BAO3306 Auditing Report: Financial Audit of Konekt Limited, 2018

This report provides an in-depth analysis of the financial audit of Konekt Limited, focusing on identifying material misstatements and assessing audit risks. The report begins with an executive summary and introduction, outlining the scope of the audit and the objectives of the assessment. It then delves into key information, including an understanding of the client and an assessment of significant accounts. The analysis identifies five key accounts – sales, total expenses, cash and cash equivalents, intangible assets, and borrowings – that are potentially susceptible to material misstatement. For each account, the report discusses the nature of the potential misstatement and the audit procedures that should be applied. The report also considers the audit planning process, including the assessment of materiality and the identification of potential risks. The report also reviews the relevant auditing standards, such as ASA 300 and ASA 230. The report concludes with a summary of the findings and recommendations for improving the reliability of Konekt Limited's financial statements. The report also includes references to relevant auditing standards and the company's financial reports.

ASSIGNMENT
BAO3306 AUDITING
REPORT

Semester 2, 2018
1. Executive summary
The assessment directly value the organization on the perspective of audit which is
relatively evaluate the financial statement for identifying the fair and true value that is
presented in its annual report. In addition, adequate audit plan has been evaluated and
form to identifying the relevant evidence, which helps in forming the audit opinion for
the organization. Moreover, audit steps are taken such as collecting the evidence and
analysing the proper application for audit standard which helps in improving the
reliability of the annual report that is presented by the organization. The analysis of
annual report has directly helps in identifying the five material accounts which can be
affected by the material misstatement. Hence, relevant evaluation of the audit
standards is conducted to identify the conditions of material misstatement present in
the annual report of the organization. Moreover, adequate evaluation has been
conducted for identifying the audit risk involved in the five identified balances which
is depicted in the annual report of the organization

2. Introduction
The overall assessment directly evaluates the annual report of Konekt Limited
for identifying all the relevant material misstatement that is currently present in the
annual report of organization. Furthermore the assessment directly value the
organization on the perspective of audit which is relatively evaluate the financial
statement for identifying the fair and true value that is presented in its annual report.
In addition, adequate audit plan has been evaluated and form to identifying the
relevant evidence, which helps in forming the audit opinion for the organization.
Moreover, audit steps are taken such as collecting the evidence and analyzing the
proper application for audit standard which helps in improving the reliability of the
annual report that is presented by the organization. The analysis of annual report has
directly helps in identifying the five material accounts which can be affected by the
material misstatement. Hence, relevant evaluation of the audit standards is conducted
to identify the conditions of material misstatement present in the annual report of the
organization. Moreover, adequate evaluation has been conducted for identifying the
audit risk involved in the five identified balances which is depicted in the annual
report of the organization. The detection of the audit risk relatively help in identifying
the overall problems that is faced by the five identified accounts which need adequate
assessment of audit application.

