Crowdspark Limited Audit: Risk Assessment and Misstatement Analysis

This report presents an audit of Crowdspark Limited, formerly Zulu Limited, a media and technology company operating in Australia. It identifies key business risks such as credit, market, and liquidity risks, and discusses the potential for material misstatements within the company's financial reporting. The audit risk model is applied to understand the relationship between control, inherent, and detection risks. An analytical procedure, including ratio analysis (net profit margin, current ratio, debt to equity, and total asset turnover), is performed to assess the company's financial performance from 2015 to 2017. The report also addresses the concept of materiality and identifies material accounts, relevant assertions, and appropriate audit procedures, concluding with recommendations for improved risk management and internal controls. Desklib offers a wealth of similar solved assignments and past papers to aid students in their studies.

1
Auditing

2
Executive summary
In the report, the various elements which are related to the audit have been considered in context
with the crowdspark limited. There is the consideration of the various business risks which are
involved and with that, the material misstatements which arise in the business have been
determined. The data which is required has been collected and with that, the ratio analysis has
been performed. There is the identification of the position of the business which is maintained.
The materiality concept which is involved has been taken into consideration and by that, all the
material accounts have been identified. The audit procedure and method of sampling which is
used has also been identified and complete procedures are performed in an adequate manner.

3
Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
Risks involved in business...............................................................................................................4
Material misstatement......................................................................................................................5
Audit risk model..............................................................................................................................6
The analytical procedure..................................................................................................................7
Materiality........................................................................................................................................8
Material accounts, assertions, audit procedures, and sampling.......................................................9
Conclusion.....................................................................................................................................16
References......................................................................................................................................18

4
Introduction
The company involves various information, that is incorporated in the reports and analyzation of
the same is required to be made. For this, there is the need to carry the audit in the business in
which all of the important information will be incorporated. This report will be prepared on the
crowdspark limited. There will be consideration of the material misstatements which are
involved. There will be the identification of the main risks which are included in the company
and there will be a proper description which will be provided. The audit risk model will be taken
into consideration in which all of the risks and the relationships that exist among the will be
taken into account. There will be the calculation of the ratios which will be made under the
analytical procedure and the performance will be evaluated on the basis of that. The materiality
concept will be understood and all the material accounts will be identified on that basis. Various
other aspects will be covered in relation to them.
Risks involved in business
Crowdspark limited which was formerly known as the Zulu limited is involved in the media and
Technology Company. The company is operating in Australia and has performed there in various
aspects (Bloomberg, 2019). There are various services which are provided by the company and
they include brand publishing, related media and information services, multimedia content
distribution services and marketing services. The company has been listed on the Australian
stock exchange.
The company is performing various operations and in that process, there are various risks which
are faced by it. The explanation of the same is provided below in a detailed manner.
Credit risk: It is the risk which is involved that the company’s counterparty will not be able to
meet the obligations on time. The main risk is in relation to the dealings with the financial
institutions and the accounts receivables. If they will not be paying their amounts on time then it
will be affecting the balance of the company and so this is the risk for the business.
Market risk: The income of the business is affected by various external sources and in that, all of
the fluctuations which are taking place will be considered. The change in the interest rate and the

