HA3032 Auditing: Developing Audit Program for Shaver Shop Group Report

Verified

Added on  2022/12/30

|10
|759
|96
Report
AI Summary
This report details the development of an audit program for Shaver Shop Group Limited, a specialty retailer. It begins by identifying key business risks, including economic conditions, changing customer habits, and competition. The report then outlines the determination of audit risk, considering inherent, control, and detection risks. Analytical procedures are performed on the statement of financial position and income statement to assess financial performance. Materiality is established at 5%, and material account balances are identified, including goodwill, inventory, trade receivables, and expenses. The report concludes that the company has a high level of inherent risk and highlights the use of probability sampling techniques. References include relevant academic sources and the company's investor information.
tabler-icon-diamond-filled.svg

Contribute Materials

Your contribution can guide someone’s learning journey. Share your documents today.
Document Page
DEVELOPING AN AUDIT
PROGRAM
tabler-icon-diamond-filled.svg

Secure Best Marks with AI Grader

Need help grading? Try our AI Grader for instant feedback on your assignments.
Document Page
UNDERSTANDING THE ENTITY AND
IDENTIFICATION OF BUSINESS RISK
Shaper shop group limited is leading specialty retailer of
beauty appliances and personal grooming company.
The company is engaged in offering differentiated customer
proposition and providing excellent customer services through
online and store network.
They have more than 115 stores across New Zealand and
Australia (Investors.shavershop.com.au 2019).
Development of audit program is done by analytical and
substantive procedures for each of the identified material
accounts balances.
Document Page
Deterioration in the general economic conditions and
retail environment-
Change in trends and customer buying habits
Increase in competitiveness
Exclusivity arrangement and product innovation
Disruption in product sourcing
Document Page
DETERMINING THE AUDIT RISK
The audit risk is computed by the formula
Audit risk= Control risk * detection risk*
Inherent risk
Inherent risk- High
Control risk- Medium
Detection risk- Low
tabler-icon-diamond-filled.svg

Secure Best Marks with AI Grader

Need help grading? Try our AI Grader for instant feedback on your assignments.
Document Page
PERFORMING ANALYTICAL
PROCEDURES OF THE STATEMENT OF
FINANCIAL POSITION:
2018 2017 2016
Particulars Amount Amount Amount
Total debt 30,98,700 1,42,81,722 67,00,313
Total Equity 5,89,94,177 5,90,82,572 5,20,45,163
Total assets 89765756 87984652 71770513
Debt to Equity Ratio 5% 24% 13%
Equity Ratio 66% 67% 73%
2018 2017 2016
Particulars Amount Amount Amount
Total Revenue 15,49,36,604 14,25,67,549 10,67,11,001
Total Assets 89765756 87984652 71770513
Gross profit 64016166 59472457 4,53,37,406
Shareholders' Equity 58994177 59082572 52045163
Gross Profit Margin 41.32% 41.72% 42.49%
Return on Equity 109% 101% 87%
Return on assets 71% 68% 63%
2018 2017 2016
Particulars Amount Amount
sales 154936604 142567549 106711001
Total assets 89765756 87984652 71770513
Total non current assets 58785118 5,45,76,473 4,64,09,451
Asset turnover 1.73 1.62 1.49
Fixed asset turnover 2.64 2.61 2.30
2018 2017 2016
Particulars Amount Amount
Current Assets 3,09,80,638 3,34,08,179 2,53,61,062
Current Liabilities 2,76,72,879 1,46,20,358 1,30,25,037
Inventory 2,38,94,168 2,91,22,762 18114692
Current Ratio 1.12 2.29 1.95
Quick Ratio 0.26 0.29 0.56
Document Page
IDENTIFICATION OF MATERIAL
ACCOUNTS BALANCES
The computation of materiality in the planning process of
audit is done by selecting the profit that is earned by the
organization before tax as it is usually viewed as the metric
against which the performance of group is measured (Ruch
and Taylor 2015).
. The auditor has used his judgment about the level of
materiality in a manner that results in inherent limitations in
the process of auditing (Minnis and Shroff 2017).
Based on the professional judgment, the materiality has been
selected at 5% ensuing that the percentage is within the range
of threshold that is accepted commonly.
Document Page
In the planning stage, the materiality was based on the
information that is available at the stage of evaluation.
The sufficiency of the audit procedures is reevaluated by
the auditor when evaluation of audit findings can be
done by using significantly lower materiality levels.
To anticipate all the circumstances would have influence
on the materiality in evaluating the finding and
completing the audit is not regarded as ordinarily
feasible for the auditors (Bananuka et al. 2017).
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
IDENTIFICATION OF MATERIAL
ACCOUNT BALANCES
Carrying value of goodwill
Carrying value of inventory
Trade receivables
Rebates to suppliers
Expenses
Related party transactions
Document Page
CONCLUSION:
It has been inferred that the company has higher level of
inherent risk compared to control and detection risk.
There are some accounts balances that have been found
to be material and the materiality of such accounts in the
planning of audit.
Auditor has mostly relied on the probability sampling
technique to test the effectiveness of the accounts
balances.
Document Page
REFERENCES:
Bananuka, J., Nkundabanyanga, S.K., Nalukenge, I. and Kaawaase,
T., 2018. Internal audit function, audit committee effectiveness and
accountability in the Ugandan statutory corporations. Journal of
Financial Reporting and Accounting, 16(1), pp.138-157.
Investors.shavershop.com.au., 2019. Investor Centre | ShaverShop.
[online] Available at:
http://investors.shavershop.com.au/Investors/?page=annual-
reports [Accessed 15 May 2019].
Minnis, M. and Shroff, N., 2017. Why regulate private firm
disclosure and auditing?. Accounting and Business Research, 47(5),
pp.473-502.
Ruch, G.W. and Taylor, G., 2015. Accounting conservatism: A
review of the literature. Journal of Accounting Literature, 34,
pp.17-38.
chevron_up_icon
1 out of 10
circle_padding
hide_on_mobile
zoom_out_icon
logo.png

Your All-in-One AI-Powered Toolkit for Academic Success.

Available 24*7 on WhatsApp / Email

[object Object]