Auditing and Assurance in Australia: SBF's Bletchington Audit Report

This report, prepared by an audit manager at Samway Baker Fitzgerald (SBF), examines the audit of Bletchington Limited, a defense industry manufacturing company. The report addresses the audit expectation gap, highlighting the difference between auditor assurance and user expectations, particularly given Bletchington's dealings with government contracts and international trade. It identifies potential issues in the audit process and the auditor's ability to meet user expectations. Furthermore, the report analyzes threats to audit independence, including self-interest, self-review, and familiarity threats, as per APES 110. For each threat, the report outlines potential safeguard measures. The analysis considers Bletchington's unique business context, including its reliance on competitive government tenders and sensitive product designs, to provide a comprehensive assessment of audit risks and mitigation strategies. The report concludes with a discussion on how these factors influence the audit process and the auditor's responsibility to maintain independence and provide reliable financial reporting.

Running head: Auditing and Assurance in Australia
Auditing and Assurance in Australia
Name of the Student
Name of the University
Author Note

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Auditing and Assurance in Australia
Memorandum
To: William Albanese
From: The Audit Manager
Date: 5th August 2019
Subject: Audit Expectation Gap and Threats to Audit Independence
The main purpose of memo is that to provide details of information in regards of aspects of
audit engagement for auditing of Bletchington Limited.
Question - 1
Expectation Gap in Audit – It one of the most important aspects in the audit engagement as it
show the difference between how the user of financial reports and public is able to keep the
responsible the auditor as it is responsibility of the auditor to know that the company is able
to meet fair and value of the company financial statement (Ruhnke & Schmidt, 2014). As per
SBF is concern they have a proper client is Bletchington. The company carry its operation of
as a large manufacturing company as it involves dealing with demographically elected
government as it only carries its business with the same (Litjens, van Buuren & Vergoossen,
2015). As the company Bletchington is concern is have a very special financial report as they
are the one who are dealing in government trading countries, investors and owners.
It can said that the their will be audit expectation gap as it seen that there will be a difference
in between the auditor assurance and the expectation of the user, as it can be said that the
company is not able to have a proper difference so it can affect the company financial
statement as a whole. The gap which is there in the audit shows that there is an alignment in
between the auditor performance and the belief of financial user. This same problem can also
be there in Bletchington as it can happen that the auditor is not able to provide as per the

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expectation of company user so that it can happen that its user is not able to proper satisfy the
financial statement. It can be said that it will be impartially as some expectation are not real
and impossible. The points are shown below:
 Bletchington auditor can have proper assurance to company
 The future feasibility is been guarantee by the auditor
 Auditor will able to give unqualified audit opinion to the company as the company is
able to have a proper financial statement and is able to have true and fair view in
company financial statement (Litjens, van Buuren & Vergoossen, 2015).
 Bletchington’s is having any fraud and error than it will able to get by the auditor
procedure.
 Auditor is able to check all the transaction properly and effectively.
As per the above the points are been concern, it is the auditor not able to meet expectations of
user as the auditor is more responsible as for the points
 Auditor is always responsible for proper assurance
 Auditor is not able to provide proper guarantee of company future entities.
 If the company is able have proper transaction and rules than the auditor unqualified
audit opinion in the company and able to have proper annual report.
 Auditor is able to have proper process but it is not proper than the company is not
having any fraud as it is having any fraud in the company.
 Auditor is able to check all company financial transaction so that it able to perform to
financial statement.
Question - 2

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Threats to Independence and Safeguards – As per the company statement and details as
Bletchington as it can see that there are many situations which can affect the audit
independence threats and the points which are shown below:
Issue Explanation Safeguard Measures
Self-
Interest
Threat
As per APES 110, as the self-interest
threat is that is the auditor is having
any financial or any other interest in
the company financial statement. It
can happen that the company is able to
have proper interest in the financial
statement as the company is giving
proper amount of financial interest in
the company (Dart & Chandler, 2013).
The auditor is able to know the
threats and overcome it by doing
external review of the same in the
financial statement, audit report and
communication as per the audit and
able to overcome the threats in
which the company able to analysis
of financial statement.
Self-
Review
Threat
As per APES 110, an auditor can have
self-review threat, as if the company
audit is done by an external so it can
be found that the company financial
statement is been audited that there
can be error and omission in company
financial statement. It should be that if
the company statement is audited than
it may find many faults in the audited
financial statement.
The safeguard is that, the auditor
should check into internal audit
team, as involvement in consider
implement and selection of the
different audit process in the
company financial statement.
Familiarity
Threat
As per APES 110, as the auditor is
concern it can happen that, the
The safeguards which the auditor is
having that it should act as per

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company is having any familiar
relationship in the company. As the
auditor is concern it can happen that
the company is having any personal
relationship in company so the auditor
is having any relationship than it can
give any threats to the company fair
and value.
professional and in a disciplinary
action as these should be consider
by the auditor.

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