ACCG340 Auditing and Assurance Service

ACCG340 Auditing and Assurance Service

Case Study Assignment (20% of the total assessment)

This assignment consists of two (2) separate components consisting of a group component with two parts (Parts 1 and 2) and an individual component (Part 3) based on Pythree Pty Ltd (Pythree).

Groups of five (5) are to be formed within your tutorials for the group component of this assignment task. Only one submission per group for Parts 1 and 2 is to be made electronically on iLearn by the due date and time i.e. you should nominate one member to submit both parts.

The group component consists of a written report to be submitted in two parts (Parts 1 and 2). The objective of the group report is to develop your communications skills and capacity for collaborative learning and to test your ability to integrate skills learnt in this unit of study, i.e. to analyse a company’s operations and data from the auditor’s perspective, with an emphasis on applying data analytic techniques.

Successful completion of this case study requires completion of Qlik Continuous Classroom learning modules specified in the Unit Weekly Guide, as well as additional modules and/or self‐directed learning of data analytic techniques as necessary. You are expected to demonstrate ability to synthesise relevant financial and non‐financial information and the data provided and use this information in planning (and performing) the audit of Pythree.

The individual component (Part 3) is an individual dashboard/app task that builds on the work completed in Parts 1 and 2. While Part 3 is to be completed individually, students in groups that work collaboratively and effectively in Parts 1 and 2 will benefit in preparing their responses to Part

  1. Each student must make an individual submission of Part 3 electronically on iLearn by the due date and time.

The objectives of this component are to consolidate your skills in utilising data analytic techniques and to develop your analytical skills in critically evaluating and developing responses to potential significant audit risks in relation to a client organisation.

Pythree Pty Ltd

You are an audit graduate assigned to the audit of Pythree Pty Ltd (Pythree) for the financial year ending June 2019. Pythree is an Australian electronic components and original equipment manufacturer.

You have the following information about the company’s operations for the year:

In order to harness the company’s engineering and manufacturing expertise and spare capacity, Pythree’s management announced in July 2018 that they would start offering from October 2018 comprehensive services to technological start‐up companies ranging from concept design to prototype creation and manufacturing. The response to these new services has been overwhelmingly positive, and Pythree has struggled to keep up with demand. A number of successfully crowdfunded campaigns through KickStarter and Indiegogo have awarded Pythree equipment manufacturing contracts. A number of other contracts are currently in the process of negotiations.

Pythree management have indicated their intention to obtain a bank loan in the new financial year to expand their operations to meet increasing demand.

You are in the process of auditing Pythree’s purchases and trade payables and have obtained the following information:

Materials are purchased from both local suppliers and overseas suppliers, notably in Malaysia and Vietnam.

Depending on the type of materials purchased, it is often delivered to a range of locations. Pythree has manufacturing plants in NSW and VIC and several warehouses in both states.

Trade payables are all processed through the central accounts department in Sydney.

The accounts supervisor, who has been with the company for ten years, went on maternity leave in December 2018. This position was filled by a new hire on a temporary contract in February 2019.

While the company has some documentation on policy and procedures for purchasing and payments, these are generally very basic and at times outdated. There is a tendency for staff to learn procedures through their day‐to‐day work activities and by informal handovers when there is staff movement.

Based on your preliminary discussions with Pythree staff, you have gathered the following information on the company’s purchases and payments processes:

When specific inventory is required or reorder quantities are reached, the warehouse staff prepare a ‘Materials Requisition’ form outlining the type and quantity of raw materials or parts required and send it to a purchasing officer. The purchasing officer then issues a purchase order and sends this to the relevant supplier and copies to the accounts department. If the purchase order exceeds $5,000, it requires approval by the purchasing manager.

When the goods are received, the warehouse counts the incoming stock and records the total quantity received on the system, creating a goods received record. If there is a discrepancy between quantity ordered and the quantity received, it is a purchasing officer’s responsibility to follow up with the supplier and inform the accounts department of the outcome.

Pythree’s trade payables system allows for suppliers to be set up for trading terms (credit and discount), payee details, general ledger account coding. It is the accounts supervisor’s responsibility to add and modify supplier account details.

Payments are divided between inventory and non‐inventory creditors. When the payables clerk receives an invoice, she determines whether it relates to an inventory creditor or not and enters invoices into the trade payables system, including their due dates.

The payables clerk normally does a payment run each week. The trade payables system picks up all the suppliers’ invoices that are at or past their due dates, totals the invoices from each creditor and creates an electronic payment file for the total amount.

The payables clerk is responsible for matching details on each invoice to the relevant good received note and purchase order prior to including the invoice in the payment run. Any applicable discount is also automatically applied at this stage if the supplier has been set up appropriately in the trade payables system.

Any payment to a single creditor exceeding $3,000 requires approval from the purchasing manager, who checks the supporting documentation, prior to being included in the payment run. The electronic payment file is then uploaded to the company’s online banking system to be paid out.

The accounts supervisor is responsible for undertaking a reconciliation of the trade payables and payments on a monthly basis.

The audit manager on the Pythree engagement is aware that you have studied the use of data analytics in auditing during your time at university and has asked you to undertake data analytic techniques in planning and undertaking the audit of Pythree purchases and trade payables.

GROUP REPORT PART 1 – 19.5 MARKS WORTH 5.42% OF THE TOTAL ASSESSMENT

  • Using the data you have obtained, provide an overview of Pythree’s purchases and trade payables for the year under audit, outlining the implications of these for the auditor. Your overview should be conducted at a relatively high level (e.g. not concerned with individual suppliers) – it should include your visualisation/s of the data (using Qlik Stories function or screenshots/copied images) and narrative explanation of the overview and audit

implications and should not exceed three (3) pages.                                      [12 marks]

  • Based on your work in (a) and the case information above, undertake a risk assessment for Pythree’s purchases and trade payables, and
  • Outline at least three (3) significant risks (including the key account affected for each risk).

