AF304 Auditing Report: Las Vegas Group Corporation Analysis

This comprehensive auditing report analyzes the financial statements of Las Vegas Group Corporation (USA) Limited, conducted by DisneyLand Audit Company Limited. The report covers various aspects of the audit process, including adherence to ethical standards (APES 110), quality control (ASA 220), audit documentation (ASA 230), and the auditor's responsibility to report misconduct (ASA 240). The report addresses key audit areas such as audit planning, risk assessment (detection, control, and inherent risk), materiality, and audit approaches for receivables, inventory, land and buildings, and overseas operations. It includes detailed analyses of materiality levels, audit procedures for verifying brand names, inventory valuation, internal control systems, debtors' balances, and payroll systems. The report also discusses the impact of economic downturns and technological advancements on the company, providing a thorough examination of the financial and operational aspects of Las Vegas Group Corporation.

Running head: AUDITING
Auditing
Name of Student:
Name of the University:
Authors’ note

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Table of Contents
Audit Report:..............................................................................................................................2
Answer to Question 1:................................................................................................................3
Answer to Question 2:................................................................................................................5
Answer to Question 3:..............................................................................................................10
Answer to Question 4:..............................................................................................................13
Answer to Question 5:..............................................................................................................15
References & Bibliography:.....................................................................................................18

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Audit Report:
To the Member of Las Vegas Group Corporation
Las Vegas Group Corporation (USA)
Nevada.
According to the Apes 110 code of ethics, an auditor needs to maintain the proper ethical
manner in case of performing his audit standards. According to the provision of section 307
of corporations act, it is generally consider as the auditors duty, to present an audit report
along with the relevant accounting provisions. Such report is needed to provide all
information, explanations and true and fair views of financial statements. According to ASA
220 an auditor needs to maintain the quality control for an audit financial report. According
to the ASA 230 an auditor need to present the proper audit documentation while submitting
his audit report. As per ASA240 it is generally the auditor’s responsibility to present any
misconduct in the audit report at the end of audit procedures.
Here the company Las Vegas Group Corporation has five subsidiary companies that facing
some misstatement issues relating to the accounting transactions. While the companies
performing their accounting records they are unable to maintain some relevant accounting
policies, which is turning to the misstatements of accounting materiality.
However those accounting issues are rectified in this present report and it was also suggesting
to this company, to consider the relevant accounting standards and policies while maintain
such documents.
Thank you.

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Answer to Question 1:
A) The AU section 329 normally stated the analytical procedures regarding the audit
planning. Under the sub-section 6 of section 329, it is stated that the main purpose of
applying analytical procedure is to provide assistance in audit planning relating to the nature,
timing and extent to audit procedures, which will be used generally to obtain evidential
matters for particular account balances and transactions details. For such purpose the audit
planning is need to be focused on, enhancing the auditors’ knowledge regarding the clients’
business including the accounting transactions and events that occurred up to the date of audit
process. Along with such an auditor need to identify the key areas that may represent
particular risks relevant with the audit performances. An auditor need to follow the below
mentioned procedures as an analytical review of audit procedures;
 Need to compare the present year’s financial information along with previous years’
data.
 Need to compare the present financial information along with the budgeted or
forecasted reports.
 Provide relevant judgements relating to the accounting growths of an organization
with the using of ratio analysis.
 Comparing between financial and non-financial information.
B) Generally the audit risk is implies the risk that an auditor may not able to detect at the
time of examine the financial statements of his clients. In case of the present scenario the type
of risk relating to companies receivables accounts and inventories, that an auditor is probably
faced during his audit examination is the detection risk. The detection risk is one type of audit
risk that an auditor is unable to detect due to material misstatements.

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C) In an audit procedures, generally three different types of risks are exists. Excluding
the detection risk, two others audit risks are control risk- relating to material misstatements,
which are not be prevented using the client’s controlling system. And the other one is
Inherent risk- such risks are normally susceptible due to the reason of material misstatements
that occurred during the transactions’ recording.
D) According to ISA 320, the concept of materiality is used in both the planning and
performing the audit function. As per the Para 10, the planning materiality is generally set
before the commencement of detailed testing of accounts. In case of any misstatements
relating to accounting information is revealed at the time of onset the audit procedure,
therefore an auditor is needed to implement lower level of materiality. As per the Para 9, the
auditor need to implement performance materiality in case to examine the complete financial
statements and for such propose an auditor need to maintain the higher level of materiality.
Followed the provision of auditing generally in case of set up the levels of materiality,
generally 5%-10% is consider as material level and below 5% is consider as immaterial and
required proper judgements.
E) MEMORANDUM
To: The Partners.
From:
Cc:
Subject: Audit approaches on behalf of Receivables, Inventory and Land and
Buildings.
Date: 25th September 2019.
This memorandum is particularly based on the concept of audit approach for different
accounting components. Those components are the receivables, Inventories and the land and

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building of the company. An audit approach is normally known as the strategy, which is used
by an auditor to conduct an audit programme.
The Company’s 80% of customers are international customer and most of the
transactions are exchanged in foreign currency. Generally, the company is allowing 60days
credit period for individual customers. In case to evaluate the collected amount an auditor
needs to implement some approaches like check general ledger, calculate the receivable total
amount, check the collection details etc.
The company usually followed the standard costing system in case to compute the
value of inventory and the raw materials are normally valued at invoice price. For such
purpose the auditor need to check the invoice details properly.
According to the provision of AASB 116, the company is required to follow the fair
value system in case of compute the value of land and building or any other tangible assets.
For such purpose an auditor needs to check the current fair value of the assets and also need
to check the amount of depreciation and any amortisations losses, if occurred.
It can be concluded from the above discussion that an auditor with the use of
following audit approaches can evaluate the individual prices of receivables, inventories and
Land & Buildings.

