Recent Question/Assignment

ASSESSMENT 2 BRIEF
Subject Code and Title ACCT2004 Auditing and Internal Controls
Assessment Assessment Two
Individual/Group Individual
Length 2,000 words
Learning Outcomes The Subject Learning Outcomes demonstrated by successful completion of the task below include:
b) Explain the professional, legal and ethical requirements and responsibilities of auditors and explore the significance of audit quality.
c) Illustrate an understanding of the audit process including risk assessment, response to assessed risks and audit reporting requirements.
d) Demonstrate an understanding of assurance engagements other than historical financial information and investigate the relevance of such engagements in the contemporary business environment.
Submission Due by 11:55pm AEST/AEDT Sunday end of week 10
Weighting 25%
Total Marks 100 marks
Assessment Task
The assessment covers a range of scenarios that auditors confront when conducting and audit. Students are to review the scenarios and apply practical solutions to each scenario using current auditing literature to justify their answers.
Instructions
Background – The Auditor and the Audit Client
Infinity Auditors are Certified Practicing Accountants who are registered company auditors. They service a broad range of clients across Australia however they are known for their work within the medical and pharmaceutical industries. Established in 1986 the firm consists of 8 partners, 50 audit staff and 10 administration staff. You have been an audit senior with Infinity Auditors for 3 years.
Infinity Auditors have two offices located in Adelaide and Brisbane.
During the year Infinity Auditors was approached by Medical Services Group Limited (MSG) to complete their 2020 financial year audit. Their financial year ends June 30 and the previous auditor was ABC Auditors.
MSG supplies medical equipment to hospitals and doctor surgeries including medical diagnostic testing units, disposable products for surgery and medical safety equipment. They sell a total of 230 stock items ranging from $50 an item to $50,000 an item. They have warehouses in Sydney, Melbourne and Adelaide but ship their products all over Australia. Recently MSG opened another warehouse in Brisbane bringing the total number of warehouses to four. The head office is in Adelaide, and this is where most of the administration staff are located.
Please complete the following questions:
Question 1
Prior to accepting MSG as a client, you need to first assess if they are a suitable audit client for your firm. Develop a Client Engagement Workpaper to be used by Infinity Auditors for their audit preplanning. You are required to look at policy and practice requirements and how you may gather sufficient and appropriate evidence to test with a clearly defined set of procedures.
Policy and practice requirements detail the types of checks that you would carry out before accepting the engagement. This section should also state the reasoning that this check is required using appropriate legislation, standards, policies or identification of any potential audit risks.
Procedure looks at how you might gather appropriate evidence to test client suitability. Note that you can complete several different procedures for each policy and practice requirement.
Workpaper Example:
CLIENT ENGAGEMENT WORKPAPER
This workpaper is used to check the suitability of new clients.
Audit Client:
Lead Auditor: YOUR NAME
Policy & Practice Requirements Procedure to be Carried Out
Policy: Obtain ethical clearance from previous auditor
Reasoning: State any legislative or conditions as to why you would take this action. Action: How would you achieve this policy?
Findings: Stated here, detail your findings here
Completed: DATE
Initials: Your initials
Complete a minimum of four (4) policy and practice requirements and a minimum of two procedures to check each policy. You can use the example provided and you are to assume that you completed the procedure so that you can document your findings.
Question 2
You have engaged MSG as a client and have started the independent audit of MSG’s financial statements.
You have been asked to circulate the receivable confirmations to MSG’s debtors. These letters seek to confirm the balances that MSG has in their accounts with that of its customers. On June 30, 2020 the Accounts Receivable balance is $3,980,250 and is considered material.
MSG’s payment terms are 14 days from the date of the invoice. Sixty per cent of the balance is represented by invoices outstanding from five different medical practitioners. The remaining forty per cent is made up of numerous smaller amounts, most of which have been outstanding for more than 60 days. Any allowance for doubtful debts is taken directly against the trade receivables account and not shown separately in the balance sheet.
a. Discuss the strength and weaknesses of debtor confirmations as audit evidence for MSG. Include the deficiencies in the accounting system and accounts receivable process in your answer.
b. Is it possible for Infinity Auditors to use debtor confirmations as the only audit evidence?
Question 3
MSG use a perpetual inventory system which updates the stock levels every time an item is bought or sold. On year end, the manager prints out a full stock list for each location showing:
• Stock code
• Quantity on hand
• Location of stock
• Cost per unit
At year end, a physical stocktake was carried out by MSG staff at the four MSG locations. All physical inventory items are checked against the inventory system printouts and any discrepancies are noted and provided to the warehouse manager who updates the stock levels in the accounting system.
On June 30, the inventory on hand in the accounting system shows total inventory cost over the four locations is $23,500,000. The physical stocktake shows a physical inventory count of $23,100,000, the level of materiality set for inventory is 3%.
a. You are to gather sufficient and appropriate evidence regarding the existence and completeness for inventory. Describe the type of tests you would carry out for each of these assertions.
b. Discuss how you would select a sample size for testing the existence and completeness assertions. You must support your reasoning with the available literature.
