Holmes Institute HA3032: Developing Audit Program for Public Company

This report presents a comprehensive audit program developed for Thorn Group Ltd., an ASX-listed company. The report begins with an executive summary and an introduction to audit programs, emphasizing their role in validating compliance and risk management. It provides a company overview, followed by an analysis of tests of control, substantive tests of transactions and balances, and key business risks. The report details substantive audit procedures, including the application of an Audit Risk Model, and explores the relationship between assertions and account balances. It identifies material account balances like inventory and account receivable. The report also outlines an audit program for Thorn Group Limited, including a sampling plan. The conclusion summarizes the importance of auditors in business management and references used in the report.

DEVELOPING AN
AUDIT PROGRAM
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TABLE OF CONTENTS
 Executive Summary
 Introduction
 Company overview
Tests of control, substantive test of transactions and balances
 Key Business Risks
 Substantive Audit Procedures
 Relationship between assertion and account balances
 Audit Program
 Sampling plan
 Conclusion
 References

Executive Summary
This report summarises a detailed account in regards to how Audit
Program is developed in relation to a publicly listed company. For this
purpose, an ASX listed business, Thorn Group Ltd. Has been taken
into account. Here, it can be seen that the company has a high Audit
risk with negative profitability in the current year. For resolving this,
five assets viz. Inventories, small investment, cash, debtors, Financial
investment and liabilities viz.

Audit program helps an auditor to validate compliance and risk
management practices of an organisation. It also ensures that
proper attention is given tocritical business matters so as to
prevent the possibility of material misstatement. Thus, to perform
all the operation of business explicitly proper planning of audit is
required. To better understand the topic of substantive audit
procedure in response to assessed risk of material misstatement
and determine assertion in relation to account balance, Thorn
Group Limited has been selected.
Introduction

COMPANY OVERVIEW
Thorn Group Ltd company is an organization that offers various financ
ial services as well as solutions to the consumer. It basically provide the
services to various people in various divisions such as consumer leasin
g, commercial finance, receivable management as well as consumer fin
ance within or across the nation. Within consumer leasing the electroni
c equipment or appliance are offered as rentals to both household and o
ffice purposes. It includes kitchen appliance, office equipment, laundry
or appliance, furniture and so on.

Continue...
Thorn Group Ltd company is an organization that offers various financ
ial services as well as solutions to the consumer. It basically provide the
services to various people in various divisions such as consumer leasin
g, commercial finance, receivable management as well as consumer fin
ance within or across the nation. Within consumer leasing the electroni
c equipment or appliance are offered as rentals to both household and o
ffice purposes. It includes kitchen appliance, office equipment, laundry
or appliance, furniture and so on.

TEST OF CONTROL, SUBSTANTIVE TESTS OF TRANSACTIO
NS AND BALANCES
Test of control Substantive test of transaction Substantive test of balances
Such audit procedure is used
by client to detect material mi
smanagement. It is therefore a
n essential part of auditing pe
rformed by auditor to control
as well as manage internal ent
ity that helps to mitigate the c
hanges of risk
Within substantive procedure
of balance all the data is mana
ged electronic form and access
ed by auditor to control all the
operations related to financial
statement. Such model can be
further used to substantive tran
saction of testing as well as co
ntrol test.
Such procedure come into use
to determine the misstatement
in financial statement that pre
vails at the end of financial ye
ar. Thus, the role of auditor is
to ensure that the entries of fin
ancial startement can again be
tracted as a source of documen
tation

Continue...
Test of control Substantive test of transaction Substantive test of balances
It include enquiry as well as o
bservation that helps to verify
the internal control. If the inte
rnal control is ineffective in t
hat case substantive procedur
e come into use.
It includes deep analyses of ev
ery entry made in journal entr
y to make sure each things are
record significantly. Substanti
ve test of transaction take mor
e time in audit activity as it inc
lude the role of various transa
ction that helps in determine a
ctual capability of firm.
It involve inspection for each t
ransaction such as fixed asset t
o ascertain the existence of pr
ocedure. This procedure is mo
re effective in comparison to i
nternal control as it only come
s into use if test of control giv
es ineffective result.

KEY BUSINESS RISKS
A business risk, in auditing, is an event that results in non-acheieveme
nt of goals and objectives by an organisation due to various reasons.
These reasons may pertain to:
 Change happening in the national, state or territorial regulations
 Changes in economic conditions
 Rise of competition in the Market
 Nautre of Business

TEST OF CONTROL
These entail essential Audit procedures which complement in the assess
ment of operations as well as other business processes. Other than this,
Test of Control also ensures that they are effectively implemented, thu
s, helping in taking corrective measure at predetermined level of asserti
ons. In the context of Thorn Group Limited, its auditor, KPMG perfor
ms this test in those circumstances wherein substantive audit procedure
s fail to deliver required evidence regarding the assertive level. Section
314 states that an auditor must understand the business entity as well as
risk associated with material mismanagement.

KEY BUSINESS RISKS (CONTD).
Operational Risk: Lack of business orders, physical assets and misse
d opportunities may hamper day to day activities of a busines. For
Thorn, the company rents out financial lease under which it supplie
s equipments to its clients. Loss incurred on such products may res
ult in operational risk for the company itself.
Compliance Risk: As business risks are directly impacted by such cir
cumstances, hence, companies are highly susceptible to such situati
ons. Also, in the context of given case scenario, one of the Key Au
dit Matters considered by the independent auditors of the company
are its 'regulatory provisions'.

SUBSTANTIVE AUDIT
PROCEDURES
Such procedures are performed in order to identify material misstateme
nts at a given assertion level. Under this, an Audit Risk Model is imple
mented by the Auditors which has been depicted below:
[AR = f (IR x CR x DR)]; where
AR = Audit Risk
IR = Inherent Risk
CR = Control Risk
DR = Detection Risk