3. Key information
a) Our understanding of the client
Evaluating the steps taken in key information collection
There are relevant steps that need to be taken into consideration for effectively
identifying the overall audit process that is conducted by auditors in an
organisation. The first step that needs to be taken into consideration is the
planning the activities for the audit process, as it allows the order to identify the
relevant paths in which the overall activities need to be conducted. With the help
of adequate planning approach, auditors are able to smoothly conduct the audit
process and able to collect the required level of audit evidence from the business
that could support the overall preparation of the audit report. More auditors also
need to identify and undertake computerisation of planning material as it
relatively helps in identifying the loopholes in the financial statement and
understand the level of inaccuracy that is presented in the report.
Moreover, the analysis also indicates that adequate Adherence to the auditing
standards needs to be conducted by the auditors for simultaneously applying the
audit procedures in the evidence collected from the organisation. This process
would eventually validate the audit process and identify the relevant material
misstatement that is present in the organisation. However, other steps need to be
taken by the auditors such as conducting and analytical review compliance test of
internal control external confirmation and substance of test for identifying the
dependence on audit programme. Furthermore, the audit also needs to determine
the timing and extent to which the audit procedure needs to be applied, as it helps
in under understanding the level of audit assertions present in the organisation
(Auasb.gov.au 2019).
Analysis of the business conducted by the Client
The main business operations of Konetkt Limited Is directly related to the
services that are provided by the organisation to its client regarding the health and
Risk Management Services. The company adequately provide adequate
information about the health and risk management conditions of a business the
client. The management needs to create an adequate workplace that would be safe
and Secure for the employees and it could be identified that the the management is
currently operating with an objective to build a workplace that has safe
environment.
Analysing the Audit program needed from the client
An adequate audit program needs to be formulated by the auditors during the
initial stage as it eventually helps in identifying the relevant steps and procedures
that need to be taken for effectively ensuring the smooth process of the audit.
Audit process also evaluates the overall annual report of the business for
adequately identifying the relevant guidelines and regulations that has been used
for formulating the financial statement. In accordance with Para 7 of ASA 300
Planning an Audit of the Financial Report, companies are mainly able to improve
the audit process, while minimising the negative impact on the Audit process that
is conducted on the organisation. Auditors adequately need to formulate an
adequate plan with relevant stages and steps for effectively improving the auditing
strategy and detecting the timing, direction and scope of the audit. The 2018
financial report has been conducted for identifying position of the company
development planning material that is currently present within the organisation.

DNA analysis of the audit programme would also effectively help in sharing the
provision that is presented in ASA 230 documentations, which eventually help in
identifying the relevant records that need to be evaluated for detecting the current
audit process of an organisation. if the analysis directly indicated that adequate
working papers also form a part of audit evidence as it relatively has in setting out
different procedures and tests, which were conducted by the auditor adequately
identifying and collecting the appropriate audit evidence of the business
(Auasb.gov.au 2019).
b) Our assessment of significant accounts
Material misstatement is an adequate problem for the auditor is which is
relatively detected from the financial statement of an organisation. The auditors
directly utilised information that is present in the annual report of the organisation
to detect the main responsibilities and determine the level of material
misstatement that is present within the organisation. However, the auditor has to
adequately provide and identify the risk of material misstatement truly
understanding of the overall environment of the entity. Moreover, the Assassin of
the risk is also needed as it effectively helps in identifying and understanding
DNA analysis of the audit programme would effectively help in sharing the
provision that is presented in ASA 230 documentations, which eventually help in
identifying the relevant records that need to be evaluated for detecting the current
audit process of an organisation. The analysis directly indicated that adequate
working papers also form a part of audit evidence as it relatively has in setting out
different procedures and tests, which were conducted by the auditor adequately
identifying and collecting the appropriate audit evidence of the business and its
current business environment.
Furthermore, the relevant evaluation is also required for identifying the
standard, which is required by the auditor's properly addressing the nature of the
business and the measures that is affecting its operational capability. The auditor
also needs to evaluate and conduct proper test for the internal control system that
has been established by the organisation throughout the years. Furthermore, the
main responsibility of the auditor is to ensure the financial statements are putting
the fair and true value of the organisation as per the accounting standards of the
region. Moreover, the annual report of Konekt Limited has been directly evaluated
to identify the key items that could be misstated by the Accountants of the
organisation (Auasb.gov.au 2019). The relevant key misstatement account of the
organisation is depicted as follows.
 Sales: Sales is considered to be one of the major materially misstated accounts
in a business which directly portrays strong profit and loss conditions in the
annual report. More from the analysis it could be identified that sales
demonstrate in 2018 annual report could be increased tremendously as
comparison to previous year’s financial figures. The sales of the organisation
have a relatively soared higher in comparison to the previous financial year,
which is relevantly considered a problematic condition, which might be
influenced by material misstatement. The auditors in such case can adequately
evaluate the sales revenue presented in the annual report, which can be
overstated. Thus, the auditor needs to adequately apply proper substantiate
procedures for confirming or denying the material misstatement that is present
in sales figure of the organisation (Konekt.com.au 2019).

