Holmes Institute HA3032 Auditing: Audit Program for Legend Corporation

This report presents an audit program developed for Legend Corporation Limited, an Australian engineering services company. It addresses key audit risks, including inherent, control, and detection risks, and incorporates the audit risk model. The report outlines the company's financial analysis, including the application of analytical procedures and the calculation of financial ratios. Materiality is considered, and relevant factors are discussed. The report identifies material accounts like cash, accounts receivable, and property, along with their corresponding audit assertions (completeness, existence, valuation, rights and obligations). The report also details the sampling methods used, such as cycle counting, random sampling, and judgmental sampling, to manage the large volume of transactions. The document concludes by summarizing the identified risks, performed ratio analysis, and the importance of material accounts, assertions, and sampling techniques. The report also includes references from Legend Corporation's annual reports and other academic sources.

HA3032 AUDITING

• The audit risk of the legend corporation has been identified.
• The key risks which are involved in the company have been
provided.
• The audit risk model has been used.
• Analytical procedure is taken into account.
• Material accounts and their assertions are provided.
• The sampling methods have been included.
Introduction

COMPANY OVERVIEW
• Legend corporation limited is situated in Australia.
• The operations are being performed since 1942.
• Engineering services are the main stream of services for
company.
• Exports are also made to various countries.

AUDIT RISK
Auditors will be undertaking the process of auditing in which all of the risks
will be considered. The main risks involved in company are:
• Inherent risk
• Control risk
• Detection risk

RISKS OF LEGEND CORPORATION LIMITED
All of the risks which have been faced by the company are as provided
below:
• Interest rate risks
• Foreign currency risk
• Liquidity risk
• Credit risk

FINANCIAL ANALYSIS
The analytical process is followed and ratios which are calculated in same
are as follows:
Ratio Formula 2016 2017 2018
Current ratio
Current assets/current
liabilities 2.36 2.44 1.99
Net profit ratio Income/Sales *100 4.34% 3.38% 5.20%
Return on total assets Net profit/total assets*100 4.30% 3.26% 4.27%
Debt ratio Total liabilities/total assets 0.43 0.39 0.48
Debt to equity Total debts/ Equity capital 0.76 0.65 0.92
Total asset turnover ratio Revenue / Total assets 0.99 0.96 0.82

MATERIALITY
The materiality is the main aspect which is required to be considered and
for that specified standard will be followed. There are various factors
which will be considered and they are:
• Size of the transaction
• Nature of the company

MATERIAL ACCOUNTS
Some of the accounts chosen by company as material are as folows:
• Cash and cash equivalents
• Accounts Receivables
• Property and plant
• Trade and other payables
• Provisions
• Borrowings

AUDIT ASSERTIONS
Assertions are required to be considered in the process of auditing as
by them all the material accounts are considered and evaluated:
Completeness
Existence
Valuation
Right and obligation

SAMPLING
The business involves huge number of transactions and it is not
possible to consider all in proceeds of evaluation. For that sampling is
involved and in that there is the consideration of various methods
involve which are as follows:
Cycle counting method
Random sampling method
Judgemental sampling
Selective sampling

Identification of the risks has been made in appropriate manner.
All the important aspects to be covered have been evaluated.
The ratio analysis has been performed.
Material accounts have been identified with the assertions and audit
procedure to be followed.
Sampling has been taken into account.
Conclusion

REFERENCES
• Legend Corporation Limited. (2017) Annual report. [Online]
Available at:
https://www.legendcorporate.com/investor_relations/annual_reports/
AR2017.pdf [Accessed 16 Sep. 2019]
• Legend Corporation Limited. (2019) About Legend corporation.
[Online] Available at:
https://www.legendcorporate.com/about/index.html [Accessed 16
Sep. 2019]
• Huang, S. Y., Lin, C. C., Chiu, A. A., & Yen, D. C. (2017). Fraud
detection using fraud triangle risk factors. Information Systems
Frontiers, 19(6), 1343-1356.