Assessment Task Tutorial Questions Assignment 1
Unit Code: HA3032
Unit Name: Auditing
Assignment: Tutorial Questions Assignment 1
Due: 11:30pm 15th May 2020
Weighting: 25%
Total Marks: 50 marks
Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in
this unit
Unit Learning Outcomes Assessed:
1. Demonstrate a thorough understanding of the reporting requirements of auditing
standards relating to auditors reports.
2. Explain how the audit planning process directs the auditor to obtain adequate evidence to
support audit findings and address the importance of materiality in an audit.
3. Explain the process of audit planning to determine risk assessments and an overall audit strategy.
4. Explain the auditors obligations with regards to understanding the clients business and
internal controls and assessing business risks.
Description: Each week students were provided with three tutorial questions of varying degrees of
difficulty. These tutorial questions are available in the Tutorial Folder for each week on Blackboard.
The Interactive Tutorials are designed to assist students with the process, skills and knowledge to
answer the provided tutorial questions. Your task is to answer a selection of tutorial questions from
weeks 1 to 5 inclusive and submit these answers in a single document.
2
The questions to be answered are;
Week 1 Question (10 marks)
Chan & Chow offer their clients a range of professional services, including:
a. providing advice on accounting policies and accounting standards
b. auditing annual financial reports
c. providing assistance to management and the board in strengthening internal controls and corporate
governance practices
d. providing assistance with the establishment and training of internal audit teams
e. checking compliance with company policies and legislative regulations
Required: For each of the five (5) services (a. e.) listed above, determine whether it is an assurance
engagement or not and explain your answer.
Week 2 Question (10 marks)
Shelly, Kelly & Mark (SKM) are the auditors of Bass. SKMs IT consulting division has undertaken a
number of accounts receivable management system implementation projects and is actively looking
for opportunities to perform more of this type of work. As a result, SKMs IT consulting division is
planning to submit a proposal to implement an accounts receivables management system at Mass.
(a) Identify and explain the two primary threats to independence for SKM. (5 marks)
(b) Outline an appropriate safeguard to address each of the threats identified above. (5 marks)
3
Week 3 Question (10 marks)
You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the
audit for the year ended 31 December 20X7. During your initial planning meeting held with the
financial controller, he told you of the following changes in the companys operations.
(i) Due to the financial controllers workload, the company has employed a treasurer. The financial
controller is excited about the appointment because in the two months that the treasurer has
been with the company he has realised a small profit for the company through foreign-exchange
transactions in yen.
(ii) Sampson has planned to close an inefficient factory in country New South Wales before the end
of 20X7. It is expected that the redeployment and disposal of the factorys assets will not be
completed until the end of the following year. However, the financial controller is confident
that he will be able to determine reasonably accurate closure provisions.
(iii) To help achieve the budgeted sales for the year, Sampson is about to introduce bonuses for its
sales staff. The bonuses will be an increasing percentage of the gross sales made, by each
salesperson, above certain monthly targets.
(iv) The company is using a new general ledger software package. The financial controller is
impressed with the new system, because management accounts are easily produced and allow
detailed comparisons with budgets and prior-period figures across product lines and
geographical areas. The conversion to the new system occurred with a minimum of fuss. As it is
a popular computer package, it required only minor modifications.
(v) As part of the conversion, the position of systems administrator was created. This position is
responsible for all systems maintenance, including data backups and modifications. These tasks
were the responsibility of the accountant.
Required:
For each of the five (5) scenarios (i v) above, explain how the components of audit risk (inherent risk,
control risk or detection risk) are affected. (10 marks)
4
Week 4 Question (10 marks)
You are the audit senior on the audit of Easy Fit Pty Limited, a large manufacturer of shoes. Easy Fit
Pty Limiteds main market lies with 18 to 24-year olds.
This is the first year in which your firm has performed the audit. As part of the planning work, you
have performed analytical procedures on an annualised basis and compared the results to industry
averages and last years audited financial information. The results are given below:
Industry Average Easy Fit Pty Limited
Ratio 20X7 20X6 20X7 20X6
1 Current ratio 2.84 3.27 1.89 2.24
2 Receivables turnover ratio 4.9 4.6 6.3 7.0
3 Inventory turnover ratio 3.7 3.8 5.0 5.5
4 Return on total assets 7% 5% 13% 11%
5 Net profit ratio 0.06 0.06 0.04 0.04
Required:
Explain the general meaning of each of the above ratios (1 – 5), discuss the conclusions that you can
draw about Easy Fits financial position and identify potential audit risks to be investigated further.
Week 5 Question (10 marks)
Super-Savers Ltd is a major manufacturer of industrial machinery. When the stores department
requires items to be purchased, they issue a three-part pre-numbered purchase requisition that needs
to be approved by the stores manager. Copy 1 is sent to the purchasing department, copy 2 is sent to
the accounts payable department and copy 3 is filed in the stores department. On receipt of an
approved purchase requisition, the purchasing department issues a five-part pre-numbered purchase
order. Copy 1 is sent to the supplier, copies 2 and 3 are forwarded to the receiving department, copy
4 is forwarded to the accounts payable department and copy 5 is filed in the purchasing department.
