Great Deal! Get Instant $10 FREE in Account on First Order + 10% Cashback on Every Order Order Now

Page 1 of 5 HA3032 AUDITING Assessment Details and Submission Guidelines Trimester T2 2020 Unit Code HA3032 Unit Title Auditing Assessment Type Group Assignment Assessment Title “Developing an Audit...

1 answer below »
Page 1 of 5
HA3032 AUDITING


Assessment Details and Submission
Guidelines
Trimester T2 2020
Unit Code HA3032
Unit Title Auditing
Assessment Type Group Assignment
Assessment Title “Developing an Audit Program for a selected publically listed Company”
Purpose of the
assessment (with
ULO Mapping)
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


The following Unit Learning Outcomes are applicable:
1. Demonstrate a thorough understanding of the reporting requirements of
auditing standards relating to auditors’ reports.
2. Explain how the audit planning process directs the auditor to obtain
adequate evidence to support audit findings and address the importance of
materiality in an audit;
3. Explain the process of audit planning to determine risk assessments and
an overall audit strategy;
4. Explain the auditors’ obligations with regards to understanding the
client’s business and internal controls, and assessing business
isks.
5. Achieve a high level of competence in applying prescribed auditing
techniques in gathering evidence to satisfy audit assertions
Weight 40% of the total assessment
Total Marks 40 Marks
Word limit Maximum 3,000 – 3,500 words
Due Date Week 10
HOLMES INSTITUTE

FACULTY OF
HIGHER
EDUCATION
Page 2 of 5
HA3032 AUDITING
Guidelines
on
Submission
 All work must be submitted on Blackboard by the due date along with a
completed Holmes Institute Assignment Cover Page.
 The assignment must be in MS Word format, single spacing, 12-pt Arial
font and 2 cm margins on all four sides of your page with appropriate
section headings and page numbers.
 Reference sources must be cited in the text of the report, and listed
appropriately at the end in a reference list using Harvard referencing
style.
HA3032 Auditing – Group Assignment Specifications

Purpose:
The aim of this group assignment is to provide you with an opportunity to design a “risk-
ased” audit program for a real world company and focus on the “Substantive tests of
alances”, 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 students group members by
completing the “HA3032 Group Form details”.
2. Each group of students group have been provided by unit coordinator, a unique
ASX listed company to use for progressive analysis in this group assignment.
3. Prepare a detailed audit program Report [3, XXXXXXXXXXwords] for the client/company in a
group of 4 students. Students must use a Report Format with an Executive Summary
and Table of Contents.
4. Use publicly available online resources for research purposes.

Detail Assignment Tasks: Developing an Audit Program for a selected listed
Company
1. Gain an understanding of the nature of the entity and its industry and then identify key
usiness 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?
2. 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
ief explanation in the report. This should be presented in a table
format.
3. 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)
4. Select up to ten different material account balances, at least five assets and five liabilities.
5. For each material account balance selected, list the relevant financial report assertions and
Page 3 of 5
HA3032 AUDITING
explain why the selected assertions are applicable to each account.
6. 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)
7. Include a sampling plan, which details how you will use sampling for each material account
alance to be tested. How many items will be tested for each test?
8. Refer to some or all of the following websites for further information and
esearch processes: http:
www.auasb.gov.au/Home, http:
www.asic.gov.au/,
www.cpaaustralia.com.au, http:
www.ifrs.org,
Group Assignment Report - Marking Criteria Weighting %
Key Business Risk Identification 4 10%
Audit Risk Model – Assessment of Inherent Risk, Control Risk, Detection Risk 4 10%
Analytical Review of the selected company, including ratio analysis in a table 4 10%
Material Account Balance Identification (Minimum 5 x Assets and 5 x Liabilities) 10 25%
Assertions identified – Co
ect Assertions are stated and explanations are noted 4 10%
Audit Program – Audit work steps / procedures are clearly stated and listed. 10 25%
Sampling Plan for each material account balance with samples sizes. 4 10%
Weight 40 Marks 100%

HA3032 Auditing Group Assignment - Marking Ru
ic
HA3032
Auditing
Group
Assignmen t
- Marking
Ru
ic
Part





Excellent





Good





Satisfactory





Unsatisfactory

Key
Business
Risk
Identificatio
n

(4 marks)

Relevant
Business Risks
have been clearly
stated and are
appropriate after
considered
analysis.


