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Auditing-Case Study: HAVELOCK EUROPA PLC - Essay Example

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Audit risk refers to the risk of an inappropriate audit opinion by the designated and assigned auditor when financial statements are materially misstated (Rittenberg, Johnstone and Gramling, 2012). However, it may be of two types that is either at financial statement level or at…
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Auditing-Case Study: HAVELOCK EUROPA PLC
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Download file to see previous pages 000 which was a loss of £345000 during the last financial year, which provide that corroborative evidence that financial statement might be materially misstated, following are the risk areas:
As clear from income statements figure sales during 2013 has been decreased by £2872000 amount, due to which closing stock should have risen but amount shown in statement of financial position show quite opposite figure that show decrease in inventory, which is a high risk area as both evidence regarding inventory show opposite position, further decrease in accounts payable by such large amount need detailed analysis of this area in order to reduce audit to an level. Because as stated by the company that it measure its inventory on lower of cost and NRV i.e. net realizable value, so all these assertions need detailed substantive testing because all these amounts involved in them are material, therefor as per materiality concept of audit auditor should carry out detailed substantive testing in this area in order to reduce audit risk to an acceptable low level.
As revised employee benefit has been adopted from 01 January 2013, which has heavy financial impact for the group defined pensions scheme, where net interest income or expense is calculated using the discount rate used to measure the expenses, it is an establish fact whenever new policies are adopted than it is presumed that the risk of material misstatement in them would be high due to either an honest mistake of facts or an intentional misstatement, further changes in retirement benefits decreased by £3293000 which is 11.6 times of the net profit,( 283 ), further as it a policy that’s why control risk is also high in this area as well.
Further a lot of actuarial calculations are involved in them that also need detailed substantive testing, e.g. assessing estimates whether they are reasonable and consistent, but due to significant changes in the amount of employee retirement benefit scheme for audit purpose it is ...Download file to see next pagesRead More
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