5
exchange rate will be taken into account. This will be including the currency risk and interest
rate risk (Budescu, Peecher and Solomon, 2012). The company takes appropriate steps by which
the same can be managed.
Liquidity risk: All the businesses are required to maintain the liquidity so that they can deal with
the obligations appropriately. The group is also focusing on the same and in that it is maintaining
the liquidity of the business in an effective manner. The cash reserves are maintained and by that
the company will be able to meet with all the liabilities.
Material misstatement
The business involves various transactions to be recorded and in that prices, there are chances
that the errors will be made. In them, there are certain such errors which affect the business in an
effective manner (Bakker et al., 2014). They are identified as the material misstatements and
shall be taken into consideration in the performance of the audit procedure. This is the risk for
the business and so shall be taken into account in an effective manner and there shall be
undertaking of the proper process for the same which will help the company to overcome all of
the issues. The company is required to consider the inherent as well as the control risk which is
involved. In them, there is a need to consider all of the aspects. The inherent risk is involved in
the process of the company and that is difficult to be identified as the same is involved in the
processes. The company will be required to establish strong internal control for the same by
which the target will be attained and this will be required to be maintained in the long run. If the
internal control system which is operated by the company is weak then it will lead to an increase
in the inherent risk as the issues will not be identified in the required manner. It can be said that
they both will be reduced together and so the process shall be developed in such a manner.
In the company there is the need to keep the proper record of all the aspects and in that there will
be consideration of the elements by which the risks are affected. They will be considered so that
the reduction in the risk can be made possible. The number of the transactions which are
involved will have to be considered as if the number will be more than the chances of the errors
will also be more (Prawitt, Sharp and Wood, 2012). Due to this, it will be taken into account in
an essential manner. The risk is required to be identified so that the steps to eliminate them can
be undertaken. If this will not be made in an effective manner then the detection risk will be

6
involved. This is the risk of the identification and so company shall undertake the process by
which all the identification can be made in an appropriate manner.
There are many difficult systems which are undertaken in the company and due to them, the
chances of risk are increased. It is required that there shall be proper analyzation which shall be
made and the proper knowledge about the same shall be obtained. By this the company will be
able to take control of the system and also the detection will be made in an effective manner.
Audit risk model
The auditor will be performing the audit and in that, they will be considering all of the
information which is provided in the accounts and reports. They will be using the data and then
evaluate the company and its performance in an adequate manner. There will be a risk which will
be involved in that process in relation to the detection of all the aspects and that is considered as
the audit risk. It will be required that all of the risks which are involved are identified and
managed in an effective manner (Mock et al., 2012). There will be a determination of the relation
which exists among them so that they can be dealt in an appropriate manner. This will be done
with the help of the audit risk model and the same is explained below:
Audit risk model = control risk X inherent risk X detection risk
The main risks have been identified in the above section and they are required to be managed in
an effective manner. In that process, the company will be required to deal with all of the
situations in such a manner that the reduction in the risk involved can be made possible. There is
the inherent risk which is involved and in that there is the need to establish internal control in a
strong manner and for that internal control system of the company will be improved. With that
be in the correct condition the other risks will also be affected in a positive manner. The internal
control will help in managing the tasks in an appropriate manner and by that the inherent risk
will be controlled. The auditors will also be using the internal control as they will be made
available with the correct and accurate results. This will be making it possible for them to detect
all of the errors in an appropriate manner and by that the reduction in the detection risk will be
made. This helped in understanding the relation which exists in the company and all of the risks

7
which are involved in it.
Once the identification will be made by the auditor they will be required to take the appropriate
steps by which they can be reduced or eliminated. There will be an additional process which will
be designed and implemented in the company (Ettredge, Fuerherm and Li, 2014). The relation
which is present among them have been understood and by that, it can be said that if there will be
the elimination of one then others will also be reduced to a certain extent. The company will be
able to manage all of the tasks with the appropriate system in practice.
The company which is used here is crowdspark limited and in that there are various risks which
are involved and all of them are identified. They are taken into consideration and it has been
identified that company is having the proper risk management process which is undertaken by
the company (Cacho, alvarez Ochoa and Ramírez, 2012). With the help of that, it will be able to
manage all the risk in an appropriate manner and there will be a reduction and elimination of the
risk which is involved.
The analytical procedure
The financial information of the company is required to be analyzed in an effective manner and
for that, there is the need to use the analytical procedure. In this, the quantitative information is
taken into use and by the help of that, the performance of the company is analyzed in an effective
manner. The position of the business will be identified and there will be a determination of the
changes which are taking place in the same in the past few years. There will be ratios which will
be calculated and by that the change in the performance which is taking place will be identified.
The company will be able to measure the position and that will be used to take further decisions
in the business (Yoon, Hoogduin and Zhang, 2015). They will be taken in such a manner that the
improvement is made and the performance and position in the coming period will be improved.
There will also be the inclusion of the risk factor in the same and that will also be reduced with
the help of the policies which will be formulated. The calculation is made in this respect and it is
shown below.
Ratio Formula 2015 2016 2017
Net profit margin Income/sales *100 -1931.44% -589.33% -
409.70%

