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.

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Audit assertions for Inventories:
i. Need to check the store ledger accounts.
ii. Need to check the purchase requisitions.
iii. Need to check the creditor’s payment details.
Audit assertions for Return Provisions:
i. Need to check the accounting policies regarding such provisions.
ii. Need to check the amount of such provisions.
iii. Need to check the overall reason for making such provisions.
Audit assertions for Operating Revenues:
i. Need to check the amount of revenues balances.
ii. Need to check the sources of incomes for the company.
iii. Need to check the overall balance generated from the operating business.
Audit assertions for amounts owing to parent entity:
i. Need to check the accounts regarding the due payments from the parents
company.
ii. Need to ascertain the value of sources of incomes that was due.
C) In case of turnaround the amount of profit that was generated from the overall
performance during the period of 1999, the auditor will not able to perform his audit
functions properly. In case of any misstatements made by a company during
maintaining of account records is totally unethical for the company and for such the
auditor will not able to perform his audit performance properly.
D) Types of errors for review of the repairs and maintenance account:
i. Misstatements in recording the particular expenses amount.

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ii. Some errors are relating to the accounting policies and procedures.
Types of errors for review of the confirmation of a portion of accounts receivable:
i. Misstatements in recording the particular incomes amount.
ii. Errors are relating to accounting principles.
iii. Existence of account receivables and also the amount of provisions that was
made.
Types of errors for review of the reconciliation of interest expense with loans
payable:
i. Misstatements in recording the particular expenses amount.
ii. Errors are relates to maintain the accounting principles.
iii. Proper rectifications in case of reconciliations of interest expenses.
E) An audit report is mainly conducted for the purpose of checking the overall
accounting transactions are recorded followed the accounting principles or not. The
internal controlling systems are providing the efficient and reliable information or not.
The audit procedure is not conducted for the purpose of rectify any internal
misconducts that is occurred due to lack of sufficient accounting and internal
controlling system of the company. So in case of the audit program relating to the
company, it did not provide a full statement on review that mainly relating to the
controls. It is only concern about to checking the relevant accounts, which are
necessary to conduct the overall organization performance efficiently.

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Answer to Question 4:
A) A) In case of the company, would not want to borrow any further loans therefore the
company needs to include such policies in memorandum of associations or articles of
associations of the company’s. Including such the management also need to pass some
special resolutions regarding such borrowings. The amount that was already borrowed by
the company need to check whether it is secured or not. The amount interest that was
charged on the borrowings amount also needs to disclose in the income statements of the
company during the current year.
B) The amount charged for the purpose of proving some benefits to the employees need
to disclose in the financial statements during the current year. In case the company is
making any provisions regarding the payment that also need to present in the balance
sheet. Along with such the company also need to maintain some relevant accounting
policies to maintain the amount of provisions.
C) Licence is generally considered as an intangible asset to the company and in case of
valuation of intangible assets the company normally needs to present the fair value
instead of cost price. Normally the concept of cost price is disclosed if the intangible
assets are self generated. In the present scenario the management needs to present the
fair value of such assets.
D) In case of destroyed property, that is already covered by the insurance, the auditor
need to check the relevant accounting policies and also the probable amount loss that
was occurred. The auditor also needed to check the insurance policies that offered to
cover the entire loss during this particular time.
E) As per the accounting policies for every fixed asset the company need to maintain
some provisions that are relevant for the particular assets. Normally to cover the
amount of loss that was occurred for fixed assets charged on the depreciation account.

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Those are normally one kind of provisions on behalf of these assets. Here the
company’s management also required to maintain the provision like previous year in
the present year also.
F) As per the accounting policies the amount of investment need to disclosed in the
financial statements as per the value that actually incurred. In case of investment no
such policies regarding the maintenance of written down value is generally followed.
However the amount of loss that occurred during the operation need to disclose in the
income statements in the year when such loss is occurred.
G) In case the custom department alleges that the company was unable to pay its dues,
however if the company was already paid its liability amounts properly therefore the
company need to check the payment details thoroughly and also need to check the tax
balances in case any amount is dues or not. Those account balances are normally
considered as the evidence in support on behalf of the company, which is needed to
maintain by the company accordingly.
B) Normally the problem, which was faced in case of deciding to use a test of controls
approach or a substantive approach, is the availability of relevant document for the purpose
of auditing. Along with such the observation is another issue that influenced in case of
performing the audit program. The inspection of documents is also making some relevant
impacts in case of deciding between two different approach systems.
C) The generally risk that was faced during the audit procedure is the material
misstatement risk. Such risk is influenced most in case of deciding between the audit
approaches. In audit approach generally an auditor decides his different strategy the
influenced the overall audit performance. So while performing in fixing the strategy of
audit, the auditor need to very much positive according with the relevant risks.