 Total expenses: The total expense of the organisation is also considered to be
under material misstatement measure, as it directly affects due overall profit
and loss conditions. From the analysis, it will be identified that some of the
expenses of the organisation soared unexpectedly during the financial year of
2018 in comparison to 2017. Relevant increment in the overall expenses as a
relatively reduce the level of revenues that has been generated by the
organisation during the financial. Therefore, it will be understood that the
expenses of the organisation might be influenced by material misstatement and
is not showing true and fair view of the financial conditions of the business.
Thus, the order to adequately need to consider their values of expenses that is
shown in the annual report such as depreciation, Finance cost, wages, salaries,
and other expenses in the profit loss statement of the organisation. In such
cases, the auditor need to adequately implement relevant audit procedures for
detecting the level of expenses that has been incurred by the organisation
during the financial year as it would eventually help in in judging the relevant
amount depicted in its annual report (Konekt.com.au 2019).
 Cash and cash equivalents: The third major component that depicts the
problem related to Material misstatement is the cash and cash equivalents,
which is relatively increased during the financial year of 2018. The analysis of
the annual report has directly indicated that the business has shown an
inappropriate increment in the estimates of the cash and cash equivalent value
in comparison to previous financial year. This mainly forces the order to
analyse and check the value of the cash conditions that is currently being held
by the organisation. There might be a chance that the cash is relatively
misstated in the financial books of the organisation to effectively strengthen
the financial position of the organisation. The auditor need to apply
appropriate auditing procedures for ensuring the financial statement is
presented in a true and fair view, which directly indicates about the financial
position of the organisation. Moreover, the internal control conditions of the
organisation needs to be evaluated for identifying the cash management policy
that has been implemented by the company (Konekt.com.au 2019).
 Intangible Assets: The major problem that can be identified in the annual
report of the organisation is in intangible asset valuation which is relatively
increased and indicate that the value is not been conducted in accordance with
the AASB standard. from the relevant evaluation of the annual report could be
identified that the company need to follow certain protocols are regarding the
valuation of intangible assets which is depicted in AASB 138 intangible
assets. However, the improper value shown in the balance sheet of the
intangible assets is relatively reflecting about the misstatements that are
conducted by the organisation in their annual report. Thus, the auditor need to
adequately devise an adequate procedure, which could support the detection
and verification of the values of the company's assets as it is essential to
determine the current financial condition of the organisation.
 Borrowings: The last account that could be identified, as materially misstated
is the borrowings account depicted in the financial statement of the
organisation. The financial statements directly indicated that an incremental
borrowing was the fitness in the annual report of 2018, which directly
increases the level of leverage to the capital structure of the business. Hence,
the auditor needs to adequately analyse the current borrowings account of the
organisation for detecting the actual loans that is taken by the management to

conduct the relevant operations. This evaluation can only be conducted with
adequate audit procedures that help in detecting the valuation condition of
each account. Moreover, the interest payment or expenses is also related to
borrowings where the increment in the borrowing levels has relatively sored
the interest expenses of the company, which needs to be addressed by the
auditors for authenticating the values of the balance sheet (Konekt.com.au
2019).
c) Our planning materiality
Planning materiality is relatively and adequate process which allows
the auditor to identify and detect material misstatement of the items that has
been shown in the financial statement. In order to determine the material of the
financial statements the auditor need to adequately identify the nature of the
item and the complexity in which the annual report has presented its value.
moreover the audit also need to identify and consider material for each of the
items that is presented in the financial statement as it would really help in
estimating the appropriate view of the current financial position of the
organisation. The relevant provision for the Material it needs to be conducted
by the organisation under the section ASA 320 Material asserting the material
items identified in the annual report of the organisation. In this process, the
auditors can adequately apply principle of professional scepticism all the
relevant items in the financial statement for denying for confirming the
presence of material misstatement in the annual report of the organisation.
The planning material it is relatively conducted by adequately
performing maturity on the account balance on the items presented in the
annual report. From the element analysis, it could be identified that planning
maturity estimates for the business as a relatively evaluated the total revenue
of the organisation, which has shown tremendous increment in the financial
year in comparison to previous year. Therefore, the auditor relatively
considered material misstatement provision of 0.5%, which represents the
material stated value of the total sales number. Consequently, adequate
calculation has been conducted for identifying the planning material
conditions effectively adding total revenues into 0.5%. The total revenue
generated by the organisation during the financial year of 2018 was it at the
levels of $87,914,000, while the materially misstated value is calculated to be
at the levels of $439,570 (Konekt.com.au 2019). The values of the Planning
material for total revenues have a relatively indicated overall material
misstatement that can be conducted during the financial report 2018. With the
help of adequate planning materiality auditors are able to access the material
item provide adequate opinion on the basis of the derived value.

