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Auditing - Assignment Example

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The auditor will have to test the inventory based on samples and is required to determine the design, size and selection of samples from the population in which every item has an equal chance of selection (CAS301)
The period covered by auditor’s review of subsequent events…
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Auditing Assignment
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Question CAS 89) The auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory
Inspection of documentation of the subsequent sale of specific inventory
Recalculation o the schedule of goods purchased and the and sold to confirm with the value of stock at hand
Inquiring directly from the suppliers on the nature, quantity and value of goods sold
Performing ratio analysis to determine the consistency or inconsistency in the inventory; such as inventory days
Question 2
The auditor will have to test the inventory based on samples and is required to determine the design, size and selection of samples from the population in which every item has an equal chance of selection (CAS301)
The sampling techniques available for the auditor include
Random selection through which inventory are selected random numbers simulator or generator
Systematic selection; whereby the inventories are divided by sample size to give sampling interval, which forms a basis of selection of subsequent units
Monetary unit sampling; through which the sampling units are selected on value weighted selection based on monetary amounts, and,
Haphazard selection auditor selects without following any systematic format.
Question 3
The auditor should consider the management’s estimation of uncertainty and adequacy of related disclosures (CAS 157).
The procedures include
Examining how management has considered alternative assumption or findings and the reasons they were to adopted
The auditor should considers the reasonableness of significant assumption adopted by management to write-off the cost of inventory
The auditor should consider the appropriateness of the financial reporting framework used to write-off the cost of inventory
The auditor should consider how management had accounted for the impairment in the financial statements by considering the recognition, measurement and disclosure principles
Question 4
External confirmation from the supplier that the sale of goods has occurred and pertains to the entity (Ex CAS211)
Recalculations of documents of inventory to ensure that transactions have been recorded
Inspecting documents used in the transaction to confirm that the amounts have been recorded appropriately
The auditor should inspect the goods purchased to verify existence
Inquiring from the sales department on the date in which the purchase of the goods took place to ascertain the correct accounting period
Question 5
The period covered by auditor’s review of subsequent events are the events between the date of the financial statements (date of last period covered by the financial reports) and the date of the auditor’s report (when they are made available to third parties) and facts after the auditor’s report (Ex CAS92).
The events that should be disclosed are the non- adjusting events that do not provide additional evidence of conditions that existed at the end financial reports.
Examples include
A fall in the market value of investments
Dividend declared to shareholders after the date of financial reports
The events that should be adjusted are the adjusting events; they give additional evidence of conditions that existed at the financial reporting date.
Examples include
Determination after the end of financial year of the cost of an asset purchased before end of reporting period
The amount of bonus payments where the company had a constructive obligation to make such payments
Outcome of a litigation process that confirms a contingent liability
Discovery of fraud or error in the financial statements
Question 6
Assume you learn of a subsequent event after the date of the audit report (end of audit fieldwork) but before the audit, report has been issued (Ex CAS 209).
The auditor has no obligation to perform any audit procedures
However, if it is an event that may have caused the auditor to amend his report, the auditor shall
Discuss the matter with management and those charged with governance
Determine whether financial statements should be amended
Inquire how management intends to address the matters
If management amends financial statements
Auditor should carry out procedures on the amendments
Provide a new report on the amended financial statements
If management does not amend the financial statements but the auditor believes that there is need to amend then
If audit report has not been provided, he should modify the opinion
If report has already been provided, notify management not to issue financial statements to third parties until necessary adjustments have been ,made
Question 7
It necessary to compare unadjusted misstatement to other bases of materiality because it enables the auditor to select audit procedures that can be expected to reduce audit risk to lower levels (Ex CAS 118)
What should the auditor do if the unadjusted misstatements exceed one or more materiality thresholds?
i. Increasing the assessed risk of material misstatement including extended additional test of controls
ii. Increasing the detection by modifying the nature, timing and extent of planned audit procedures
Works Cited
Moroney, Robyn, and Fiona Campbell. Auditing: A Practical Approach First Canadian Edition. John Wiley & Sons Canada, Limited, 2012. Print.
Reporting on Financial Statements in the BC Public Sector under Canadian Auditing Standards. Victoria, B.C.: Office of the Auditor General of British Columbia, 2012. Print. Read More
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