ACC 707 Auditing and Assurance Services Individual Assignment
Introduction
The requirements of ASA 701 Communicating Key Audit Matters in the Auditor’s Report will be included in this report. This report had been on the basis of the two case studies. Name of two organizations have been mentioned in the case studies, which are Computing Solutions Limited and Beautiful Hair Ltd. The content of this report will be the key matters of the above-mentioned case studies along with their disclosure in the case studies. The key auditing matters related risk and the substantive audit procedure to minimize the risk has been identified. Additionally, the rationale for selecting of auditing matters and also for its disclosures has been provided. A company must minimize its risk by having its accounting details verified by an auditor. All the accounting details must meet the regulations and law, which are given to the auditor. An organization must minimize its risk by having its accounting details verified from time to time, so that it can avoid all kinds of fraud activities and leakage in confidential data, from their competitors. This assignment addresses all the laws and regulations to be followed by both the organizations and the auditors. On avoiding which the organization will face issues like Fraud and leakage of confidential data to its competitors. In addition, if the auditor avoids the same, the audit report will be hampered and it will bear incorrect information, resulting in misguiding the organization.
Question 1
(a) Identify and explain the two key assertions at risk in relation to inventory
Existence and valuation are two key assertions at risk in relation to inventory. Existence, the first key assertion, deals with audition of assets such as inventory (Lessambo, 2018). The definition of this assertion according to the Statement of Accountant Standard (SAS) No 31 is the kind of assertion that checks whether assets like an inventory of an organization exists or if the recorded transaction involved with that asset had happened on a specific given date. For instance, in this case, it will be checking if the inventory amount is present in the six new regional warehouses of Computing Solutions Limited (Computing Solutions) on a specific given date. The definition of another key assertion relating to this inventory is given in the SAS 31 as the assertion that checks if all the aspects of financial statements such as asset, liabilities, revenue, equity, and expense are being recorded with an accurate value of each. For instance, in this case, it will be checking if the inventory’s value on hand at end of the financial year 2018 be neither undervalued nor overvalued in any possible way and if it truly represents the 22 percent of sales in the same financial year.
(b) Identify and describe two substantive audit procedures that you could perform in response to each risk identified above.
Observation of the physical inventory count and matching the record of purchase of inventory with inventory in the warehouse or sold are the two substantive audit procedures which can be performed in response to each risk identified above (Chan & Vasarhelyi, 2018). The first substantive procedure for the auditor is to check the physical count of the inventory personally by visiting the six new regional warehouses of the organization. After counting the amount of inventory present there, the auditor asks for an explanation if difference is found between the amount recorded by the management. The second step of the substantive procedure of this audit is to crosscheck purchase record of Computing Solutions with its inventory present in a warehouse or sold The auditor can check both the purchase record of inventory with sales record along with the physical count of inventory present in the six regional warehouses of the Computing Solutions.
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Management Accounting
Management Accounting
Management Accounting,The overall aim of this unit is to introduce the fundamentals of management accounting which apply to the wider business environment and the organisations which operate within that environment. Students will explore how management accounting uses financial data to aid planning decisions, and the monitoring and control of finance within organisations.
