Professional Audit of Konekt Limited: Risk and Materiality Assessment

This report presents an audit of Konekt Limited, an Australian company specializing in organizational health and risk management. The audit focuses on identifying significant accounts at risk of material misstatement, setting planning materiality, and assessing potential risks. Key areas of concern include cash and cash equivalents, other assets, intangible assets, trade and other payables, and provisions. The report details the auditor's risk assessment procedures, which are crucial for forming an opinion on the fairness of the company's financial statements. Planning materiality is determined based on the company's total revenue, and the report emphasizes the importance of both qualitative and quantitative aspects of materiality in ensuring accurate financial reporting. Desklib offers a range of study tools, including past papers and solved assignments, to help students understand auditing principles and practices.

Running head: Professional Auditing
Professional Auditing
Name of the Student
Name of the University
Author Note

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Executive Summary
The report show about auditing process of the company y and show how the auditor gives its
opinion upon the financial statement of the company. It also shows about the company name
Konekt Limited. It shows about the misstatement of the account in the company and also
show the planning materiality of the company. Lastly it show the risk assessment procedure
which is to be followed by the auditor in regards of the misstatement of the account in the
company financial statement.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Overview of the Client/ Company.........................................................................................3
Materiality in the Company financial statement....................................................................4
Audit Risk Assessment..........................................................................................................8
Conclusion................................................................................................................................11
Reference..................................................................................................................................12
Appendix..................................................................................................................................14

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Introduction
Auditing is the process to know about the financial statement of the company,. The
auditing process is been carried by both internally and externally. Internally Audit is been
carried out by the employee of the company or the audit committee of the company. It is been
done so that the company can able to know whether there lacking behind and able to do the
correction of the mistake (Adler et al., 2018). As internal audit is able to check the internal
control of the company so it able to find all the problem which are there in the internal
control of the company and as a result it able to guide the company about the problem which
are there in the internal control and the company is able to do the correction in the internal
control problem and help the management to do the business smoothly (Barton and Bruder
2014). The external person is called auditor who carry audit process in the company and
gives its opinion whether the financial statement are showing true and fair view or not. To
check the details of the financial statement auditor have to carry many procedure so that it
able to ascertain the amount of risk which is there in the financial statement and able to give
proper opinion about the financial statement (Christensen, Elder and Glover 2014). It also
check about the internal control of the company as it is the main reason where the most fault
of the company can occur and also it is the place which can tell the auditor about whether
there is any fraud is happening in the company or not and also it show about the material
misstatement in the financial statement of the company. The assignment is been based about
the company Konekt Limited and it show about the various risk which are been associated in
the company and also it show about the planning materiality of the company.

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Discussion
Overview of the Client/ Company
The assignment is been based about the company Konekt Limited. It is an Australian
based company which deals in regards of the employee’s safety as it deals in organizational
health and risk management solution in different industry. As the company help different
organization about minimization of the employee’s injury and also it help them to reduce the
workplace cost which the company have to spend in the business (Konekt.com.au 2019). It
mostly carries its business in Australia and it then largest company in its industry. The
company have a large experience as it have more than 20 years of experience in the field so it
can be said the company is most prominent in providing this kind of services in Australia.
Materiality in the Company financial statement
Materiality is the part which should be checked by the auditor, as if the company
financial statement have contain materiality than it will not able to provide true and fair view
(DeFond and Zhang 2014). Materiality represent the misstatement which is been done by the
company as it have done some amount of omission and error while recording the financial
transaction in the business as it also show about how the company is not able to prepare
proper accounting as result it affected the financial statement of the company. As if there will
be misstatement in the company than it will directly affect the stakeholder as stakeholder are
the one who take decision on the basis of the financial statement so if there is error or
omission than it will not able to take accurate or fair decision in regards of the company
(Edgley 2014). The company can have both kind of materiality as qualitative and quantitative
aspects.
Qualitative Aspects of Materiality

