Question? Call Us  +1 (817) 546-4770

ACC321 Auditing And Professional Ethics

Academic Anxiety?

Get an original paper within hours and nail the task

156 experts online

Free Samples

ACC321 Auditing And Professional Ethics

.cms-body-content table{width:100%!important;} #subhidecontent{ position: relative;
overflow-x: auto;
width: 100%;}

ACC321 Auditing And Professional Ethics

0 Download7 Pages / 1,669 Words

Course Code: ACC321
University: University Of The Sunshine Coast

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: Australia

Question:
Prepare a report for the audit senior, which addresses the 5 issues below.    1. The audit partner has suggested that the preliminary assessment of materiality for the financial report as a whole be set at $15,000.  Comment on the appropriateness of this figure for your client.  Provide evidence to support your view.  Include a brief discussion of the effect that changing the preliminary assessment would have on the audit budget.  2. Prepare an analytical review (in the form of a trend analysis) using the income statement items from the trial balance.  Note: Present your analysis in table format; comments on the results are not required for requirement 2.   3. Use the trend analysis to identify 3 income statement accounts that appear to be atrisk of material misstatement.  Provide justification for why these accounts should be subjected to significant audit testing.  In your explanations, identify an assertion that is likely to be at-risk for each account (i.e. identify 1 assertion per account; 3 in total).    4. For each account and assertion identified in requirement 3, design and describe an audit procedure that would provide relevant evidence for this (i.e. describe 1 procedure for each account; 3 procedures in total).  Note: you need to explain the procedures in your own words with as much detail as possible (for example, if applicable, identify the sampling frame and specific documents required for your procedure).  5. The audit partner has suggested that fraud risk should not be considered for this client, as he feels that the client’s staff are all very trustworthy.  Comment on the appropriateness of the audit partner’s suggestion.  Identify whether there are any indications of fraud evident in the analytical review. 
Answer:

Introduction:  
Considering the balances provided in Chestnut Trial Balance a detailed discussion on the materiality level for the audit of the organization shall be made. Along with discussion on the materiality level for the audit an elaborate audit plan for certain account balances will also be made for the benefit of the readers in the document.
Part 1: 
In Australia the auditing and assurance services are guided by the Auditing and Assurance Standards issued by the Australian Auditing Standards Board (AAUSB). In order to determine the materiality for class of transactions and account balances in financial statements an auditor must refer to ASA 320 (Simon et. al. 2018). ASA 320 provides following benchmarks for auditors to calculate materiality levels:

Class of transactions

Benchmarks

Sales for revenue

5% to 10% of sales.

Cost of sales for expenditures

5% to 10% of cost of sales

  (Junior, Best and Cotter, 2014)
Considering that the sales balance is provided for 6 months period ending on December 31, 2016 the auditor should use 10% of sales to determine materiality level in respect of items of revenue. Thus, for a sales of $98,975 the materiality level would be (98975 x 10%) = $9,897.50. In respect of expenditures again 10% benchmark can be used to determine materiality level for the audit of items of expenditures. Hence, for amount of expenditures the materiality level would be (30525 x 10%) = $3,053.
Thus, the material amount determined initially for the audit is quite high at $15,000. Hence, the amount of $15,000 is not appropriate for determination of materiality level (Soh and Martinov-Bennie, 2015).
The change in preliminary assessment would substantially increase the efforts on the part of the auditor to verify transactions above the material amount. Since earlier it was quite high the auditor would have to increase their efforts during the course of auditing. Cost of auditing would obviously increase significantly subsequent to the change in material amount after preliminary assessment.
Part 2: 
Analytical review: Conducting ratio analysis for evaluating any significant changes in profitability, liquidity and solvency position is one of the most effective means for an auditor to identify possible area of material misstatements in financial statements. Let’s have the ratio analysis on the profitability aspect of Chestnut before commenting on the possible areas misstatement in the trial balance (Simnett, Carson and Vanstraelen, 2016).
The amounts in the table below are in $ and the ratios are in percentages.  