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D) In case of auditing the depreciation expenses an auditor needs to;
i. Check the relevant accounting policies regarding the depreciation.
ii. The methods that was generally followed to charging as depreciation.
iii. The fair value of the assets on which the depreciation would be charged.
iv. The income statements in case the amount of depreciation expenses are charged
properly or not.
v. Need to check the relevant accounts in case to avoid misstatements.
E) In case to maintain the audit program an auditor need to check the following
documents properly;
i. The memorandum of association and the article of association of the company.
ii. Each and every accounting details of parent and subsidiary company.
iii. Different accounting policies, which are relevant for the accounting principles.
iv. Invoice details, purchase details, amount receivable and payable details.
v. Income statements, Balance sheet, cash flow statements and other relevant
documents.
vi. Bank statements and other borrowing details from individual borrowers.
Answer to Question 5:
A) I) In case of any amount, that is generally considered as the abnormal items need to
disclose in the income statement of the company during the period of occurrence.
Here in the present scenario the revaluation amount of land needs to disclose in the
income statement and such disclosure need to present before the commencement of
audit procedures. An auditor must need to satisfy himself about the frequency of
revaluation, whether it is adequate and appropriate or not. The auditor also need to

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check the value in case whether it is materially differ from the carrying value of the
assets or not, along with such an auditor also needs to verify the basis of de-
recognition and accounting treatment of an assets in case disposal such assets.
II) According to the accounting policies the inventory should be valued at cost or net
realizable value, whichever is lower. Here the company was accepted the higher value
in case of such valuation, which was out of the general accounting guidelines. Using
such method resulted the value of sales differ comparing to the actual value of cost of
sales occurred. In the present scenario though the company wants to revalue the sales
amount and amount which was charged already would be written off accordingly.
Such effects will definitely impacts on the financial statements of the company and
the auditor needs to perform his operations properly.
III) Any amount of charges that generally occurred in case of development of an asset
is considered as capital expenditure. Such expenditure amount will include along with
the capital assets. Here the amount that was charged as the development expenses of
machineries can be shown in the income statements during the present year. However
such changes will definitely affect the value of such assets and the financial
statements will also differ due to such changes. In that the auditor needs to check the
relevant accounting balance properly in order to perform his audit functions.
B) In case of providing security on behalf of any loan amount, the company was need to
providing any important thing such as an asset. However if the loan amount is
exceeding comparing the amount of security than the organizations may faced some
several problems in case to continuing its business operations. In that scenario the
organization need to implement some relevant strategies to cover up the loan amount
and also need to implement some strategies in case of avoiding outsources funding.
Here the amount of bank overdraft is $3, 00,000 which is totally covered by the assets

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value that means in case of liquidation the company will pay off its due amounts
using the value of assets. It is normally considered as a serious issue in case of
continuing the business operations. Company needs to follow the fair value system for
the purpose of representing the value of assets and also need to consider the lower
value in between cost and fair value of inventories.
C) The general misstatements that occurred during the preparation of financial statements
need to rectify properly in case to present the fair and audited income statement. Such
misstatements are need to;
i. Present in the audit report for the purpose of rectification.
ii. Need to present the market value or cost of such assets, which is considered as
the fair value, in the financial statements.
iii. Need to present the increased value of assets with proper amortisations.
D) Auditors’ responsibility for providing information that relating to the financial report
are as follows;
According to AU 551, the auditor’s responsibilities in case of maintain the
audit reports are given below;
i. Need to submit the relevant document in case of provide as the security
of audit performance.
ii. While performing the audit functions the auditor needs to follow the
basic guidelines and principles that issued as per audit guidance.
iii. Need to provide idea about the financial statements, income statements
of the organization.
iv. Provide the complete details of materiality of each account.

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v. Whether the financial statements are prepared along with the general
accepted accounting principles, accounting standards and auditing
standards or not.

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