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1. Lack of Proper Disclosure – If the company is not able to provide the necessary
disclosure in regards of the accounting and other details of the company so it is been
consider as an misstatement in the financial statement as the company should
disclose all the information in regards of the financial statement of the company
(Eilifsen and Messier Jr 2014). As it should give proper disclosure of the matter such
as contingent liability or related party transaction in the business so it is been
consider a material misstatement so it should be disclose properly in the financial
statement of the company.
2. Error in the Financial Statement – Company should not have any error in the
financial statement as it may happen that the company is not able to record properly
in the financial statement so it will be consider as misstatement in the financial
statement of the company (Escobar and Demeritt 2017). As if there is an error in the
recording of the transaction so it can happen that the company is not having proper
records so it can over or under state so this will affect the financial statement and as a
result it will affect the financial decision of the stakeholders. So the company should
not have any error while preparing the financial statement of the company.
Quantitative Aspects of Materiality
There are some steps which should be follow by the auditor in order to know the
quantitative materiality, the steps are been shown below:
1. The auditor should make a judgement of the materiality in the planning stage of the
audit, as it should make a judgement over the financial statement as so that it can able
to assertion the amount of materiality which the financial statement can able to have
as it should make a percentage upon the profit so that it will help in the carrying audit
process in the company (Furnham and Gunter 2015).

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2. It should assertion upon the different account which can able to have misstatement
and able to effect the financial statement of the company.
3. It should bale to add all the amount which it have got in regards of the materiality and
should do the aggregate of the same in regards of the financial statement of the
company.
4. Auditor should compare the actual materiality and the estimated so that it able to
know about the risk which is been associated in the business and than it should carry
the audit procedure in the company.
Five account of the company which have materiality
1. Cash and Cash Equivalents – It can be seen from the financial statement of the
company that in there is significant increase in the cash account of the company as in
2017 it was $2848 but in 2018 it is $5661 so it can be seen that the increase is too
high so it is been consider by the auditor as it may contain misstatement in the
account it may happen the company have overstated it so that it can able to quick
ratio good and able to show the financial user so that it able to invest more in the
business of the company (Griffin 2014).
2. Other Assets – It can be seen from the financial statement of the company that there
is big increase in the other asset of the company so it is been consider as
misstatement by the company as in 2017 it was $290 and in 2018 it is $460 so this
show there is a big increase in the other asset so the auditor will take into
consideration as misstatement which is been done by the company so that it can able
to show a good current ratio of the company as it will able to attract more number of
the investor by the help of showing good current ratio (Griffiths 2016).
3. Intangible Assets – It can be seen from the balance sheet of the company as there is
so much increase in the intangible asset so it is been consider as materiality by the

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auditor as it was shown such a big increase as in 2017 it was $12665 and in 2018 it is
$44112 so this show there is a big increase in the intangible asset so it is been
consider as a misstatement by the company as it is been increase by the company so
that it can able to show the financial user that the have so much brand value and
goodwill in the market so it is been consider as a material misstatement account by
the auditor (Groomer and Murthy 2018).
4. Trade and other Payables – It can be seen from the balanced sheet of the company
that there is a increase from a high margin which is been consider not proper by the
auditor so as a result the auditor consider it as a material misstatement which is been
done by the company. As in 2017 it was $5572 and in 2018 it is $13082 so this show
that there is a big increase so this can be done by the company so that it can able to
show the investors that the company is performing good as a result it able to get some
much amount credit from the creditors of the company (Hall 2015).
5. Provisions – It can be seen from the company financial statement that there is a
provision which is been created by the company in the current year as it does not
have any provision in the year 2017 so it is been consider as material misstatement by
the auditor as why suddenly the company is able to make provision in regards of the
trade receivables of the company (He, Zeadally and Wu 2015).
Planning Materiality
Planning materiality is the method which the auditor do in the planning stage of the
auditing as it should make a plan of the misstatement which is to be done by the auditor as it
make planning of the materiality which is been there in the financial statement of the
company (King 2014). It is the method which is been used by the auditor to ascertain the
financial statement materiality. As per the company is been concern the auditor have done
that it should take into consideration about the total revenue of the company. So it can be said