Period

July 01, 2016 – Dec 31, 2016

July 01, 2015 to June 30, 2016

Gross profit margin

 

Sales

98975

187450

Gross profit (Sale – Cost of sales)

     68,450

   123,855

Gross profit margin

        69.16

        66.07

Operating profit ratio

Sales

98975

187450

Operating profit (Sales – Operating expenses)

     25,056

     33,072

Operating profit ratio

        25.32

        17.64

(Bepari and Mollik, 2016)
Since, the period of information provided in trial balance in the current period is only for 6 months thus, it would be extremely difficult to come to a particular assertion from ratio analysis. However, an idea can still be formed about possible area of misstatement in financial information, if any from analytical review.        
Part 3: 
The operating profit ratio of Chestnut as increased by almost 8% in the six months period ending on December 31, 2016. Thus, the operating expenditures have to be checked carefully as there could some error material in the financial information. Another important factor that came to the notice is the amount of repairing and maintenance expenditures. In 2015-16 it was around $5050 for the entire year (Carson, Fargher and Zhang, 2016). However, in the 6 months period in 2016-17 it is merely $720. The drop is quite significant especially considering the organization has not huge turnover. Hence, there could be material error in financial information in this regard.

Percentage of repaid and maintenance cost to sales

Sales

98975

187450

Repair and maintenance

           720

        5,050

Percentage of repaid and maintenance cost to sales

          0.73

          2.69

(Simnett and Huggins, 2015)
The three account that shall be specifically verified are as following:
Accounts receivable:
Accounts receivable is quite huge for a small organization like Chestnut. Thus, for obvious reasons accounts receivable shall be verified to test whether transactions have been correctly recorded in accounts receivable ledger to reflect the correct amounts to be receivable for debtors. The accounts receivable balance is $120,750 as on December 31, 2016 (Ellis, 2018).
Repair and maintenance:
As already mentioned repair and maintenance expenditures is significantly low in the current 6 months compared to the last year. Is it due to anything that the organization has done or has there been any mistake on the part of the accountant to record the amount of repair and maintenance expenditures is to be determined by the auditor?
Expenditures: Cost of sales and other expenditures shall be verified to check whether there is any material error in reporting these amounts in the trail balance. This is due to importance of the account balances in determination of profit and loss of the organization (Fu, Carson and Simnett, 2015).    
Part 4: 

Account

Audit procedure

Accounts receivable

Obtaining external confirmation from customers of the organization to verify whether the amount showed as receivable are correctly stated.    

Repair and maintenance

The transactions posted for repair and maintenance shall be verified with supporting documents and vouchers to ensure that all repaid and maintenance expenditures have been recorded correctly in the books of accounts of Chestnut.

Expenditures including cost of sales

The cost incurred to procure materials shall be verified with the entries posted in the books of accounts for cost of sales. Also the auditor must check whether all necessary trade discounts and rebates have been deducted at the time of payment and accordingly entries have been recorded or not.