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Answer to Question 2:
A) In case of set level of materiality the percentage of each values are given below;
Figure 1: Amount of Materiality for Income statement.

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Figure 2: Amount of Materiality for Balance sheet.

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B) MEMORANDUM
To: The Audit Partners.
From:
Cc:
Subject: Detailing the procedures required regarding the overseas operations.
Date: 25th September 2019.
This memorandum is particularly based on the concept of audit procedures required regarding
the overseas operations. The company is engaged in overseas operation since 1992. In 1992
the company accounted 15% of group turnover and 10% of gross profit through the overseas
operations.
For the purpose of such overseas operation, the auditors need to check all the relevant
accounting details of purchasing and sales account thoroughly. An auditor needs to follow
such procedure for audit the overseas operations. Those procedures are; review the internal
controls over this area including authorisation level for making the sale, if the assets are sold
through an agent, examine corresponding details, check the amount received with reference
to copy of receipts issued, examine the reasonable price through an auditor and ensure that
the sale proceeds have been fully accounted for.
It can be concluded from the above discussion that an auditor can implement such audit
procedure in case to examine the overseas operations.
C) The audit procedure for verifying the Brand name:
 In case of brand name the auditor needs to examine the certificate of registration.
 If the brand names are purchased then the agreement with the seller need to verify.
 Need to examine the copy of receipts with respect to renewal payment made.

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 Need to show the value of such brand name in the balance sheet at their cost less
amortization charges.
D) For the purpose of issued a qualified audit report, the amortization process is need to
follow for the value of intangible assets. Normally the cost of an intangible assets is
amortized over a particular number of years, regardless the actual useful life of such
assets. In case to present the fair value of an intangible asset the amortization charges are
need to deduct from the cost of such assets.
E) Audit strategy for Inventory valuation: The Company is generally charged the average
costing method for the purpose of valuation of inventories. In case to audit the value of
such inventories an auditor need to check;
 Invoice list of each inventories.
 Present market value of such inventory.
 Examine the store ledger account properly.
 Examine the amount paid for purchasing such inventories.
 Enquiry about the charges on Inventory.
F) 1) While checking the internal control system it was found that some accounting
transactions are not recorded properly. Those transactions are mandatory to records in
case to evaluate the overall performance of the company. However the overall internal
control system is good for the company; regarding the records of abnormal items, stock
valuations etc. So, in that case if any small changes in internal controlling system can be
rectify the overall systems.
2) However, if the managerial department was already issued a letter regarding the
problem of internal controlling system and the organizations does not rectify the problem
yet, therefore as an auditor while reporting on behalf of his performance must needs to

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mention such areas of problems in his report. He also needs to suggest some reasonable
steps so that the managerial department can rectify their internal controlling system
effectively.
G) 1) While checking the debtors’ balances the main objective was to find out the amount of
collection that made by the company from individual debtors. Along with such collection the
auditor also needs to find out the amount due from individual debtors and the amount of
credit sales made by the company during a particular time period.
2) The general procedures of testing Debtor balances are as follows;
i. Examine the existence, accuracy and recoverability of debtor balance.
ii. Ensure about the balance shown in the ledger accounts are consistent with
balances of control accounts.
iii. Need to examine the credit policy.
iv. Ensure about the amount of bad debt written off.
v. Significant ratios relating to debtors are according to standards.
3) Some further testing regarding to the debtor’s audit is;
i. Current year aging schedule with that of the earlier year.
ii. Calculations of relevant ratios in accordance with the debtors and maintain the
relevant standards.
iii. Actual closing balances along with the balance of the earlier year.
iv. The value of present year’s debtor and the value of present year’s sales with budget
figures with respect to the same.
4) In case of overvalued or undervalued the amount of the provision for doubtful debts an
auditor needs to check the company’s accounting policies regarding such provisions, along
with such the amount charged in the income statements by an accountant. If in case any

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misstatements are found regarding such particular issues the auditor needs to evaluate
through the ratio calculations.
H) I) Here, normally record system is conducted through the timesheets which are
keypunched into a transaction file. Though the processing of such procedures the accounting
details of the payroll systems are not properly evaluated and if somehow any misconduct
were happened with the employees’ master file and the batch program then the total data will
be lost as no output is made from the batch update program.
II) In case of password and user ID, those are considering as the important factor for payroll
system. Once such details are lost the payment structure of the company will suffer some
accounting issues. So in that case every employee and individual accountant needs to
carefully conduct this program.
Answer to Question 3:
A) I) generally if the parent company is existing then the subsidiary company will also
exist, whether it suffers any kind of losses or not. Here the main problem that was
faced by the company is due to downturn in the economy. Along with such another
problem faced by the company was continuous fall of prices in personal computer’s
that simultaneously affecting the overall growth of the company.
II) The company was also faced some issues regarding to the collection from the
debtors. Along with such it was also faced some issues relating to maintenance of
accounts, which are relevant for the overall organizations performances.
B) Audit assertions for Trade Debtors:
i. Need to check the overall debtor ledger accounts thoroughly.
ii. Check the invoice balances in order to find out the amount of collection.
iii. Check whether any provisions are made or not.