Semester 2, 2018
Assignment is worth 20% of the overall assessment for this subject.
Due date: week 10
Length: 3000 words (maximum)
Similarity index: 30% (maximum)
This assignment requires you prepare a document to assist the Audit Manager in planning an audit. You must refer to the relevant chapters of the textbook for information relating to audit planning. Your submission for this assignment must not exceed 3000 words in length. You must attach a signed and dated assessment declaration sheet to the front of your assignment.
You must ensure the clarity of your answer and the overall presentation of your assignment. Presentation includes grammar, spelling and compliance with the word limit. You must complete your assignment in group of two.
Assignment must be submitted electronically AND in hardcopy.
Electronic submission: must be submitted via VU Collaborate. An originality report is available to students upon submission. Note: VU Collaborate may take up to 24 hours to produce a report. Assignment with originality report level of more than 30% may indicate that the contents have more than 30% in similarity with assignment submitted by other students OR assignment has not been properly referenced. Assignment with originality report level exceeding 30% will be penalised by four (4) marks. Students can re-submit assignment on VU Collaborate as many times as necessary but the final submission both in electronic and in manual format must be made by the due date.
Hardcopy submission: must be submitted by the due date. A signed declaration form must be attached to the front of the assignment.
Students must submit assignment on VU Collaborate on the due date.
- Exceeding the 3000 words limit: FOUR (4) marks deduction.
- Exceeding the 30% similarity index limit: FOUR (4) marks deduction.
- Late submission: TWO (2) marks deduction per day.
Plagiarism is defined as presenting someone else’s work, including the work of other students, as one’s own. Any ideas or materials taken from another source for either written or oral use must be fully acknowledged, unless the information is common knowledge. All students are strongly advised to do the following:
- goto http://wcf.vu.edu.au/GovernancePolicy/PDF/POA040915000.PDF
- enter School of Accounting and Finance
- enter Student Resources
- read the PLAGIARISM POLICY.
The subject aims to familiarise the student to some of the key tools used by auditors for collecting and evaluating evidence, in both manual and computerised accounting information systems, so as to enable them to express an opinion on the fair presentation of financial reports.
The subject also aims to provide students with an insight into the current environment in which auditors operate, including legal liability, ethical and other professional aspects such as the “audit expectation gap”. As such, the subject provides both a conceptual and practical approach to external, as well as internal and public sector auditing, enabling students to gain a complete picture of the audit process in light of contemporary audit issues.
In addition, the subject aims to enhance a number of generic skills through both the formal components of assessment and the student’s class participation. These include: research, problem solving, and analytical skills; written and presentation skills; and within/between group interaction skills.
This group assignment aims to provide students with an appreciation of the initial stage of the audit process known as audit planning. Specifically, it allows students to develop an understanding of the steps involved in developing an audit plan. Students are required to follow the structure approach specified in Gay & Simnett, 2015, Auditing & Assurance Services 6e, McGraw-Hill Education.
On successful completion of this unit, students should be able to:
- Develop an appreciation of the reasons for the existence of a societal demand for audit and assurance services, and an understanding of the current environment in which auditors operate, including legal, ethical and professional aspects
- Demonstrate an understanding of the key auditing principles, concepts and practices used by auditors to gather evidence and make judgments in order to form an audit opinion on the fair presentation of financial reports
- Develop an insight into the audit of specific transactions and account balances
- Be aware of the auditor’s responsibility in completing an audit
- Obtain basis understanding of other types of assurance engagement
The rationale for BAO3306 Auditing as per Unit of Study Outline is that on completion of this unit students should have a sound understanding of the underlying concepts of auditing and in particular of financial auditing. By adopting a logical, structured approach they should have the capacity to analyse the salient audit issues and apply relevant auditing theories and succinctly communicate their professional, ethical decision.
One of the unit outcomes requires students to be familiar with key tools used by auditors for collecting and evaluating evidence, in both manual and computerised accounting information systems, which will enable them to express an opinion on the fair presentation of financial reports.
To ensure the audit is carried out efficiently and in a timely manner, the auditor develops an audit plan for the conduct and scope of the audit. ASA300 states that the auditor shall plan the audit so that the engagement will be performed in an effective manner.
1. For the purpose of the assignment, you assume the role of an auditor and your firm has recently been appointed as external auditor of an entity. As required by Auditing Standard ASA300, you are assisting your Audit Manager in preparing an audit plan for the audit of the entity’s financial statements.
2. The audit fee is $170,000 and had been communicated to the client in the Engagement Letter.
3. You are required to download the 2017 annual report published by the following entity:
- Murray River Organics Group Limited (http://www.murrayriverorganics.com.au)
4. Using information in the relevant chapters of the textbook, the company annual report and other relevant information, preparing a document for your Audit Manager to assist him in planning the audit. Note that quoting directly from textbook does not meet the objective of the assignment.
With reference to relevant chapters of the textbook prepare a document for your Audit Manager. Your document must include the followings:
1. Executive summary
3. Key information:
a) Gain an understanding the client
b) Identify five (5) significant accounts most at risk of being materially misstated
c) Set planning materiality level
d) Identify what can go wrong (audit risk assessment) for each of the five (5) accounts selected in (b)
For the purposes of the assignment, the following auditing standards are relevant:
- ASA210 Agreeing the Terms of Audit
- ASA220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information
- ASA230 Audit Documentation
- ASA250 Consideration of Laws and Regulations in an Audit of a Financial Report
- ASA300 Planning an Audit of a Financial Report
- ASA315 Identifying and Assessing the risks of Material Misstatement through Understanding the Entity and its Environment
- ASA320 Materiality in Planning and Performing an Audit
- ASA330 The Auditor’s Responses to Assessed Risks
- ASA520 Analytical Procedures
Hints and Tips
1. You are required to plan the audit using only information that is publicly available. That is, you only use the information that is published by the entity either on its website or printed materials.
2. You must download and use the pro-forma document on VU Collaborate.
3. When identifying accounts most at risk of being materially misstated, you are advised to use analytical procedure – simple comparison to identifying those accounts.
4. When making preliminary judgements about materiality levels and identifying five significant accounts, you are required to consider the statement of profit or loss, statement of financial position and the notes.
5. To calculate materiality level for this audit assignment, you are advised to calculate 0.5% of total revenue, i.e. 0.5% of total revenue of $68 million = $68 million x 0.005 = $340,016.
6. In assessing what can go wrong, you are required to assess the audit risk for the five (5) significant accounts you have selected using the audit risk model. When deciding on the significant accounts, you need to consider the audit risk associated with those accounts.
7. Quoting directly from textbooks and reports will increase the similarity index. Quoting without proper referencing will also increase the similarity index. As this assignment requires you to use auditing theory to prepare a document for a real-life organisation, quoting from textbook does NOT meet the requirements. Students are advised to write their own document.
8. VU Collaborate has the facility to report on whether your assignment is copied from other sources. Penalty of four (4) marks may apply for poor presentation. Serious breaches will be reported to the disciplinary panel.
9. Submit your assignment early. A penalty of two (2) marks per day applies to late submission.
10. If you want to remove the previous version of the assignment on VU Collaborate, submit a blank assignment or a new version.