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Accounting-Audting - Assignment Example

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S324CH of the Corporations Act, the independence of an auditor whether internal or external is the case where either is independent from all the parties that may influence the outcomes of the audits hence having a financial interest. According to the Charter of Audits the…
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ASSIGNMENT Accounting-Auditing Answers I) Please explain as to why this is an important condition to be met (2 Marks)
S324CH of the Corporations Act, the independence of an auditor whether internal or external is the case where either is independent from all the parties that may influence the outcomes of the audits hence having a financial interest. According to the Charter of Audits the conditions such as that of reporting to the audit committee instead of the management creates independence of the auditors1.
(II) Provide three benefits of the audit committee in enhancing governance (6 Marks)
Audit committee was created by Cadbury Report (1992) to aid governance on first improvement of the financial practices and reporting through reviews, monitoring and direct practices enhancing internal controls and well prepared financial reports. Secondly, the committee has the powers to influence appropriate actions against fraud which aids governance in terms of ethics establishment. Thirdly, they enhance both internal and external audit functions as internal auditors report to them and they have the ability of monitoring external auditors’ activities1.
Answers 2:
According to ISA (400) the failure of tests of control on the preliminary assessment about control risk has the effect of derailed effectiveness of the specific control, this result into ineffectiveness of the audit conducted according to the audit plan1.
Answers 3:
There are a variety of the sales system weaknesses derail the sales performance. They include: first; Need for approval, the document and those handling them need to be approved at each stage which has never been the case in this system. Secondly, there is the likelihood that the parties involved in the process may be emotionally involved hence derailing prospective focus that would result into loss of control1. Thirdly, there is self limiting in the manner in which the records of sales are collected and unfairly allocated; this is in the case where the driver handles all the invoices with the management remaining with none. Fourth, the buy cycle is not quite supportive to the sales system since apart from simply making payments of deliveries they do nothing else to support in the audit process therefore the buyers do not at in any way required to support the selling process. Fifth, the sales system in question is quite insensitive to the critical issues that revolve around money whether payment or receipt1. Within the entire sales department there is actually non among the salespeople who mentions any issue around budget in terms of whether there is a prospect likely to afford the product offered by John limited or not.
Answers 4:
(a) The existence assertion for inventory (2Marks)
The existence for assertion for inventory is verified using numerous processes among which is the observation of the company’s inventory count annually, this confirms the actual existence of the inventory in question. The other procedure is that of employing the available accounting tools to perform valuation of inventory to determine the value of stock at auditing as required by ASC 330-10-35-11.
(b) The existence assertion for accounts receivable. (2 Marks)
The company to determine such assertions can employ the accounts receivable turn days as one procedure that is if they understand the company’s history of accounts and sales volume. Secondly, they can conduct an evaluation of the company’s history of uncollectible accounts expense to net credit sales while doing an adjustment depending on the economic conditions1.
Works Cited
1. Knechel, W. Robert. Auditing: assurance & risk. 3rd ed. Mason, OH: Thomson/South-Western, 2007: 117-268 Read More
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