(80% - 99%)

Business Risks
are well stated
and
appropriate to
the company
selected.



(65% - 80%)

Business
Risks are
noted and
stated, but
they are only
generic in
nature.


(50% - 65%)

Business Risks
have not been
adequately
addressed. There is
insufficient or
i
elevant
information noted.

(0 - 49%)
http:
www.auasb.gov.au/Home
http:
www.auasb.gov.au/Home
http:
www.asic.gov.au
http:
www.asic.gov.au
http:
www.asic.gov.au
http:
www.asic.gov.au
http:
www.cpaaustralia.com.au
http:
www.cpaaustralia.com.au
http:
www.cpaaustralia.com.au
http:
www.cpaaustralia.com.au
http:
www.ifrs.org
http:
www.ifrs.org
Page 4 of 5
HA3032 AUDITING
Audit Risk
Model

(4 marks)
The Audit Risk
Model has been
very well
understood and
applied.
All risk
components
are co
ectly
stated and the
Audit Risk
Model has
een applied
co
ectly
to the
company
selected.
(80% - 99%)
The Audit Risk
Model has been
co
ectly
understood and
all the risk
components are
noted. The
analysis is
sound, but detail
is lacking.
(65% - 80%)
The Audit
Risk Model
has been
satisfactorily
applied, but
either some
minor
mistakes are
noted or
there is a
lack of detail
in some
areas. (50%
- 65%)
The Audit Risk
Model has not been
understood,
considered or
analysed in the
eport. There is
minimal or no real
grasp of the
concept or it is
missing from the
eport.
(0 - 49%)
Analytic
al
Review


(4 marks)
The Analytical
eview has been
very well
performed and
includes three
years of ratios.
All four key ratios
are appropriate
and presented in
a table with
sound
commentary.
(80% - 99%)
The Analytical
eview has been
well performed
and includes four
key ratios. They
are relevant and
presented in a
table with some
good
commentary.


(65% - 80%)
The
Analytical
eview has
een
satisfactorily
performed.
Ratios are
noted and
there is some
commentary
, but there
are some
minor
e
ors.

(50% - 65%)
The Analytical
eview is sub-
standard. There are
atios missing. There
is no commentary or
it
is poorly written. The
equirements have
not been
understood. The
analytical review is
missing from the
eport.
(0 - 49%)
Material
Account
Balance
Identificatio
n

(10 marks)
Materiality has
een co
ectly
calculated
using an
appropriate
ase with
explanation.
Five Asset
accounts and
five Liability
accounts have
een selected
and they are
appropriate to
the company.
This section is
presented in a
table. (80% -
99%)
Materiality has
een co
ectly
calculated with
some
explanation.
Five Asset
accounts and
five Liability
accounts have
een selected.
This section is
presented in a
table. (65% -
80%)
Materiality
has been
stated with
some
explanation.
Asset
accounts and
liability
accounts have
een
provided, but
some are not
material.
Some
Formatting is
noted. (50% -
65%)
Materiality has not
een calculated and
it is missing.
Account balances
are either
Answered Same Day Sep 20, 2021 HA3032

