Determine the level of materiality to be used for the audit of the group accounts for the year…

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Section 1.

• Determine the level of materiality to be used for the audit of the group accounts for the year

ending in 2019. Your answer should include a discussion of the nature of materiality, and a

description of what materiality represents in terms of the audit of a set of financial statements, and

should discuss the different bases and considerations employed in arriving at materiality. Explain the

rationale behind your choice of a certain level of materiality. Provide a quantitative estimate of

materiality for your company.

• Review the various draft notes and disclosures accompanying the draft annual report. Highlight

those that may have significance to the audit, eg. Contingencies, and outline the audit procedures

that you will need to perform.

Section 2.

• The partner has requested you to prepare a preliminary analytical review on the information

provided by your company. The partner suggests that as a minimum you address key balance sheet

and profit and loss ratios over the period 2016 to 2019. Based on these results and the nature of

your company’s business and its markets, outline the apparent trends and changes in these ratios,

the key risk areas for the audit and the matters that will have to be addressed in the audit plan. Give

examples of relevant assertions and at least one audit procedure for each assertion.

Section 3.

• Review the statement of cash flows. Which category of cash flows provided the majority of cash

inflows? Which category had the greatest outflows? Identify the primary cash receipts and cash

payments during the year. What were the main non-cash financial and investing activities? Using the

results of your review of the cash flows, evaluate the going concern risk of this company. What audit

procedures would you recommend to address this risk.

• Review the audit report of the 2019 financial report. State what type of opinion was expressed?

Are there any additional sections or paragraphs indicating any audit issues? If any, describe the

nature of these issues in detail.

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