Acc707 Auditing And Assurance Services Assessment Answers

Answer:

Introduction:

In order to judge the financial statement of the companies, various users of the financial statement ranging from investors to creditors as well as various government agencies and even general people utilise the report from auditor. It acts as one of the key tools for judging the financial statement of the firm and performance of the same (Vik and Walter 2017). It is duty of the audit examiner to contest the financial statements of audit clients to ensure there is no or least material miss-assessment that may germinate through the fraudulent activities or errors of the firm. Under this situation, it is highly essential for the auditor to check and ensure the quality of the audit reports. In this regard, it would be ideal to mention that auditor need to analyse all the relevant documents and factors within the process of management and auditing assertions for them. Moreover, for this purpose it can also be mentioned that management of the client of auditor’s client to do some explicit as well as implicit claims during the time to process and present the different financial statements and claims are considered as the assertion of management. Besides this, it can also be highlighted regarding the auditors needed to consider the possibilities of risk as the key audit matters depending upon the financial statements and material statement of the report of the audit client (Huggins et al. 2015). When it comes to Australia, it can also be seen that presence of the ASA 701 Communication Key Audit Matters contains all the regulations and the guiding principles of the auditors who require complying with the management assertions during the time of analysis. Under this scenario, this report is aimed to analyse the audit assertions and the key audit matters for the given Computing Solutions Limited and Beautiful Hair Ltd.

Key assertions at risk in relation to inventory:

Completeness:

Huge utilization of this administration declaration can be seen by the administration of the audit customers during the time spent stock valuation as this affirmation gives help to the administration in keeping record of all the stock valuation related exchange through the required financial statements. As indicated by this audit attestation, one noteworthy hazard in stock valuation is the modest representation of the truth of stock (Siriwardane et al. 2014). For instance, a business associations has acquired the required stock for their business, yet the staff of stock administration has not recorded this buy in the required money related articulations because of specific reasons. It shows towards the nearness of feeble inner control inside the association. The give data about Computing Solutions demonstrates towards the nearness of stock of 14 percent from the offers of 2014 in the stock of 22 percent of offers in 2018. This perspective shows towards the nearness of stock of 2014 in the stock of 2018 (Bostrom et al. 2015). This viewpoint likewise demonstrates towards the nearness of modest representation of the truth of imagine because of any sort of blunders. Every one of these viewpoints demonstrate towards the nearness of deficiency in the stock valuation of Computing Solutions.

Accuracy:

Alongside fulfillment, precision is additionally considered as a noteworthy statements utilized by the administration of the organizations with the end goal of stock administration. The principle utilization of this declaration can be seen in giving help with the recognizable proof of mistakes in the stock administration process. As per this affirmation, the administrations of the organizations confront some real issue at the season of the physical tallying procedure of stock alongside the stream of the stock to the required money related statement of the organizations (Veiga 2016). It very well may be seen from the given data of Computing Solutions that the organization has been includes in the move of their stock to six distinct distribution centers from their focal stockroom in March 2017. In this manner, the way toward moving the stock can prompt the event of scientific blunders during the time spent the physical tally of stock and the decrease in the stock turnover can be the reason this mistake. Henceforth, this can be viewed as real affirmation chance in the stock valuation of Computing Solutions.

Description of two Substantive Audit Procedures in response to risks identified:

It is required for the auditors of the organizations to recognize and apply the required substantive audit methodology after the distinguishing proof of the key administration attestations in danger; and the exchange is demonstrated as follows:

Firstly, completeness of the stock valuation process is one statement in Computing Solutions in danger. With the point of tending to this danger of audit affirmation, it is required for the evaluator to receive and play out the compromise of the stock considering process the required substantive audit strategy (Fernandez 2017). The principle prerequisite of the evaluator under this audit methodology is to follow he estimations of the stock got from the procedure of physical stock checking with general record of the organization. Auditors use to embrace the system of this specific audit methodology for the confirmation of balance in inventory as per the acquired accounting and financial records.