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that the auditor have taken the total revenue as the base in regards of the calculation of the
planning materiality and the percentage which is been consider as 0.5% as the calculation
percentage in regards of the planning materiality of the company.
Table No – 1
Source – Author
Audit Risk Assessment
It is process which is been used by the company in order to know the risk which is
been there in the financial statement of the company (Knechel and Salterio 2016). This are
the procedure which is been carried by the company so that it can able to know the risk which
is associated with the business of the company. As this the most important process which is
been carried as it help the auditor to know the risk and able to collect them so that it can able
to know the risk and able to give proper opinion upon the financial statement of the company.
There are many processes in the risk assessment procedure of the auditor which is been
explained below:
 The auditor should know about the company and the nature of the business it carry so
that it able know what are the risk associated in the company as it should see the
overview of the company and also the management of the company so it should check
all the risk associated in the business (Power and Gendron 2015).
 The auditor should also check the strategy which the company is following in regards
of the business so that it able to know the risk which can be there in the strategy so it

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should check the strategy as well the implication of the strategy in the business of the
company (Reid 2015).
 It should also examine the company management so that it can know who are the
members in the management and also how much expert people are there and how the
management is able to manage the business of the company.
 It should ask the individual working in the organization so that it able to know the
answer which are been given by the management is correct or not. As it should check
the management answer with the employee answer so that it can able to get a clarity
of the answer and also able to judge the same in the financial statement of the
company.
 It can able to perform different analysis so that it can able to know about the different
in the figures so that it can proper judgement of the financial statement of the
company so that it able to know all the difference which are there in the financial
statement of the company.
Risk assessment of the above mention points
1. Cash Account – The auditor of the company will verify the cash account of the
company as per ASA 330 it will check all the transaction of the company related to
the cash and also check the cashier document so that it able to know about the cash
inflow and outflow as it will also check about the cash flow statement of the
company so that it can able to know the inflow and outflow of the cash which will
help the company to get an overview of the financial statement and as a result the
auditor will able to know reason of the increase in the cash and cash equivalent of the
company (Wang, Li and Li 2014).
2. Other Assets – The auditor of the company should verify all the items as per ASA
330 it will see the items which are been included by the company in their other asset

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and also it verify all the transaction which the company have done in related to the
other assets of the company. It should check whether their no error and omission by
the company in recording of the transaction and lastly it should also check the
disclosure which is been given by the company in their financial reporting so that the
auditor can able to know the reason of the increase in the value of the other asset in
the financial statement of the company (Xia et al., 2015).
3. Intangible Asset – The auditor should check the items which are been included in
the intangible asset by the company as per ASA 330 it should check that the
company have done the valuation of the intangible asset as per the accounting
standard or not. It should also analysis about the transaction which is been done by
the company in related to the intangible asset of the company. As it should check the
disclosure of the company in the notes of account so that it can know the reason of
the increase in the intangible asset of the company so after carrying this procedure
the auditor will able to know the reason of the increase in the intangible asset.
4. Trade and other Payables – The auditor should check the transaction related to the
trade and other payables of the company. As per ASA 330 it should do the third party
verification so that it can able to know the real amount and able to verify the same
with the balance which is been given in the financial statement of the company lastly
it should check the disclosure which is been given by the company in regards of the
trade payables so that it able to know the reason of increase in the financial statement
of the company.
5. Provisions – The auditor should check about accounting treatment which is been
done by the in related to the provision of the company. As per ASA 330 It should
have a questioner with the management as it will help the auditor to know the reason
why the company have make the provision in the current year as it was not there in

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the previous year so it should be checked by the auditor about the reason of such
increase in the provision and it should also check the provision which is been given
by the company in the financial statement of the company so that it can able to know
the reason of the provision in the company.
Conclusion
The report conclude about the auditing process which is been carried by the auditor in
the company as the auditor check the financial statement of the company and gives it opinion
upon the financial statement of the company as whether the financial statement are showing
true and fair view or not. The auditor have to carry many procedure in the company so that it
able to know the risk which is been associated in the financial statement of the company. It
also check the internal control of the company so that it can able to know how the company
manages its business internal and the internal control help the auditor to know there are any
risk or fraud in the company or not. It check that the company does not have any material
misstatement of the company as it have contain material misstatement than it will affect the
decision power of the financial user of the company.
It show an details of the company Konekt Limited which is an Australian based
company and carry its business as risk management of the company and also help the
company to reduce employee cost. It shows about the materiality concept and show the
accounts of the company which contain misstatement and can affect the financial statement
of the company. It also includes the planning materiality and the auditor have taken the total
revenue as the base for the calculation of planning materiality of the company. Lastly it
concludes about the risk assessment procedure and also show the risk assessment which the
auditor has to carry in the company shown accounts.

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Appendix