5
When goods are received, the receiving department just stamps order received on its two copies of
the purchase order, which then forms its receiving record. One copy of the receiving record is filed in
the receiving department and the other is forwarded to the accounts payable department. The
accounts payable department checks that there is a purchase requisition, purchase order and
receiving record for each supplier invoice and then approves it for payment. The accounts payable
department prepares a pre-numbered payment voucher and forwards it, along with the suppliers
invoice, purchase requisition, purchase order and receiving record, to the financial accountant, who
signs the payment voucher, completes the payment by bank transfer to the supplier and returns the
supporting documents to the accounts payable department. At the end of the month, the assistant
accountant undertakes a sequence check of all pre-numbered documents. The financial accountant
receives the monthly bank statement, prepares a bank reconciliation and investigates any reconciling
items.
Required:
(a) Identify the weaknesses in Super-Savers internal control concerning the purchases and payments
functions. (5 marks)
(b) Explain why each is a weakness and provide a recommendation as to how to overcome the
weakness. (5 marks)
Submission Directions:
The assignment has to be submitted via Blackboard. Each student will be permitted one submission
to Blackboard only. Each student needs to ensure that the document submitted is the correct one.
Academic Integrity
Academic honesty is highly valued at Holmes Institute. Students must always submit work that
represents their original words or ideas. If any words or ideas used in a class posting or assignment
submission do not represent the students original words or ideas, the student must cite all relevant
sources and make clear the extent to which such sources were used. Written assignments that include
material similar to course reading materials or other sources should include a citation including source,
author, and page number.
6
In addition, written assignments that are similar or identical to those of another student in the class is
also a violation of the Holmes Institutes Academic Conduct and Integrity Policy. The consequence for
a violation of this policy can incur a range of penalties varying from a 50% penalty through to
suspension of enrolment. The penalty would be dependent on the extent of academic misconduct
and the students history of academic misconduct issues. All assessments will be automatically
submitted to Safe-Assign to assess their originality.
Further Information:
For further information and additional learning resources, students should refer to their Discussion
Board for the unit.
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Home>Business & Finance homework help>Accounting homework help>auditing
1
Assessment Task Tutorial Questions Assignment 1
Unit Code: HA3032
Unit Name: Auditing
Assignment: Tutorial Questions Assignment 1
Due: 11:30pm 15th May 2020
Weighting: 25%
Total Marks: 50 marks
Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in
this unit
Unit Learning Outcomes Assessed:
1. Demonstrate a thorough understanding of the reporting requirements of auditing
standards relating to auditors reports.
2. Explain how the audit planning process directs the auditor to obtain adequate evidence to
support audit findings and address the importance of materiality in an audit.
3. Explain the process of audit planning to determine risk assessments and an overall audit strategy.
4. Explain the auditors obligations with regards to understanding the clients business and
internal controls and assessing business risks.
Description: Each week students were provided with three tutorial questions of varying degrees of
difficulty. These tutorial questions are available in the Tutorial Folder for each week on Blackboard.
The Interactive Tutorials are designed to assist students with the process, skills and knowledge to
answer the provided tutorial questions. Your task is to answer a selection of tutorial questions from
weeks 1 to 5 inclusive and submit these answers in a single document.
2
The questions to be answered are;
Week 1 Question (10 marks)
Chan & Chow offer their clients a range of professional services, including:
a. providing advice on accounting policies and accounting standards
b. auditing annual financial reports
c. providing assistance to management and the board in strengthening internal controls and corporate
governance practices
d. providing assistance with the establishment and training of internal audit teams
e. checking compliance with company policies and legislative regulations
Required: For each of the five (5) services (a. e.) listed above, determine whether it is an assurance
engagement or not and explain your answer.
Week 2 Question (10 marks)
Shelly, Kelly & Mark (SKM) are the auditors of Bass. SKMs IT consulting division has undertaken a
number of accounts receivable management system implementation projects and is actively looking
for opportunities to perform more of this type of work. As a result, SKMs IT consulting division is
planning to submit a proposal to implement an accounts receivables management system at Mass.
(a) Identify and explain the two primary threats to independence for SKM. (5 marks)
(b) Outline an appropriate safeguard to address each of the threats identified above. (5 marks)
3
Week 3 Question (10 marks)
You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the
audit for the year ended 31 December 20X7. During your initial planning meeting held with the
financial controller, he told you of the following changes in the companys operations.
(i) Due to the financial controllers workload, the company has employed a treasurer. The financial
controller is excited about the appointment because in the two months that the treasurer has
been with the company he has realised a small profit for the company through foreign-exchange
transactions in yen.
(ii) Sampson has planned to close an inefficient factory in country New South Wales before the end
of 20X7. It is expected that the redeployment and disposal of the factorys assets will not be
completed until the end of the following year. However, the financial controller is confident
that he will be able to determine reasonably accurate closure provisions.
