Auditing and Assurance in Australia: API Audit Planning Report

This report, addressed to a senior auditor, provides advice regarding the audit planning for Always Precise Instruments Pty Limited, a manufacturer and supplier of small arms military equipment. It analyzes the company's financial performance over the last two years, focusing on ratio analysis, including current, quick, return on equity, return on total assets, gross margin, and various expense ratios. The report identifies potential audit risks associated with these ratios, such as inefficient working capital management, misstated quick assets, inflated expenses, and inventory and receivable management issues. It then suggests specific audit procedures to mitigate these risks, including reviewing working capital plans, reconciling cash balances, verifying expense documentation, checking inventory management systems, and examining debt and equity structures. Additionally, the report examines audit controls within the company's processes, like purchase orders and production orders, identifying potential risks of misstatements and recommending improvements to reduce those risks, like upgrading software to match purchase orders with product demand and analyzing market demand before purchasing finished goods.