8
Current ratio Current assets/current
liabilities
1.93 2.14 2.75
Debt to equity Total debts/ Equity capital 0.33 0.38 0.64
Total asset turnover
ratio
Revenue / Total assets 0.10 0.23 0.43
The data which is available in the reports have been used for the making of the calculation of in
relation to the ratios. In that, there is the consideration of all of the aspects which are involved.
The profitability of the company is considered and it is identified that the company is making the
losses. It has been determined that there is the decrease in the loss which is made in each year
which shows that the position is improving from before but then also there is the loss which is
continuing and business is to bear the same (Zulu limited, 2016). The liquidity of the company is
taken into account and by that, it is identified whether the company will be making the payments
of the obligations on time or not. If the payment will not be made on the time then it will be
increasing the burden of the company for the coming period. There is the improvement which
has been noted in the same as the increase from 1.93 to 2.14 has been made in 2016 and after
than further increase to 2.75 is made by the company (Zulu limited, 2017). This shows that the
company is marinating the liquidity and will be meeting all of the obligations. It is analyzed that
the company can use some of the reserves to cover the losses so that the profitability can also be
improved. This is because the funds are blocked and if they will be used in some place then
additional earnings will be developed.
The capital structure of the company has also been taken into account and in that it is identified
that the portion of the debt in the company is increasing with time. There is the need to maintain
the limit as the additional debt will be increasing the charges for the company which will be
required to be paid by the company. The efficiency is tested with the help of asset turnover ratio
and it is identified that improvement is taking place in the same and the company is beginning to
use the resources in a better manner and is developing the better revenues (Keune and Johnstone,
2012). This is improved but still more enhancement is required by which the loss can be covered
and an overall improvement in the position of the business is made possible.
Materiality
In the business, there are various aspects which are important and are considered to be material.

9
In them, all of the major accounts which are involved will be considered and the relevant aspects
in relation to the same will be discussed. The evaluation of them will be made and for that proper
identification of them will be made. In this, the materiality concept will be used and with that,
the other elements will be taken into account (Brasel et al., 2016). The business will be having
various transactions in which the value of them will be high and if the impact is made on them
then they will be affecting the complete organization. There is the need to keep the proper check
on them and for that, the errors which are made shall be avoided. There will be a proper system
which will be established and in that the company will be required to monitor all of the important
aspects by which the chances of making the mistakes will be eliminated. All of the accounts are
identified and process to be followed for them will also be taken into consideration.
Material accounts, assertions, audit procedures, and sampling
Account
Balance
Amount
(2017)
AUD
Assertions Audit
Procedures
Audit
Evidence
Sampling
Cash and
cash
equivalents
5001740 Rights &
Obligations
The company can
use the cash in the
manner it wants as
the rights are
retained by it.
Existence:
The amount which
 There will
be checking
of the cash
book and
with that,
the receipts
will also be
matched.
 The bank
statement
Bank
statement
Cash Book
Reconciliation
statement
Selective
sampling by
selecting all
the
transaction
which are of
value higher
than
$50000.

10
will be available in
the year-end will be
shown in the
balance sheet.
will be
evaluated
and all of
the
deviations
in the
balance of
cash book
and bank
account will
be
reconciled.
Account
receivables
500604 Completeness:
There will be
involvement of the
complete value in
this account.
Existence:
The balance which
will be received by
the company in the
coming period will
be existing in the
accounts of the
company (Stewart
and Kinney Jr,
2012).
 The
invoices in
relation to
the sales
will be
matched
with the
sales
register.
 The bank
account will
be verified
to identify
the changes
which have
taken place
and the
Bank
statement
Sales invoices
Debtors
Accounts
Random
Sampling
by choosing
any of the
receivables
in a random
manner.

