The aim of this group assignment is to provide you with an opportunity to design a “risk-based”… 1 answer below »

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Students are required to:

1.1- Identify and distinguish between tests of controls, substantive tests of transactions

and substantive tests of balances.

1.2- Identify and understand when the auditor will undertake substantive audit

procedures in response to specific assessed risks of material misstatement.

1.3- Understand how assertions relate to account balances

1.4- Understand how to select the most efficient and effective combination of audit

procedures that allows them to achieve the audit objective

1.5– Active participation in an “audit team context” with professional group

discussions

1.6- Co-operation with fellow students to produce a joint assignment in a report format

on time and to a high standard along with power-point slides.

HA3032 Auditing – Group Assignment Specifications

Purpose:

The aim of this group assignment is to provide you with an opportunity to design a “risk-based”

audit program for a real world company and focus on the “Substantive tests of balances”, which

involves substantiating the ending balance of an account(s), which is comprised of multiple

transactions, as at a certain year-end date.

Assignment Requirements and Structure

1. Students are required to form groups of 4 – 5 students and inform their session lecturer of their

group members by completing the “HA3032 Group Form details”.

2. If you have difficulties forming such groups, please contact your lecturer ASAP.

3. Each group of students will select, or have selected for them, a unique ASX listed company to use

for progressive analysis in this group assignment.

4. Final approval of the company/client – i.e. any company listed on the ASX and which has not

already been selected by another group – is required by your lecturer.

5. Prepare a detailed audit program Report [3,000 words] for the client/company in a group of 4 – 5

students. Students must use a Report Format with an Executive Summary and Table of Contents.

6. Use publicly available online resources for research purposes.

7. Prepare a 10mins oral presentation in class using power-point slides and graphics (10 marks).

Detail Assignment Tasks: Developing an Audit Program for a selected listed Company

1. Select a listed company from the current ASX List or this will be allocated to your group.

2. Gain an understanding of the nature of the entity and its industry and then identify key business

risks. After this is completed, assess where the risks of material mis-statements could be in the

financial report. Consider the factors affecting both Inherent Risk and Control Risk. Finally, apply

the Audit Risk Model [AR = f ( IR , CR , DR )] to the selected company. Which risk rating would

you apply (Low, Medium or High) to the company’s inherent risk assessment and control risk

assessment? How does this affect your assessment of Detection Risk and Audit Risk?

3. Perform analytical procedures of the Statement of Financial Position and of Financial

Performance over the last three years using appropriate ratios and/or metrics. Select four key

ratios and provide a brief explanation in the report. This should be presented in a table format.

4. Discuss with your group members which account balances are considered “material”. Explain how

you calculated materiality for planning purposes and provide appropriate justification for your

decision-making.

(Note – Use a table format to structure your answers to questions 5, 6, 7 & 8)

5. Select up to ten different material account balances, at least five assets and five liabilities.

6. For each material account balance selected, list the relevant financial report assertions and

explain why the selected assertions are applicable to each account.

7. Design a comprehensive set of audit work steps for each material account balance, which

addresses the selected assertions and which will result in sufficient and appropriate audit

evidence being collected for your selected client company. (Assume that a predominantly

substantive approach is being adopted)

8. Include a sampling plan, which details how you will use sampling for each material account

balance to be tested. How many items will be tested for each test?

Page 3 of 5

HA3032 AUDITING

9. Refer to some or all of the following websites for further information and research processes:

http://www.auasb.gov.au/Home, http://www.asic.gov.au/, www.cpaaustralia.com.au,

http://www.ifrs.org,

Attachments:

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