 

(c) For each of the risks identified in (b) above, provide a specific substantive test of detail and

discuss the audit evidence you would need to obtain to address the risk.               [3 marks]

Your responses to (b) and (c) should be presented using the following format:

substantive analytical procedures) and extent (none, small, medium, extensive) of audit procedures to be undertaken in auditing the occurrence assertion in relation to Pythree’sBased on the case information provided only (i.e. disregarding the data), suggest the appropriate audit approach and the nature (tests of controls, substantive tests of details,GROUP REPORT PART 

purchases. Justify the audit approach you have suggested.

(e) Based on the case information provided only, outline three (3) internal controls in relation

to Pythree’s purchases and trade payables.

  • For each of the controls identified in (e) above, outline how you would test the control.
  • Using the data provided, assess the effectiveness of two (2) of the controls identified in (e) and outline your findings. Where applicable, outline limitations in the data and describe any

Justification

SUBMISSION AND DUE DATE – Only one submission per group should be made for Parts 1 and 2 (group report) by one (1) nominated group member to Turnitin on iLearn by 5pm on Monday 13 May (Week 10). The submitting group member should be listed first on the group coversheet.LENGTH AND FORMATTING – Part 1: Maximum 4.5 pages ; Part 2: Maximum 2.5 pages. This excludes any bibliography and appendices where applicable (note that appendices, where attached, will not be marked). Font size must be at least 11 with no less than 1.15 line spacing with a minimum of 2.5cm margins on all sides.

The person submitting the assignment must send the Turnitin Originality report to each group member. This is because each member of the group will be held accountable for any plagiarism. Plagiarism is treated very seriously by the University and students are advised to familiarise themselves with the University’s Academic Honesty Policy. If you are a group member and have not received the Turnitin Originality report within 24 hours of assignment submission from your nominated group submitter, you need to contact us at accg340@mq.edu.au.

All students must individually complete the self and peer assessment form and submit this in person to their tutor in the Week 10 tutorial.

Please refer to the Unit Frequently Asked Questions (FAQs) on iLearn for any further queries on this assessment task. Please email us at accg340@mq.edu.au if you have consulted the FAQs and your query is not resolved.

PENALTIES AND PEER RATINGS – Please note the following:

Peer assessment ratings are strictly applied without exception for this assessment task. Non‐contributing group members will not be tolerated.

  • Late submissions will receive a deduction of 10% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission ‐ 20% penalty).
  • Incorrect submissions (e.g. submitting the wrong file/old version/assignment for a different unit, etc.) will be awarded a mark of zero (0). It is your responsibility to ensure that you submit the correct file. You may resubmit until the due date and time. Any submission on the due date and time will be taken to be final. No further resubmission will be allowed.
  • Failure to adhere to length requirements will result in any content beyond the page limits not being marked.
  • Failure to adhere to formatting instructions or provided formats will result in a deduction of 25% of the total awarded mark for this component of the assessment task.
  • Failure to complete the assignment in a group will result in a deduction of 25% of the total awarded mark for the group component of the case study assignment. It is your responsibility to ensure that you are in a group early in the session. No complaints in relation to non‐performing/absent group members will be considered just before/on/after the due date and time. Any complaints should be directed to your Tutor in the first instance, and subsequently to the Unit Convenor if these remain unresolved. These must be brought to our attention early in the semester. The Tutor or the Unit Convenor may direct students who do not contribute or participate in the group component to complete this component individually with this penalty applicable. This penalty will not be waived under any

INDIVIDUAL DASHBOARD/REPORT (PART 3) – 10 MARKS WORTH 10% OF THE TOTAL ASSESSMENT)

Using knowledge developed from Pythree’s operations and risks from your group report in Parts 1 and 2 and your own independent further research and analysis, develop a dashboard/app that will enable you to monitor at least three (3) specific identified risks in relation to Pythree’s purchases and trade payables on an ongoing basis.

You should explicitly identify each element of the dashboard/app you have developed. For each (combination of) element(s)/chart type(s) included in the dashboard, you are required to:

Explicitly identify and explain the risk and its relevance to the auditor that the element(s) is designed to monitor/respond to, and

Explain the rationale for its inclusion and design, including an explanation of the manner in which it will be used to monitor/respond to the identified risk.

LENGTH AND FORMATTING – Maximum 2 pages using the format supplied below. This excludes any bibliography and appendices where applicable (note that appendices, where attached, will not be marked). The font size must be at least 11 with no less than 1.15 line spacing and a minimum of 2.5cm margins on all sides. You may vary the row heights in the template as necessary within these boundaries. Note that visualisations must be included within these 2 pages to be awarded marks (i.e. visualisations cannot be included only in an appendix).

SUBMISSION AND DUE DATE – Submission of individual report must be made individually to Turnitin on iLearn by 5pm on Monday 13 May (Week 10).

Please note that all students must complete this component of the assessment task by themselves. Being in the same group is not acceptable justification for a high similarity score between two students’ individual submissions.

PENALTIES – Please note that the following penalties for this assignment:

  • Late submissions will receive a deduction of 10% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission ‐ 20% penalty).
  • Incorrect submissions (e.g. submitting the wrong file/old version/assignment for a different unit, etc.) will be awarded a mark of zero (0). It is your responsibility to ensure that you submit the correct file. You may resubmit until the due date and time. Any submission on the due date and time will be taken to be final.
  • Failure to adhere to length requirements will result in any content beyond the 2 pages limit not being marked.
  • Failure to adhere to formatting instructions will result in a deduction of 25% of the total available marks made from the total awarded mark for this component of the assessment task.

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