11
amounts
which are
received.
Other assets 222782 Valuation:
The other assets
will be valued by
using the
appropriate policies
and procedures
which have been
specified in their
respect.
Existence:
They will be shown
in the balance sheet
with the total
amount.
 All the
items which
are involved
will be
identified
and proper
evaluation
of them will
be made.
 The
payment
and receipt
which is
made in
their
relationship
will be
checked.
Bank
statement
Cashbook
Policy
statements
Account
balances
Judgemental
sampling
where the
items with
the higher
value will
be taken
into use.
Restricted
cash
20042 Existence
The cash amount
will be involved in
the balance sheet at
year-end.
 The manner
in which the
balance has
been created
will be
identified.
Cashbook
Bank
statement
All the
transactions
will be
evaluated.

12
Completeness
There will be a
correct value which
will be determined
by involving all the
items.
 All the
transactions
will be
taken into
account and
changes that
are involved
will be
considered.
Property
plant and
equipment
97004 Valuation:
The valuation
model which is
adopted will be
used in an
appropriate manner.
Right, an
obligation:
The company will
be using the plant
and property and so
will be having the
right on the same
and by that
obligation will also
be on the owner.
 The value
which is
entered will
be checked
as per the
method.
 Agreement
for the
purchase
will be
checked.
 All the
payments
and receipts
will be
verified
with the
bank
statements.
Asset register
Bank
statement
Purchase or
sales invoice
Judgemental
sampling
which will
be covering
the major
items.

13
Liability accounts
Trade and
other
payables
914595 Completeness:
There will be the
inclusion of the
complete value in
relation to all the
accounts which are
due.
Existence:
The company will
be involving them
in the books and
will be represented
in the final
accounts.
 The
purchase
invoices
will be
checked
with the
payables
account.
 A bank
statement
will be
evaluated to
identify the
payments
which have
been made.
Purchase
invoices
Bank
statement
Payables
register
Random
sampling in
which any
of the
balances
which are
due will be
evaluated.
Loans and
borrowings
683903 Valuation:
The value of the
loan will be
determined as per
the agreement.
Obligation:
The obligation for
the repayment of
 The loan
agreement
will be
checked
with the
amortization
schedule
which is
prepared.
 The bank
Loan
agreement
Amortization
schedule
Bank
statement
Judgmental
sampling
will be
undertaken
and loans
will be
considered
on auditor’s
judgment.

14
the loan will be on
the company.
statement
will be used
for
identifying
the balance
which has
been paid.
 The closing
value will
be
determined
by
considering
all the
payments
and due
balances.
Employee
benefits
169260 Rights and
obligations:
The payment of the
employee benefit
will be the liability
of the company.
Existence:
The amount which
will be used in this
is identified on the
ending date.
 The policies
which are
made in this
respect will
be
reviewed.
 Compliance
with the
requirement
will be
evaluated.
Bank
statements
Policies and
laws
applicable
Selective
sampling by
using the
benefits of
the higher
amounts.

15
 The bank
statement
will be
checked to
ensure the
payments
which are
made.
Other
current
liabilities
318890 Completeness:
There will be the
use of the complete
data in relation to
all the liabilities
which are included
in this category.
 The
identificatio
n of all the
involved
liabilities
will be
made.
 There will
be checking
of the
policies
which are
applicable.
 Compliance
with the
requirement
will be
identified.
 The
calculation
of the value
Policies
applicable
Valuation
sheets
Payments
made with the
bank statement
Selective
sampling in
which the
two
liabilities
with highest
amounts
will be
selected.

