qualitative and quantitative assessment of the materiality.
Explain whether (and, if so, how) the information provided impacts on the auditor's assessment
of preliminary materiality
Materiality depends on the degree and quality of the omission or defect measured in the
events surrounding it. The deciding factor may be the size or value of the object, or a mixture of
the both. Evaluating a degree of materiality for the financial statements presented overall
promote interaction the decisions of the accountant in the detection and potential consequences
of material errors and in the preparation of the type, pacing, and degree of more audit process.
Qualitative variables that impact the materiality decision of an investigator include: quantities

associated with fraud. Scam quantities are generally deemed more severe that accidental
mistakes of equivalent amounts of dollars because fraud represents the integrity and competence
of the managers or other workers involved. As per the information Auditor analysis the financial
statement after that takes right decision in regard of suppliers. These information direct impact
on the auditor assessment (Engage, 2019).
QUESTION 4
(a) What are the auditor's responsibilities for 'going concern assumptions?
It is the duty of the auditor to obtain ample adequate audit procedures in the audited
financial statements on the suitability of the manager's use of the going concern basis and to
determine whether there is a substantial doubt regarding the capacity of the organisation to
survive as a continuing concern. In the preparation of financial statements, the principle of
current concern is an implicit presumption, since it is presumed that the company neither has the
purpose nor there is a need to significantly buy up or curtail the size of its activities. "The duty of
the auditor to think of going from over given comments is:" The auditor is not capable of
predicting potential events or situations. The probability that the organisation may eventually
disappear as an ongoing concern despite the receipt by the accountant of a report which does not
give rise to significant doubt, within those one year after the end of the financial period, does not,
in itself, imply the audit ineffective results. Appropriately, the lack of relation in an auditor's
report to serious doubt should not be seen as offering certainty as to the capacity of an
organisation to proceed as an ongoing concern.
According to ISA 570, the auditor 's duty is to achieve acceptable audit proof as to the
acceptability of the manager's the use of reporting basis of current issue in the audited financial
statements and to determine if there is significant doubt as to the capacity of the company to
function as a growing concern. Applicants will be asked to identify the audit process that the
auditor may carry out in the AA exam to determine whether or not a business is a current
concern (Lenz, Sarens and Hoos, 2017).

Identify any significant events or conditions that individually or collectively may cast significant
doubt on SS's ability to continue as a going concern
Many constraints, along with some other issues as set out in note x, imply that there is an
earn abnormal that may cast considerable doubt on the ability of the group to survive as a
continuing concern. With respect to this issue, our view is not altered.
 A major decline in revenue from sales. ...
 Significant Debt or Interest Payable Overdue sum. ...
 Most of the checking account. ...
 Absence of research & design Fund. ...
 Lost in Key Management. ...
 Problems with Cash Flow. ...
 Lost from the Great Project (Nedyalkova, 2017).
QUESTION 5
Clients Accounting Traetment Justification
Caufield Ltd Raw material received from
the Korea so this process show
in the assets side of the
balance sheet.
It is audit procedure and part
of the Inquiry in which discuss
about the raw material from
the company.
Caufield Ltd This injury present in the
expenses side in profit and
loss account along with
present in the liability side.
For this follow the audit
procedure of observation and
recalculation to present all the
amount in the financial
reports.
La Trobe Electrical Ltd This treatment shows in the
balance sheet of liability side
and add amount of outstanding
For this follow the analytical
procedure in broad manner.

shares which is considering as
liability.
Caufield Ltd Loss of inventory show in the
assets side and less from the
assets. Either it show in the
profit and loss statement and
do not less from the balance
sheet.
For this treatment follow the
procedure of inspection in
which collect all the details
about the inventory.

REFERENCES
Books and Journals
Axén, L., 2018. Exploring the association between the content of internal audit disclosures and
external audit fees: Evidence from Sweden. International Journal of Auditing. 22(2).
pp.285-297.
Bradbury, M. E., 2017. Large audit firm premium and audit specialisation in the public
sector. Accounting & Finance. 57(3). pp.657-679.
Cohen, M. and Rozario, A., 2019. Exploring the Use of Robotic Process Automation (RPA) in
Substantive Audit Procedures. The CPA Journal, 89(7), pp.49-53.
Denisov, I. V., Khachaturyan, M. V. and Umnova, M. G., 2018. Corporate social responsibility
in Russian companies: Introduction of social audit as assurance of
quality. Calitatea. 19(164). pp.63-73.
Engage, E., 2019. Textual-Analysis for Research in Professional Judgment and Decision
Making, Audit and Assurance, Risk, Control, Governance, and Regulation.
Lenz, R., Sarens, G. and Hoos, F., 2017. Internal audit effectiveness: multiple case study
research involving chief audit executives and senior management. EDPACS. 55(1). pp.1-
17.
Nedyalkova, P., 2017. Study on the factors affecting the assessment of internal audit in the
public sector. International Journal of Business and Social Science. 8(7).