Solution

Preeta answered on Sep 26 2021
155 Votes
HA3032 Auditing
Audit Program
Contents
Introduction:    2
Key Business Risk:    2
Nature of the entity and industry:    2
Key business risk:    3
Audit Risk Model:    3
Inherent risk:    4
Control Risk:    4
Detection Risk:    4
Risk rating:    5
Analytical Review:    5
Key Ratios:    5
Material Account Balance Identification:    6
Materiality Level:    6
Material Account Balance:    6
Assertions:    9
Audit program:    12
Sampling Plan:    15
Conclusions:    16
References:    18
Introduction:
A business cannot exist without any risk (Nugent and Leidner 2016). There are mainly three types of risks, business risks, non-business risks and financial risks. Financial risks can be further divided into market risk, operational risk, credit risk and liquidity risk. There are several risk response strategies which can be adopted by a company, it can avoid it, it can accept it, the risk can be monitored and the company can be prepared for it, it can mitigate the risk and transfer the risk (Ciocoiu, Irimescu and Stefpeptenatan 2019). But it is important for business organizations to recognize that risk first in order to take the right risk response strategy.
The main responsibility of the auditor is to find out that the financial statement as prepared by the management of the organization is free from any material misstatement whether due to fraud or due to e
or (Salem, 2012). But while doing so, the auditor also checks the existing risks in an organization which might have an impact on the financial statement and through auditors the business organizations also identify the risk. Auditors mainly identify the business risks. Both internal as well as external audit can be conducted to identify the risks.
In this report, audit of Downer EDI Ltd or popularly known as Downer group will be conducted to identify the potential business risks.
Key Business Risk:
Nature of the entity and industry:
The organization Downer group is an Australian company. It operates in the construction service industry and provide a lot of related integrated service. It provides engineering and infrastructure management services, rolling stock services, drilling services, mine planning, management services and highway maintenance to the public and private rail, road, power, telecommunications, mining and resources sectors, exploration sectors. It designs, builds and sustains assets, infrastructure and facilities. It operates across Australia, New Zealand, Asia and the Pacific with almost 53,000 employees.
Key business risk:
The business risks which the company is cu
ently exposed to are as follows:
· Economic Risk – Due to recent global pandemic, the economy is highly fluctuating and might go towards recession as per the experts. Due to slow economy, the construction, mining and infrastructure industry has already suffered. The demand for infrastructure in energy, transport, etc. is highly reducing (Bhattacharyay 2010). In this situation, the company might lose some of its potential as well as existing clients.
· Financial Risk – Some financial risks always remain in every business like the debtors amount not being recovered and going to bad debt, unexpected loss, fluctuation in the interest rate, etc (Christoffersen 2011).
· Reputation Risk – It is also very common in all types of companies. The risk always exist that the customers will be unhappy and might attract lawsuit, failure of a product, negative press, etc (Scandizzo 2011). Since the company, Downer is mainly service based so the satisfaction of the customers is very important since a loyal customer will
ing more customers.
Audit Risk Model:
The risk of the auditor expressing unqualified opinion based on a material misstatement in the financial statement or weakness in the internal control is known as audit risk (Piercey 2011). The whole audit risk is based on three risks individually, which are inherent risk, control risk and detection risk. The former two risks depend on the organization and the later risk depend on the auditor.
Inherent risk:
Inherent risk refers to the risk of existence of e
or or omission in the financial statement (Bame-Aldred et al. 2013). Inherent risk in the organization are as follows:
· Account staff often makes mistakes in recording insurance like the premium paid, payments received against a damage, etc.
· Estimates might be wrong regarding provisions, bad debt, etc.
Control Risk:
This risk refers to the fact that the internal control of the company might not be strong enough to detect fraud or e
or (Jiang and Son 2015). Control risk in the organization are as follows:
· Documents being approved without managers’ duty.
· There is problem in segregation of duties and one staff has too many responsibilities.
· The selection process of the suppliers is not transparent.
Detection Risk:
This risk refers to the failure of the auditor to detect a risk. In this case, the detection risks are:
· Not applying proper audit procedures.
· Inco
ect audit testing method.
· Auditor failing to understand business transactions.
Risk rating:
There are multiple risks in all the types of risk, which makes the risk rating quite high for the organization.
Analytical Review:
Analytical review refers to the evaluation of the financial information presented by an organization by drawing a relationship between the financial and non-financial data (Luippold and Kida 2012). This helps the auditor to understand the business of the client and the changes happening in the business so that the potential risks can be identified. Analyzing the ratios of the company is an effective procedure for analytical review.
Key Ratios:
The financial statement of the year 2019, 2018 and 2017 has been analyzed to get the key ratio of Downer.
    Key Ratios
    2019
    2018
    2017
    Cu
ent Ratio
    1.08
    1.09
    0.96
    Earnings Per Share
    0.29
    0.08
    0.26
    Debt-equity Ratio
    0.59
    0.50
    0.47
    Return on Equity
    8.19
    2.04
    6.99
Cu
ent ratio and debt equity ratio look fine and maintain a similar level. As it is evident, there has been huge fluctuation in earnings per share and return on equity. The level was almost similar in 2019 and 2017 but there was a sudden dip in both the ratios in the year 2018. Both the ratios involve net income and equity. But equity was also used in debt equity ratio and that has not fluctuated. So, the main reason for this can be considered to be fluctuation of net income. The reason for sudden fluctuation in net income needs to be investigated. The amount of equity is high in the company compared to the debts, so the shareholders details need to be checked to find out any related part is the...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here