16
will be
checked to
evaluate its
correctness.
Deferred
tax
liabilities
198308 Valuation:
The value of the
liability will be
identified by using
the proper methods.
Right and
obligation:
The company will
be having the
obligation to deal
with the tax
liability.
 The tax
invoice will
be checked.
 Law which
is applicable
will be
taken into
account.
 Return with
which the
payment is
made in the
past will be
considered.
Tax invoice
Bank
statement
No
sampling as
this will be
checked on
an
individual
basis.
Conclusion
The report has been made on the crowdspark company and in that all the audit-related matters
have been taken into account. There is the identification of the major risks which are involved in
the company. With that, the misstatements which arise in the business have also been identified.
There is the use of the audit risk model by which all of the risks which are involved are taken
into account. There is the relation which exists among them and that is taken into account with
the help of that model. The calculations have been made under the analytical procedure and by
that, the evaluation of the performance is made in an adequate manner. The material accounts
which are involved are identified and with that, there is the determination of the assertions and
audit procedures which are applicable.

17

18
References
Bakker, I.S., Grossmann, I., Henneman, D., Havenga, K. and Wiggers, T. (2014) Risk factors for
anastomotic leakage and leak‐related mortality after colonic cancer surgery in a nationwide
audit. British Journal of Surgery, 101(4), pp.424-432.
Bloomberg. (2019) CrowdSpark Ltd. [Online] Available at:
https://www.bloomberg.com/profile/company/CSK:AU [Accessed 22 Sep. 2019]
Brasel, K., Doxey, M.M., Grenier, J.H. and Reffett, A. (2016) Risk disclosure preceding negative
outcomes: The effects of reporting critical audit matters on judgments of auditor liability. The
Accounting Review, 91(5), pp.1345-1362.
Budescu, D.V., Peecher, M.E. and Solomon, I. (2012). The joint influence of the extent and
nature of audit evidence, materiality thresholds, and misstatement type on achieved audit
risk. Auditing: A Journal of Practice & Theory, 31(2), pp.19-41.
Cacho, S.I.R., alvarez Ochoa, M. and Ramírez, M. (2012) Qualitative Perspective of Audit
Materiality: Empirical Evidence in Mexico and Colombia. Chinese Business Review, 11(10).
Ettredge, M., Fuerherm, E.E. and Li, C. (2014) Fee pressure and audit quality. Accounting,
Organizations and Society, 39(4), pp.247-263.
Keune, M.B. and Johnstone, K.M. (2012) Materiality judgments and the resolution of detected
misstatements: The role of managers, auditors, and audit committees. The Accounting
Review, 87(5), pp.1641-1677.
Mock, T.J., Bédard, J., Coram, P.J., Davis, S.M., Espahbodi, R. and Warne, R.C. (2012) The
audit reporting model: Current research synthesis and implications. Auditing: A Journal of
Practice & Theory, 32(1), pp.323-351.
Prawitt, D.F., Sharp, N.Y. and Wood, D.A. (2012) Internal audit outsourcing and the risk of
misleading or fraudulent financial reporting: Did Sarbanes‐Oxley get it wrong?. Contemporary
Accounting Research, 29(4), pp.1109-1136.

19
Stewart, T.R. and Kinney Jr, W.R. (2012) Group audits, group-level controls, and component
materiality: How much auditing is enough?. The Accounting Review, 88(2), pp.707-737.
Yoon, K., Hoogduin, L. and Zhang, L. (2015) Big Data as complementary audit
evidence. Accounting Horizons, 29(2), pp.431-438.
Zulu limited. (2016) Annual report. [Online] Available at:
https://www.asx.com.au/asxpdf/20160928/pdf/43bjh70k245hmt.pdf [Accessed 22 Sep. 2019]
Zulu limited. (2017) Annual report. [Online] Available at:
https://www.asx.com.au/asxpdf/20170831/pdf/43lyclbzzg3zyp.pdf [Accessed 22 Sep. 2019]