QUESTION
ASSIGNMENT
BAO3306 AUDITING
Semester 1, 2012
Overview
Assignment is worth 20% of the overall assessment for this subject.
Due date: Week 10
Length: Maximum word limit 3000 words (including Appendices)
Introduction
This assignment requires you to form a group of two (2) to develop an audit plan. You
must refer to Chapter 6 of the textbook for information relating to audit planning.
Your submission for this assignment must not exceed 3000 words in length. You must
attach the assessment declaration sheet to the front of your assignment. You must sign
and date the assessment declaration sheet. For domestic students, submission should
be made as instructed below. Offshore students should follow the instructions of the
local lecturer.
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 (2).
Submission instruction
Assignment must be submitted electronically and in hardcopy.
Electronic submission: must be submitted via turnitin located on webct. An
originality report is available to students upon submission. Note: turnitin 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 webct 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.
Only one member of the group needs to submit the assignment. Students can submit
assignment on Webct until 11:59PM on the due date. Assignments not meeting these
requirements will be subjected to a penalty of four (4) marks for poor presentation.
An additional penalty of two (2) marks per day will apply for late submission.
Note: Webct will not accept late submission.
Plagiarism
Plagiarism is defined as present ing 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.
Background
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. ASA300.5 states that
the auditor shall plan the audit so that the engagement will be performed in an
effective manner.
Required
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 preparing an audit plan for the audit of the entit y’s
financial statements.
2. The audit fee is $92,000 and had been communicated to the client in the
Engagement Letter.
3. You are required to download the 2011 annual report published by the following
entity:
ACRUX (www.acrux.com.au)
4. Using the first four steps in the audit process as prescribed in Chapter 6 (pages 254255)
of the textbook, plan the audit for the entity you have chosen. Since you are
required to develop an audit plan for a real life entity, quoting directly from textbook
does not meet the objective of the assignment.
5. Your audit plan must include the followings:
1. Executive summary
2. Introduction
3. Audit plan with the following headings:
a. Understanding the entity and its environment
b. Understanding internal control
c. Assessing the risks of material misstatement (for 5 key accounts)
d. Developing responses to assessed risks (for the accounts selected above)
4. Conclusion
5. References
6. Appendices
Additional information
For the purposes of the assignment, the following auditing standards are relevant:
– ASA210 Terms of Audit Engagements
– ASA220 Quality Control for Audits of 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 Understanding the Entity and its Environment and Assessing the Risks of
Material Misstatement
– ASA320 Materiality and Audit Adjustments
– ASA330 The Auditor’s Procedures in Response 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 proforma audit plan on webct.
3. Informat ion on the organisat ion’s internal control structure can be obtained by
looking at the relevant section in the annual report, materials published on the
entity website and comparing them to the Principles of Good Corporate
Governance and Best Practice Recommendations published by the ASX
Corporate Governance Council.
4. In assessing the risks of material misstatement, you are required to identify
five (5) account balances at risk of being materially misstated. You are
required to support your selection using the Audit Risk Model.
5. Quoting directly from textbooks and reports will increase the similarity index.
Quoting without proper referencing will also increase the similarity index.
You are advised to develop your own audit plan.
6. Turnitin has the facility to report on whether your assignment is copied from
other sources. Penalty of four (4) marks applies for exceeding the 30% limit.
Serious breaches will be reported to the disciplinary panel.
7. Only one student in the group needs to submit the assignment.
8. Word limit applies to the entire assignment except appendices, bibliography
and references. Penalty of four (4) marks applies for exceeding the word limit.
9. If you want to remove the previous version of the assignment on turnitin,
submit a blank assignment or a new version.
10. Turnitin may take up to 24 hours to generate originality report. Late
submission is subjected to a penalty of two (2) marks per day.
SOLUTION
B.Understanding internal control:
The corporate Governance of the company is the basic foundation that guides the operation of the company. The objectives and goals of the company, risk etc are managed in line with the corporate Governance guidelines set out by ASX. Though there is no single fit for all model of corporate governance, it’s up to the company to diligently apply those principles in the right manner and at the right time. The ASX has covered the detailed aspects of every other principle that can be used by the company to achieve a better operational efficiency and business ethics that will reflect on their financial statements. (Recommendations of ASX Corporate Governance,2006)
The risk that is associated with every business decision and overcoming these to keep up with the growing pace of the business activities is what is achieved by every organisation that follows the best recommended corporate governance principles of ASX.
The given case of Acrux clearly depicts the corporate Governance principles that have been applied in every core of its business activities. The corporate Governance of the company is broadly categorised into various segments, each of which adhere to the general corporate Governance recommended by the ASX Corporate Governance council.
There are basically 10 principles that are considered as the best practice recommendations provided by the ASX.
1. Lay solid Foundations for management and oversight
2. Structure the board of Directors to add more value
3. Promote ethical and responsible decision making process
4. To safeguard the integrity in the financial reports
5. Disclosure at the right time and in a balanced manner
6. Shareholder’s rights needs to be respected
7. Identify the risks of the firm and manage them to safeguard the best interest of the firm
8. Enhancing the performance of the firm
9. Fair and responsible remuneration
10. Understand and protect the interests of the stakeholders
These are just general guidelines and are not rules that need to be followed by every other company in Australia. These are framed to make the company produce efficient and quality outcome by protecting the interests of the stakeholders. So, the firms are free to adopt those principles that can easily be implemented and are applicable to their nature of business. The ASX listing rules that the companies are required to clearly state in their financial report the corporate guidelines that they have adopted in their company and to what extent. (ASX corporate Governance Council,2003)
The Acrux statement of corporate Governance clearly states that the company has designated the roles of the Board as per the ASX principle 1. The board of Acrux has to perform r
