Hi i have attached 3 pictures regarding assessment 2 of them are assessment questions 1 picture tells requirements of this assessment Assessment need to be done in perfect and professional way Thanks

DISCUSSION ON AUDITING AND ASSURANCE SERVICES
8
DISCUSSION ON AUDITING AND ASSURANCE SERVICES    
BASED ON TWO SITUATIONS
Executive Summary
This report discuss about topic such as auditing assertions, auditing risks, audit procedures to overcome such risks and ASA 701 based on two given situations.
The report is prepared using reference materials available in the internet on auditing standards as well as annual reports of some listed companies.
Points that apply to both the situations are given as common notes before starting discussion based on particular situations.
Table of Contents
    Headings
    Page No.
    Brief description of terms covered
    02-03
    · Auditing Assertions
    02
    · Audit Procedures
    02
    · Audit Risk
    02
     - Risk of material misstatement
    02
     - Detection Risk
    03
    · Requirements of ASA 701
- Rationale for ASA 701
- Key Audit Matters
    
03
    Question 01- Audit of Inventory
    03-05
    · Facts of the Question
    03
    · Discussion on the facts
    04
    · a. Key Assertions at risk in relation to inventory
    04
    · b. Substantive Audit Procedures that may be prefe
ed by the auditor in response to each risk above
    
04
    · c. Requirement for application of ASA 701 with respect to matters specified above
    
05
    Question 02-Audit of Intellectual Property
    05-06
    · Facts of the Question
    05
    · Discussion on the facts
    06
    · a. Key Assertions at risk in relation to intellectual property
    06
    · b. Substantive Audit Procedures that may be prefe
ed by the auditor in response to each risk above
    
06
    · c. Requirement for application of ASA 701 with respect to matters specified above
    
06
    Reference List
    07
Brief Description of Terms Covered
A sound knowledge of the terms refe
ed to in the questions is required for complete understanding of the concept and solutions.
Auditing Assertions
Auditing Assertions otherwise known as Management Assertions or Financial Statement Assertions are representations made by the management (or the preparers of financial statements) with respect to certain aspects of business, which are relied upon by the auditors at the time of assessment of misstatements that may occur. These are the basic concepts on the basis of which the auditors plan their audit program, keeping in mind the reliability of internal controls existing in the business.
There are five key assertions in auditing namely:
1. Existence or Occu
ence
2. Completeness
3. Rights and obligations
4. Valuation and Accuracy
5. Presentation and disclosure.
Audit Procedures
Audit procedures are the steps that are adopted by the auditors in order to attain sufficient (on the basis of quantity) and appropriate (on the basis of quality) audit evidence. These procedures consists of methods like inspection, surveillance, re calculation, reenact, confirmation and analytical procedures. In order to detect misstatements that could materially affect the business, at assertion level, auditors also performs substantive audit procedures which are additional procedures performed for re confirmation.
Audit Risk
There are certain risks associated with audit of any entity which comprise the risks of statements being materially misstated and the risk of not detecting such misstatements. Sum total of such risks are named as audit risk. Eilifsen et al. (2001) describe how the business process focus approach of auditors is applied to an individual audit. These risks are classified as below:
Risk of material misstatement
The risk that the financial statements are misstated significantly even before the conduct of audit. This contains two constituents:
Inherent risk
The proneness of an assertion could be materially misstated about a class of transaction and events (implies profit and loss items), account balance at period end (implies balance sheet items) or disclosure (implies disclosure in notes to accounts) and presentation, material either individually or it becomes material if aggregated with other misstatements.
Control risk
The risk that a misstatement that could occur in an assertion and that could be material will not be prevented, or detected and co
ected at proper time by the entity’s internal control.
Detection Risk
Detection Risk means the risk that the audit plan performed by the auditor to reduce audit risk to a tolerably small level will not spot a misstatement that occurs and that could be material, either individually or when combined with other misstatements. The experience and expertise of the auditor helps to reduce the chance of detection risk. Marchant (1987) found that experienced auditors perform better at identifying possible e
ors in analytical review than inexperienced auditors, but the performance difference is not due to differences in analogical reasoning ability.
Requirements of ASA 701
This standard deals with auditor’s accountability to converse key audit matters in the report of Independent Auditor. It is envisioned to address both the auditor’s decision as to what to communicate in the auditor’s report and the presentation and inclusions in such communication. ASA 701 ‘Communicating key audit matters in the Independent Auditor’s Report’ possesses the following requirements:
1. Auditor shall fix the key audit matters from the matters communicated to those charged with governance on the basis of its importance and expected impact on the decisions of users.
2. The auditor shall provide details on each of so determined key audit matters in a distinct part of the Independent Auditor’s report under the heading “Key Audit Matters” using suitable sub headings.
3. The auditor shall communicate to those charged with governance the matters that have been considered as key audit matters. In case there is no such key audit matters so determined then he shall inform the same to those charged with governance.
4. The auditor shall document along with justification for such determination:
a. The...