Secondly, accuracy of the stock administration process is the following administration statement of Computing Solutions in danger. With intend to address this affirmation hazard, the duty of the auditors is to recognize and play out the required substantive audit methodology. For this situation of Computing Solutions, the necessity of the evaluator is to embrace the methodology to watch the tallying procedure of the physical stock of the organization. In the meantime, it is required for the evaluators of Computing Solutions to increase understanding about the stock valuation procedure of the organization with the assistance of the talk with the pertinent representatives (Kash et al. 2014). Some different exercises of the examiner in this procedure are the perception of the procedure of physical stock tallying, testing of the examples of stock with the mean to discover any sorts of mistake in them and others. As indicated by the gave data of Computing Solutions, the organization is thinking about the move of their stock from six unique distribution centers and this angle prompts the mindfully of the evaluator to test the stock of those stockrooms with a specific end goal to limit this danger of audit statement. Aside from this, survey of the affirmation related archives for stock administration can be viewed as another significant strategy for the auditors to decrease the audit declaration dangers.

Explanation of requirement of ASA 701 Communicating Key Audit Matters:

The prior dialogue shows towards the way that Australia has the norms of ASA 701 Communicating Key Audit Matters that gives the auditors all the required rules and standards for the investigation of the dangers identified with audit statements. As per ASA 701 Communicating Key Audit Matters, the nearness of four necessities can be seen for the auditors for the appraisal of the audit statements. As indicated by the principal prerequisite, it is the prime obligation of the evaluators to recognize and also decide the key audit matters in the monetary announcing of the customer associations in the wake of considering all the important territories identified with material errors (Knechel and Salterio 2016). After this necessity, the second prerequisite puts the commitment on the auditors to make compelling correspondence of the key audit matter within the sight of powerful audit judgment and feeling. After this procedure, the following real prerequisite for the auditors is to guarantee the successful correspondence of the key audit matters with the workers and staffs who are in charge of administration and interior control. Ultimately, according to the last prerequisite, it is required for the evaluators to guarantee appropriate documentation of the key audit matters in the yearly report of the organizations under the segment of examiner's report. These are the premise prerequisites according to ASA 701 Communicating Key Audit Matters.

ASA 701 Communicating Key Audit Matters shows towards the way that the recognized affirmations in danger can be viewed as the key audit matters within the sight of a portion of the significant reasons. It should be specified that modest representation of the truth of stock or blunder in the physical stock tally can have real material consequences for the financial statement of Computing Solution as it can prompt the confusion of the budgetary position of the organization. From that point onward, it very well may be seen that the utilized judgment, and additionally suppositions for the valuation of the stock, include the absence of straightforwardness and additionally high vulnerability; and these perspectives can make the material effect on the monetary articulations of Computing Solution (Lessambo 2018). Subsequently, every one of these reasons bolsters the choice of considering them as key audit matters.

After the procedure to distinguish the key audit matters and the utilization of the substantive audit methodology, the duty is on the auditors to consider the revelation of the data identified with the key audit matters in the yearly report of the organizations. In this procedure, the auditors are required to consider two angles. The principal perspective is the reasons that contribute towards the choice to consider the declaration hazards as key audit matters. The second perspective is the appropriation and additionally the use of the substantive audit methods for limiting the impacts of those key audit matters on the money related articulations of the customer organizations (Groomer and Murthy 2018). It is the prime obligation of the evaluators to consent to the prerequisites and additional measures of ASA 701 Communicating Key Audit Matters for the assurance of the key audit matters alongside the use of substantive audit systems.

Key assertions at risk in relation to inventory:

From the instance of Beautiful Hair it can be identified that the protected innovation of mystery fixings includes two noteworthy administration declarations that are in danger and they are demonstrated below:

Possession:

Possession is viewed as one of the critical administration declarations that the administrations use at the opportunity to the valuation of licensed innovation. It should be specified that the administrations of the organizations utilize this affirmation with the plan to find out the way that whether the organization has the legal ownership of the protected innovation of their business or not in the important monetary explanations (AICPA 2017). It can also be seen from the instance of Beautiful Hair that the protected innovation of the organization identified with mystery fixings can make materialistic impact on the budgetary proclamations of Beautiful Hair and it is likewise significant for the matter of the organization. Thus, the nonattendance of appropriate responsibility for licensed innovation of mystery fixings can make the audit statement danger.

