Assume that you are audit senior in an accounting firm. Your firm has recently won an audit for a...

Question

Assume that you are audit senior in an accounting firm. Your firm has recently won an audit for a company that you selected in assignment 1. However, your firm does not have any other clients that operate in this industry. Your audit partner is concerned about his lack of knowledge of the industry the company is operating in. He is aware of the requirements of ASA 315 (par 25 and 26).
Your audit partner asks you to prepare a memo on the ‘state of the company’s industry’ and associated risk factors.
Required:

Prepare a list of all useful sources that you can use to obtain the required knowledge.
Prepare a memo to the audit partner on the ‘state of the company’s industry’ and associated risk factors.
Suggested five most important general balance-related or transaction-related audit objectives based on your finding of the risk factors.

General requirement:
The length of the writing / essay must not exceed 1000 words. Words in Bibliography or Reference Lists section are not included in the word count.
4 marks will be given for the contents (sources and understanding of industry and able to link audit objectives with findings) and 1 mark will be given for correct referencing (Harvard or APA) and clear paragraph structure (topic sentences in paragraphs and show coherence with careful proofreading)
Please note that this is an individual assignment and there is no tolerance for collaborations between students in completing this assignment. Assignment suspected of committing plagiarism will be penalised in the marks given.

Company’s name	Ticker used in ASX	Student’s name
Empire Oil & Gas NL	EGO	ALI

005_ks8nbzo-1abhalx4.docx

Robert · Accepted Answer

MEMO 
To …………. 
1) In given case, the auditor has won an audit of EMPIRE OIL AND GAS NL. But the 
auditor has no knowledge and information about the business due to non receipt of any 
other audit in the same industry. So in order to conduct an audit for the company, it is 
necessary for the auditor to obtain basic knowledge and information about the business 
(ASA 315 Identifying and Assessing the Risks of Material Misstatement through 
Understanding the Entity and Its Environment). 
There are a few basic methods to obtain knowledge on business. 
a) Literature searches: reviewing all readily material like magazines, newspaper, 
memorandum and articles of the company, annual reports and online databases. 
b) Analytical procedures 
c) Observations and inspections 
i) Talking with people:  It is a good way to get information during the 
initial stages of the project. It can be used to gather information that is not 
publicly available, or that is too new to be found in the literature, like talking 
with suppliers, talking with customers, having a word with the bank where the 
company has taken loan, reading minutes of the meeting of Board, Annual 
general Meeting. 
ii) Personal interviews: It is a very effective way of getting the knowledge of the 
business and assessing the risk towards it, by interviewing employees, 
directors, interested parties to get the basic information about the materiality 
of the information and again by cross examining the people. This is possible 
mainly where the interviewee is not ready to respond to other methods of 
survey 
iii) Telephone surveys: It is a very fast and very effective way to obtain 
information where the interviewer forms a questionnaire and where he can 
call many respondents to gather information. In this form the information 
gathered by the interviewer can be easily and quickly cross checked  
iv) Mail surveys: This type of form to gather knowledge is basically where 
the enterprise is widely spread and where wide geographic area is concern.

Assume that you are audit senior in an accounting firm. Your firm has recently won an audit for a company that you selected in assignment 1. However, your firm does not have any other clients that...

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