Read the annual report and other news items related to the company, and then complete the following tasks.
- Create a framework for your audit procedure using the Audit Risk Approach. Your framework should include the following:
- At least 3 examples of how you would mitigate risk in your audit
- At least 3 accounts or areas that you would focus your attention on for this audit
- An outline of tests and procedures that you would employ based on your company
- A detailed analysis of the sampling techniques that you would utilize for each of the 3 accounts or areas that you chose
- An explanation of the type(s) of documentation that you would require as audit evidence
- Discuss the levels of assurance that can be provided on audit reports.
- Explain how the internal controls of a company can impact the overall business.
- Define 2 internal control areas that you would focus on with your business
Deliverable Length: 800–1,000 words
Prepare an audit report for your company. Be sure to include the key elements that must be covered in a standard audit report, and discuss the circumstances surrounding each of the following:
- Explain the process that you will utilize to formulate your audit opinion.
- Discuss the methodology that you would employ if misstatements are discovered.
Below you will find some additional information on your project. This is just some tips that I share in the last few chat sessions but I think it will help you organize your thoughts. For those of you who have not been listening to the chats here is an opportunity to have the tips for the final assignment all in one place.
Intro (You are providing details about your company to your audit team)
- Discuss your company in one or two paragraphs.
- Provide any detail you feel pertinent.
Framework (You are telling your audit team what framework you will use to guide the audit)
- Discuss briefly the framework that you will use.
- You can either use the Integrated Framework, General Audit Framework that we discussed in class, or make up your own.
Risk Mitigation (You are informing the audit team of the potential risks)
- Risk ie financial reporting
- Risk ie business risk
- Risk ie audit risk
*Please note that some people took a different approach and I commented when I saw this and said it was good.
Accounts or Areas of Focus
- Accounts i.e. Accounts Receivable (provide information on why you choose this account)
- Area of focus i.e. Inventory (provide information on why you choose this area)
- Area of focus i.e. Capital assets (provide information on why you choose this area)
Test and Procedures (List for the audit team the test and procedures – this is the only area that can be outlined with on other explanation)
- Accounts receivable – Completeness Test/Rights and Obligations – Confirmations
- Inventory – Completeness Test – Inventory Count
- Capital Assets – Completeness Test – Reviewing assets to ensure ownership
Sampling (Explain to the audit team the sampling approach that will be used.
- Accounts receivable – Statistically sample 20% of the accounts listed in the accounts receivables. Satisfactory response rate would be at least 80% returns
- Inventory – Review the last independent inventory count and determine if a reconciliation
- Capital Assets – Judgmentally select one item per quarter for the last year and tie back to purchase records or proof of purchase
Documentation Required (Tell your audit team what type of documentation that the team will be reviewing)
- Accounts receivable – Accounts receivable register or a list of sales receipts that can then be tied back to receivables and then sampled
- Inventory – Inventory count performed by a third party, reconciliation of inventory account evidence of adjustments to inventory for any variances
- Capital Assets – Capital assets register, purchase orders and/or proof of purchase documents
Levels of Assurance (Explain levels of assurance that you can provide to your audit team)
- Briefly discuss overall assurance
- In chapters 1 and 2 it details levels of assurance that any auditor can provide – here you are saying the level the level of assurance that any auditor can provide for any external audit
Internal Controls (Explain Internal Controls to your audit team)
- Explain how internal controls can impact the overall business
- List two internal controls such as: 1. Manager Review and approval 2. Reconciliation
Explain the common ethical issues that you could encounter during an audit