Occurrence:

The administrations of the business associations utilize the attestation of the event for the valuation of the protected innovation and the principal reason for the use of this affirmation is the trying of the way that the whether the licensed innovation procurement process has happened accurately or not. This is apparent from the given data about Beautiful Hair that the mystery fixing has been considered as a noteworthy licensed innovation with significant material effect on the monetary explanations of Beautiful Hair (Brasel et al. 2016). For this particular reason, it can prompt the advancement of audit declaration chance in the event that the securing of the licensed innovation has not been done appropriately.

Description of two Substantive Audit Procedures in response to risks identified:

The accompanying discussion demonstrates the embraced substantive audit methods by the examiner of Beautiful Hair after the distinguishing proof of the key statements in danger:

Firstly, declaration hazard is identified with the responsibility for licensed innovation of mystery ingredients and to aim this risk, the substantive audit methodology for the auditor of Beautiful Hair is to assess every one of the reports for the title assertions of the protected innovation of mystery fixings (Vik et al. 2017). The primary point of the testing of these reports is to guarantee the way that Beautiful Hair has all the agreements of the protected innovation in their name. The real segments of the reports are the title deed and enlistment of the protected innovation. The nearness of every one of these reports demonstrates that Beautiful Hair has the responsibility for licensed innovation for mystery fixings. Subsequently, the nonappearance of these archives can prompt the audit statement hazard.

Secondly, as per the prior analysis, occurrence is the second sort of affirmation hazard for Beautiful Hair for the protected innovation of mystery fixings (Carson et al. 2016). With a specific end goal to address this hazard, the required substantive audit technique for the auditors is the check whether the securing from Shimmers Ltd has accurately happened or not while getting the business. In this procedure, it is required for the auditor to take help of the considerable number of records raised at the season of the procurement of the licensed innovation.

Explanation of requirement of ASA 701 Communicating Key Audit Matters:

As indicated by the directing standards of ASA 701 Communicating Key Audit Matters, it is required for the auditors to consider four fundamental necessities while surveying the audit statement dangers. Under the main commitment, it is required for the auditors of the organizations for the assurance of the key audit matters by considering all the significant angles that can have the material effect on the financial statement of the business element (Crain et al. 2016). The principal prerequisites are identified with the second necessity as in this the auditors are expected to guarantee the best possible correspondence of the key audit matters in the financial statement within the sight of the required supposition and judgment. After the fulfilment of the second necessity, the third prerequisite puts the commitment on the auditors to guarantee the correspondence of the key audit matters with staffs of inward control and administration. As indicated by the last necessity, it is required for the auditors to guarantee the viable documentation of the data connection to the key audit matters in the required segment of the yearly reports.

According to ASA 701 Communicating Key Audit Matters, the audit attestation dangers of Beautiful Hair can be considered as the key audit matters within the sight of a few reasons (Preber 2014). The main purpose behind considering them as key audit matters is that the licensed innovation of the ingredients secret in nature is of incredible incentive for the organization and it has significant material consequences for the budgetary explanations. Therefore, the non-announcing of the licensed innovation in a balance sheet will effectively affect the money related position of the organization. It should be said that ASA 701 Communicating Key Audit Matter puts the commitment on the auditors to unveil all data about the key audit maters alongside the data of mutative audit methods in the yearly report under auditor's report segment (Strong 2018). This will furnish the speculators with the required certainty on the money related articulations.

Conclusion:

It tends to be seen from the above discussion that the evaluators are expected to contemplate the managing standards of ASA 701 Communicating Key Audit Matters for the appraisal of the audit declaration dangers. The above examination demonstrates the nearness of three declarations for the valuation of stock and licensed innovation. They are ownership, occurrence and accuracy. It can likewise be seen that the auditors of both of the organizations have received diverse audit methodology for tending to these attestation dangers; like the perception of the physical stock tally, compromise of stock checking, verification of the title deed for the acquisition of the intellectual property, investigation of title understanding and others. All of the aforementioned requires the reduction of the audit assertion risks.

Reference:

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Siriwardane, H.P., Kin Hoi Hu, B. and Low, K.Y., 2014. Skills, Knowledge, and Attitudes Important for Present?Day Auditors. International journal of auditing, 18(3), pp.193-205.

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