Auditing and Assurance: A Report for Australia's Financial Landscape

This report delves into the realm of auditing and assurance within the Australian context. It begins by addressing the concept of privity letters, elucidating their significance and the auditor's responsibilities concerning third-party reliance on audit reports. The report then moves on to evaluate internal control systems, specifically focusing on payroll processes and the implementation of effective controls to ensure accuracy and efficiency. The discussion encompasses various audit procedures, providing examples of planning, testing controls and transactions, testing balances, and reporting. The report references key academic sources to support its analysis, offering a comprehensive overview of auditing and assurance principles as applied in Australia.

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Answer to Question No 1................................................................................................................2
Answer to Question No 2................................................................................................................2
Answer to Question No 3................................................................................................................3
Reference List..................................................................................................................................5

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Answer to Question No 1
Privity letters are the letters that are requested by the third parties from the auditor.
Privity letter is a letter from the part of the auditor that acknowledges the reliance of the third
parties on the report that has been audited. The purpose of the letter has been to construct a
relationship with the demanded proximity and the foreseeability thereby creating a care of duty
by the auditor towards the third party (Junior, Best and Cotter 2014). AGS 1014 gives out
guidance with respect to the privity letters.
The auditor responds undeniably for a privity letter by explaining that the body of the
investors or the shareholders is the solitary group who is authorized to be dependent on the audit
report. There are added factors that are given to the state and why it has been irrational for the
third party to depend on the audit report as deemed suitable.
Answer to Question No 2
6. The performance reviews and applications controls is accurate for the organization as the
payrolls are paid at fortnightly and review of the performance would improve effectiveness of
the organizations and would eliminate any mistakes in the control accounts and in the payroll.
7. The payroll journal is processed by the accounting department in an effective manner with the
help various accounting tools and software in effective manner and thereby eliminates any
human error that is available in the journal.
8. The control accounts are maintained and assessed on a monthly basis that assists in making
sure that the amount paid is corresponding to the payroll accounts. The amount that is paid is in
accordance to the payroll amounts as the amount in the payroll is accurate. This amount has been
paid in respect to the payroll accounts and the control accounts are maintained in order to keep

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track and records of the payments and to ensure that no mistakes are available in the accounts
thereby maintaining effective payroll structure of Stent Ltd. The monthly assessment of the
control accounts ensures that the accounting statements are maintained effectively and all the
income and expenditure of the firm is maintained in order to identify the profit for the firm. It
can therefore be said that all the eight steps that have been discussed are maintained effectively
so that payroll system of the organization is maintained effectively and the employees receive
their wages effectively.
Answer to Question No 3
(a) The various kinds of audit procedures are given as follows:
1. Planning
2. Testing controls and Transactions
3. Testing Balances
4. Reporting
(b) Each of the audit procedure can be given given with the help of an example and each one
of them would be discussed accordingly.
1. Planning: In this aspect, it is essential to explain the industry and the company to the
auditor. The role of the auditors has been to assess the internal control system and to
recognise the regions that have higher risk probability like handling the cash and
processing systems (Knechel and Salterio, 2016).
2. Testing controls and transactions: The auditors will examine the internal controls and
scrutinise the properties and the accuracy of the transactions (Simnett, Carson and
Vanstraelen 2016). The auditors even count the inventory, cash and the various other
resources in order to approve the counts.

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3. Testing Balances: The auditors evaluate the performance of the organization making use
of the financial ratios and even the statistical sampling. For instance, the auditors may
construct the effective total and the wages that are taxable making use of the records of
the earnings and undertake a comparison of the figures that have been recorded.
4. Reporting: The auditors draft the report which comprises of a synopsis of the results and
informing the organization about any risks and compelling the organizations to improve
the figures that have been reported (Moroney et al. 2014).

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Reference List
Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: A historical
analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Moroney, R., Campbell, F., Hamilton, J. and Warren, V., 2014. Auditing: A Practical Approach.
Wiley Global Education.
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.