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Audit Assignment Trimester
Inherent Risk and the Audit Plan
Introduction
The information environment facing accountants has changed radically. In the past accountants were largely concerned with collecting and processing data; but no longer. Today, vast amounts of information are available and the challenge is to select and communicate useful and relevant data. The assignment provides students with this challenge.
You are required to collect and analyse information about an Australian listed company with the aim of assessing the inherent risks that might impact on the company’s Financial Reports.
Your role is that of external auditor. You have been assigned by the audit partner to investigate the inherent risks that impact on the Financial Report audit, the information you gather will be the basis for the Audit Plan.
Procedure
Select one company listed on the ASX. Choose a company that is easy to understand like a retailer or a manufacturer. Do not do J&B Hi-Fi. Avoid financial institutions unless you have a particular interest in this type of company.
In preparation for the 2008 Audit Plan (year end 30/06/08)
Part 1 25%. Collect and analyse period relevant information on non-quantitative aspects of inherent risk for your client. See Appendix A of ASA315 for guidance. This information should be acquired fromthe business press like the Australian Financial Review, the business section of the Age, or magazines like the Economist. (Hint: search for your company name). Information is also available in the company’s Annual Report, though this is a biased source. The information must be relevant to the period in question. Make sure you identify the particular assertions, accounts or other aspects of the financial reports that are likely to be misstated, and so of interest to the auditor.
Part 2 25%. Discuss the influence of the current tight credit markets, the recession and the threat of deflation on the inherent risk of the audit of your company. Keep these matters separate from those discussed in part 1.
Part 3 25%. Collect and analyse information on the quantitative aspects of inherent risk. This process is called Analytic Review. Information can be acquired from the FinAnalysis data bases in the library No calculation of ratios is required or permitted. Quantitative information should be taken directly from the databases and from the company’s financial reports (don’t forget the notes). Do not submit any data in this section unless it is discussed in the report. Again, be specific about what potential errors or frauds might exist in the financial reports.
Part 4 25%. Draw on the research and analysis in parts 1, 2 and 3 to write a memo* to the Audit Partner about specific areas of risk that are important to the Audit Plan. Do not discuss specific audit procedures in this memo, only areas of risk that require special attention in the audit.#p#分页标题#e#
Caution: This assignment is about inherent risk relating to the financial report: that is, matters that have an impact on audit planning, audit procedures and the auditor’s opinion, it is not about business risk in general. In the past students have done great business risk analyses, but not mentioned audit risk or the audit – and failed. You need to identify how the risks are likely to lead to specific errors in the financial reports, Eg risk 1 is likely to result in overstatement of inventory. If you have not mentioned the audit in any one paragraph, that paragraph is probably irrelevant and will receive no marks.
Additionally, examine your answer to make sure it is relevant to your company. No marks will be given for general observations that might be relevant to the audit of any company. This assignment is about a specific job that you might be assigned when you are hired by an audit firm. General information is of no use.
Word Length
The assignment may be completed individually or in groups of one, two or three. Maximum word lengths vary accordingly: 1 person = 1500 words; 2 people = 2500 words, 3 people = 3500 words. The word length of the assignment should reflect the marks allocated above. (Of course, one clearly argued paragraph is preferable to five pages of confused nonsense.) Students are responsible for organising and managing their own groups. Off campus students are encouraged to form on-line groups through the discussion forum.
Caution: students might be tempted to split the three parts of the assignment amongst a group of three. However, the report as a whole must be well integrated and coherent. Poorly integrated assignments often fail.
Submission
Hard copies of assignments for each group should be submitted in person or put in the mail by May 11. On time submission will be determined by the postmark, that is, the date of mailing.
Include a plagiarism declaration signed by every group member. Late submissions will be penalised 1 mark per day.
No on line submissions are permitted.
Student assignments are expected to exhibit coherence and good quality organisation, punctuation, spelling, grammar and referencing. Marks will be deducted for substandard performance in these areas. Where the paper is judged unreadable, students will be asked to resubmit and will not receive more than 50% for the resubmission.
*A memo is an informal internal report; please don’t worry too much about the particular structure of the memo, just make sure it’s sensible and clear.
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