(iii) To help achieve the budgeted sales for the year, Sampson is about to introduce bonuses for its
sales staff. The bonuses will be an increasing percentage of the gross sales made, by each
salesperson, above certain monthly targets.
(iv) The company is using a new general ledger software package. The financial controller is
impressed with the new system, because management accounts are easily produced and allow
detailed comparisons with budgets and prior-period figures across product lines and
geographical areas. The conversion to the new system occurred with a minimum of fuss. As it is
a popular computer package, it required only minor modifications.
(v) As part of the conversion, the position of systems administrator was created. This position is
responsible for all systems maintenance, including data backups and modifications. These tasks
were the responsibility of the accountant.
Required:
For each of the five (5) scenarios (i v) above, explain how the components of audit risk (inherent risk,
control risk or detection risk) are affected. (10 marks)
4
Week 4 Question (10 marks)
You are the audit senior on the audit of Easy Fit Pty Limited, a large manufacturer of shoes. Easy Fit
Pty Limiteds main market lies with 18 to 24-year olds.
This is the first year in which your firm has performed the audit. As part of the planning work, you
have performed analytical procedures on an annualised basis and compared the results to industry
averages and last years audited financial information. The results are given below:
Industry Average Easy Fit Pty Limited
Ratio 20X7 20X6 20X7 20X6
1 Current ratio 2.84 3.27 1.89 2.24
2 Receivables turnover ratio 4.9 4.6 6.3 7.0
3 Inventory turnover ratio 3.7 3.8 5.0 5.5
4 Return on total assets 7% 5% 13% 11%
5 Net profit ratio 0.06 0.06 0.04 0.04
Required:
Explain the general meaning of each of the above ratios (1 – 5), discuss the conclusions that you can
draw about Easy Fits financial position and identify potential audit risks to be investigated further.
Week 5 Question (10 marks)
Super-Savers Ltd is a major manufacturer of industrial machinery. When the stores department
requires items to be purchased, they issue a three-part pre-numbered purchase requisition that needs
to be approved by the stores manager. Copy 1 is sent to the purchasing department, copy 2 is sent to
the accounts payable department and copy 3 is filed in the stores department. On receipt of an
approved purchase requisition, the purchasing department issues a five-part pre-numbered purchase
order. Copy 1 is sent to the supplier, copies 2 and 3 are forwarded to the receiving department, copy
4 is forwarded to the accounts payable department and copy 5 is filed in the purchasing department.
5
When goods are received, the receiving department just stamps order received on its two copies of
the purchase order, which then forms its receiving record. One copy of the receiving record is filed in
the receiving department and the other is forwarded to the accounts payable department. The
accounts payable department checks that there is a purchase requisition, purchase order and
receiving record for each supplier invoice and then approves it for payment. The accounts payable
department prepares a pre-numbered payment voucher and forwards it, along with the suppliers
invoice, purchase requisition, purchase order and receiving record, to the financial accountant, who
signs the payment voucher, completes the payment by bank transfer to the supplier and returns the
supporting documents to the accounts payable department. At the end of the month, the assistant
accountant undertakes a sequence check of all pre-numbered documents. The financial accountant
receives the monthly bank statement, prepares a bank reconciliation and investigates any reconciling
items.
Required:
(a) Identify the weaknesses in Super-Savers internal control concerning the purchases and payments
functions. (5 marks)
(b) Explain why each is a weakness and provide a recommendation as to how to overcome the
weakness. (5 marks)
Submission Directions:
The assignment has to be submitted via Blackboard. Each student will be permitted one submission
to Blackboard only. Each student needs to ensure that the document submitted is the correct one.
Academic Integrity
Academic honesty is highly valued at Holmes Institute. Students must always submit work that
represents their original words or ideas. If any words or ideas used in a class posting or assignment
submission do not represent the students original words or ideas, the student must cite all relevant
sources and make clear the extent to which such sources were used. Written assignments that include
material similar to course reading materials or other sources should include a citation including source,
author, and page number.
6
In addition, written assignments that are similar or identical to those of another student in the class is
also a violation of the Holmes Institutes Academic Conduct and Integrity Policy. The consequence for
a violation of this policy can incur a range of penalties varying from a 50% penalty through to
suspension of enrolment. The penalty would be dependent on the extent of academic misconduct
and the students history of academic misconduct issues. All assessments will be automatically
submitted to Safe-Assign to assess their originality.
Further Information:
For further information and additional learning resources, students should refer to their Discussion
Board for the unit.
Applied Sciences
Architecture and Design
Biology
Business & Finance
Chemistry
Computer Science
Geography
Geology
Education
Engineering
English
Environmental science
Spanish
Government
History
Human Resource Management
Information Systems
Law
Literature
Mathematics
Nursing
Physics
Political Science
Psychology
Reading
Science
Social Science
Home
Blog
Archive
Essay
Reviews
Contact
google+twitterfacebook
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