(Simnett, Zhou and Hoang, 2016)
Part 5: 
ASA 240 has been issued by AASUB for consideration of risk emanating from fraud committed by management or other employees of an organization. An auditor must follow the standard while considering fraud risk in an audit. Auditor’s personal point of view about the employees of an organization does not affect the status as far as ASA 240 is concerned (Arnold et. al. 2016). The personal judgement of an auditor about the trustworthiness of the employees of the client is of no significance in complying with the guidelines mentioned in the standard. Auditor will have to consider the fraud risk in accordance with ASA 240.
Hence, the advice of the senior partner of audit is not appropriate in this regard as the auditor will have to assess the risk of fraud in the audit even if the employees of Chestnut are trustworthy.   
Conclusion: 
From the above discussion the following points can be concluded about Chestnut and its audit:
Firstly, the auditor’s preliminary assessment of materiality for the financial report as a whole at $15,000 is very high compared to the amount of revenue and expenditures. Secondly, the analytical review reveals that the operating margin of the enterprises has improved significantly in the 6 months ending period in December, 2016. However, the repairing and maintenance expenditures seems have been misstated in the period. Finally, the suggestion given by the audit partner for not verifying the risk of fraud in the audit is not correct.
Recommendation: 
The auditor must change the materiality level and lower the amount for financial statement as whole to ensure that more number of transactions are verified and tested with substantive audit procedures. The auditor must use substantive audit procedures on accounts receivable, repair and maintenance and cost of sales along with other account heads. The suggestion of audit partner for fraud risk purpose is not appropriate hence, must be ignored by the auditor. In fact the auditor must use ASA 240 to verify whether there has been any fraud (Yao, Percy and Hu, 2015). 
References: 
Arnold, B., Bateman, H., Ferguson, A. and Raftery, A., 2016. Partner-Scale Economies, Service Bundling, and Auditor Independence in the Australian Self-Managed Superannuation (Pension) Fund Industry. Auditing: A Journal of Practice & Theory, 36(2), pp.161-180.
Bepari, M.K. and Mollik, A.T., 2016. Stakeholders’ interest in sustainability assurance process: An examination of assurance statements reported by Australian companies. Managerial Auditing Journal, 31(6/7), pp.655-687.
Carson, E., Fargher, N. and Zhang, Y., 2016. Trends in auditor reporting in Australia: a synthesis and opportunities for research. Australian Accounting Review, 26(3), pp.226-242.
Ellis, R., 2018. Quality assurance for university teaching: Issues and approaches. In Handbook of Quality Assurance for University Teaching (pp. 21-36). Routledge.
Fu, Y., Carson, E. and Simnett, R., 2015. Transparency report disclosure by Australian audit firms and opportunities for research. Managerial Auditing Journal, 30(8/9), pp.870-910.
Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: A historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.
Simnett, R., Carson, E. and Vanstraelen, A., 2016. International archival auditing and assurance research: Trends, methodological issues, and opportunities. Auditing: A Journal of Practice & Theory, 35(3), pp.1-32.
Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research add value?. Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.
Simnett, R., Zhou, S. and Hoang, H., 2016. Assurance and other credibility enhancing mechanisms for integrated reporting. In Integrated Reporting (pp. 269-286). Palgrave Macmillan, London.
Simon, C.A., Smith, J.L. and Zimbelman, M.F., 2018. The Influence of Judgment Decomposition on Auditors’ Fraud Risk Assessments: Some Tradeoffs. The Accounting Review.
Soh, D.S. and Martinov-Bennie, N., 2015. Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting. Managerial Auditing Journal, 30(1), pp.80-111.
Yao, D.F.T., Percy, M. and Hu, F., 2015. Fair value accounting for non-current assets and audit fees: Evidence from Australian companies. Journal of Contemporary Accounting & Economics, 11(1), pp.31-45.

Free Membership to World’s Largest Sample Bank

To View this & another 50000+ free samples. Please put
your valid email id.

E-mail

Yes, alert me for offers and important updates

Submit 

Download Sample Now

Earn back the money you have spent on the downloaded sample by uploading a unique assignment/study material/research material you have. After we assess the authenticity of the uploaded content, you will get 100% money back in your wallet within 7 days.

UploadUnique Document

DocumentUnder Evaluation

Get Moneyinto Your Wallet

Total 7 pages

PAY 5 USD TO DOWNLOAD

*The content must not be available online or in our existing Database to qualify as
unique.

Cite This Work
To export a reference to this article please select a referencing stye below:

APA
MLA
Harvard
OSCOLA
Vancouver

My Assignment Help. (2021). Auditing And Professional Ethics. Retrieved from https://myassignmenthelp.com/free-samples/acc321-auditing-and-professional-ethics/operating-profit-ratio.html.

“Auditing And Professional Ethics.” My Assignment Help, 2021, https://myassignmenthelp.com/free-samples/acc321-auditing-and-professional-ethics/operating-profit-ratio.html.

My Assignment Help (2021) Auditing And Professional Ethics [Online]. Available from: https://myassignmenthelp.com/free-samples/acc321-auditing-and-professional-ethics/operating-profit-ratio.html[Accessed 18 December 2021].

My Assignment Help. ‘Auditing And Professional Ethics’ (My Assignment Help, 2021) accessed 18 December 2021.

My Assignment Help. Auditing And Professional Ethics [Internet]. My Assignment Help. 2021 [cited 18 December 2021]. Available from: https://myassignmenthelp.com/free-samples/acc321-auditing-and-professional-ethics/operating-profit-ratio.html.

×
.close{position: absolute;right: 5px;z-index: 999;opacity: 1;color: #ff8b00;}

×

Thank you for your interest
The respective sample has been mail to your register email id

×

CONGRATS!
$20 Credited
successfully in your wallet.
* $5 to be used on order value more than $50. Valid for
only 1
month.