d) Our assessment of what can go wrong
The above table provide adequate information about the audit risk on the
selected areas of the balances, which is relatively derived by conducting adequate
misinterpretation in the annual report. the auditor's directly utilise and manage risk
by identifying and applying relevant audit risk model on the financial statements
of the company. The relevant audit risk is identified by calculating the detection
risk, control risk, and inheritance risk that is present in the annual report of the
company. The equation relatively helps in determining the level of total audit risk
that is present within the business and might reduce the authenticity of the
financial statement. The table directly trace the account balances of the identified
items for the organisation.
Account Balances Assertions Audit Work
Steps
Audit Sampling
Sales Proper assessing
of the values
presented in the
annual reports
needs to be
conducted, where
relevant check
needs to be
conducted on the
material
misstatement
conditions
(Auasb.gov.au
2019)
Relevant cash
sales and credit
sales items for
proper
understanding of
the sales of the
business needs to
be conducted
Sampling test for
collection of
appropriate data
Expenses Proper assessing Relevant checking Random sampling

of the expenses to
be conducted,
where adequate
evaluation of the
expenses needs to
be conducted.
Thus identifying
whether accurate
level of expenses
are being
portrayed by the
organization.
the internal
control system so
that the expenses
are properly
recorded for
identifying the
expenses of the
organization
approach
Cash and Cash
Equivalents
The analysis of the
cash and cash
equivalents needs
to be conducted
for identifying the
accurate level of
misstatement
present in the
annual report.
Relevant cash
sales and credit
sales items for
proper
understanding of
the sales of the
business needs to
be conducted
Sampling test for
collection of
appropriate data
Intangible Assets The intangible
assets of the
company needs to
be evaluated on
the basis of
accounting
standard, where
relevant
impairment testing
needs to be
conducted for
identifying the
correct value of
the intangible
assets
Using the
impairment
charges that has
been made on the
asset for deriving
its value
Applying attribute
sampling for
collecting
appropriate
evidence
Borrowings The accuracy of
the borrowing
values nee sot be
conducted by
checking the
relevant loans
amounts that has
been issued by the
company during
the financial year
Relevant ASA 505
External
Confirmation
needs to be
conducted for
identifying the
borrowed amounts
of the organization
Sampling test for
collection of
appropriate data

4. Conclusion
The evaluation conducted in the above assessment directly indicates about the
planning process and programs that can be used by the auditor's effectively improving
the audit of the organisation. Moreover, the auditor's responsibility is to identify and
detect all the relevant material misstatement that is present in the annual report of the
organisation. Furthermore, the discussion as adequately help in identifying the
material misstatement that is present in Konekt Limited financial report 2018.
Relevant discussion has been conducted on the audit materiality and Audit risk model
for the organisation, which is relatively, helps in depicting the attributes of the audit
process. This is eventually helps in identifying the levels of measures that can be
preceded by the auditors for minimising the level of risk involved in audit.
Additionally, adequate discussion has been conducted to identify the relevant material
risk involved in the annual report of the organisation.

Appendix