Account created successfully!
We have sent login details on your registered email.

User:

Password:

You probably require accounting help if your assignment is pertaining to M.Y.O.B. online. Since M.Y.O.B. (Mind Your Own Business Australia) has a widespread operation and cloud computing applications, the task might be challenging for you. Here is where experts at MyAssignmenthelp.com come in to gather factual information from various resources. Our academic writers will be able to provide M.Y.O.B. help through graphs, charts and financial reports. Moreover, we utilize powerful plagiarism software to check for the authenticity of the content. We strive to provide unique assignments to help the students earn exemplary grades.

Latest Management Samples

div#loaddata .card img {max-width: 100%;
}

MPM755 Building Success In Commerce
Download :
0 | Pages :
9

Course Code: MPM755
University: Deakin University

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: Australia

Answers:
Introduction
The process of developing a successful business entity requires a multidimensional analysis of several factors that relate to the internal and external environment in commerce. The areas covered in this current unit are essential in transforming the business perspective regarding the key commerce factors such as ethics, technology, culture, entrepreneurship, leadership, culture, and globalization (Nzelibe, 1996; Barza, 2…
Read
More

SNM660 Evidence Based Practice
Download :
0 | Pages :
8

Course Code: SNM660
University: The University Of Sheffield

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: United Kingdom

Answers:
Critical reflection on the objective, design, methodology and outcome of the research undertaken Assessment-I
Smoking and tobacco addiction is one of the few among the most basic general restorative issues, particularly to developed nations such as the UK. It has been represented that among all risk segments smoking is the fourth driving purpose behind infections and other several ailments like asthma, breathing and problems in the l…
Read
More
Tags:
Australia Maidstone Management Business management with marketing University of New South Wales Masters in Business Administration 

BSBHRM513 Manage Workforce Planning
Download :
0 | Pages :
20

Course Code: BSBHRM513
University: Tafe NSW

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: Australia

Answer:
Task 1
1.0 Data on staff turnover and demographics
That includes the staffing information of JKL industries for the fiscal year of 2014-15, it can be said that the company is having problems related to employee turnover. For the role of Senior Manager in Sydney, the organization needs 4 managers; however, one manager is exiting. It will make one empty position which might hurt the decision making process. On the other hand, In Brisba…
Read
More

MKT2031 Issues In Small Business And Entrepreneurship
Download :
0 | Pages :
5

Course Code: MKT2031
University: University Of Northampton

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: United Kingdom

Answer:
Entrepreneurial ventures
Entrepreneurship is the capacity and willingness to develop, manage, and put in order operations of any business venture with an intention to make profits despite the risks that may be involved in such venture. Small and large businesses have a vital role to play in the overall performance of the economy. It is, therefore, necessary to consider the difference between entrepreneurial ventures, individual, and c…
Read
More
Tags:
Turkey Istanbul Management University of Employee Masters in Business Administration 

MN506 System Management
Download :
0 | Pages :
7

Course Code: MN506
University: Melbourne Institute Of Technology

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: Australia

Answer:
Introduction
An operating system (OS) is defined as a system software that is installed in the systems for the management of the hardware along with the other software resources. Every computer system and mobile device requires an operating system for functioning and execution of operations. There is a great use of mobile devices such as tablets and Smartphones that has increased. One of the widely used and implemented operating syste…
Read
More
Tags:
Australia Cheltenham Computer Science Litigation and Dispute Management University of New South Wales Information Technology 

Next

Need an essay written specifically to meet your requirements?

Choose skilled experts on your subject and get an original paper within your deadline

156 experts online

Your time is important. Let us write you an essay from scratch

Tips and Tricks from our Blog

PROJ6016 Employer Based Project

Free Samples PROJ6016 Employer Based Project .cms-body-content table{width:100%!important;} #subhidecontent{ position: relative; overflow-x: auto; width: 100%;} PROJ6016 Employer

Read More »

PPMP20009 Marking Rubric

Free Samples PPMP20009 Marking Rubric .cms-body-content table{width:100%!important;} #subhidecontent{ position: relative; overflow-x: auto; width: 100%;} PPMP20009 Marking Rubric

Read More »