Referencing
It is essential that you use appropriate APA 7th Edition style for citing and referencing research. Please see more information on referencing in the Academic Skills webpage.
Submission Instructions
The assessment needs to be submitted by midnight of week 10.
Academic Integrity
All students are responsible for ensuring that all work submitted is their own and is appropriately referenced and academically written according to the Academic Writing Guide. Students also need to have read and be aware of Torrens University Australia Academic Integrity Policy and Procedure and subsequent penalties for academic misconduct. These are viewable online.
Students also must keep a copy of all submitted material and any assessment drafts.
Special Consideration
To apply for special consideration for a modification to an assessment or exam due to unexpected or extenuating circumstances, please consult the Assessment Policy for Higher Education Coursework and ELICOS and, if applicable to your circumstance, submit a completed Application for Assessment Special Consideration Form to your Learning Facilitator.
Assessment Rubric
Assessment Attributes Fail
(Yet to achieve minimum standard) 0-49% Pass
(Functional)
50-64% Credit
(Proficient) 65-74% Distinction
(Advanced)
75-84% High Distinction
(Exceptional)
85-100%
Knowledge and understanding of client engagement, ethics, audit pre-planning and business risk.
Percentage for this
criterion = 25%
Demonstrates a partially developed understanding
of the client audit engagement process, ethical standards, audit preplanning and business risk assessment.
Demonstrates a functional knowledge of client engagement, ethics, audit
pre-planning and business risk by
Identifying 2 policies and procedures to be carried out on client engagement
Demonstrates a functional knowledge of current audit legislation, standards and audit risk.
Provide at least one procedure to test policies and gather sufficient and appropriate evidence.
Demonstrates proficient knowledge of client engagement, ethics, audit pre-planning and business
risk by
Identifying 3 policies and procedures to be carried out on client engagement
Demonstrates proficient knowledge to current audit legislation, standards and audit risk.
Provide appropriate procedures to test policies and gather sufficient and appropriate evidence.
Demonstrates advanced knowledge of client engagement, ethics, audit
pre-planning and business risk by
Identifying 4 policies and procedures to be carried out on client engagement
Demonstrates advanced knowledge to current audit legislation, standards and audit risk.
Provide several aligned procedures to test policies and gather sufficient and appropriate evidence.
Demonstrates exceptional knowledge of client engagement, ethics, audit
pre-planning and business risk by
Identifying 4 policies and procedures to be carried out on client engagement
Demonstrates exceptional knowledge to current audit legislation, standards and audit risk.
Provide excellent aligned procedures to test policies and gather sufficient and appropriate evidence.
Knowledge and understanding of audit processes and evidence gathering.
Percentage for this criterion = 25%
Demonstrates a partially developed understanding of audit processes and evidence gathering.
Demonstrates a functional knowledge of audit processes and evidence gathering by:
Identifying some strengths and weakness in the audit evidence gathering technique selected.
Demonstrates some analysis and synthesis of new knowledge with application of audit gathering techniques.
Demonstrates proficient knowledge of audit processes and evidence gathering by:
Identifying a few strengths and weakness in the audit evidence gathering technique selected.
Demonstrates a functional analysis and synthesis of new knowledge with application
of audit gathering techniques.
Provides further recommendation for audit evidence collection.
Demonstrates advanced knowledge of audit processes and evidence gathering by:
Identifying multiple strengths and weakness in the audit evidence gathering technique selected.
Demonstrated strong analysis and synthesis of new knowledge with application of audit gathering techniques.
Provides further recommendation for audit evidence collection.
Demonstrates exceptional knowledge of audit processes and evidence gathering
Identifying multiple strengths and weakness in audit evidence gathering technique selected.
Demonstrated an excellent analysis and synthesis of new knowledge with application of audit gathering techniques.
Provides further recommendation for audit evidence collection.
Knowledge and understanding of audit assertions and sampling.
Demonstrates a partially developed understanding of audit assertions and audit sampling.
Demonstrates a functional knowledge of audit processes and evidence gathering by:
Providing adequate tests for assertions.
Demonstrates proficient knowledge of audit processes and evidence gathering by:
Providing reasonable solutions for testing assertions.
Demonstrates advanced knowledge of audit processes and evidence gathering by:
Providing solutions aligned to case for testing assertions.
Demonstrates exceptional knowledge of audit processes and evidence gathering
Providing robust solutions for testing audit assertions.
Percentage for this criterion = 25%
Identifying sampling methods with limited justification.
Identifying sampling methods with justification.
Identifying useful sampling methods with justification to literature.
Identifying sampling methods with justification to literature.
Effective
Communication
(Written)
Percentage for this
criterion = 15%
Specialised language and terminology is rarely or inaccurately employed.
Meaning is repeatedly obscured by errors in the communication of ideas, including errors in structure, sequence, spelling, grammar, punctuation and/or the acknowledgment of sources.
Communicates in a readable manner that largely adheres to the given format.
Generally employs specialised language and terminology with accuracy.
Meaning is sometimes difficult to follow.
Information, arguments and evidence are structured and sequenced in a way that is not always clear and logical.
Some errors are evident in spelling, grammar and/or punctuation.
Communicates in a coherent and readable manner that adheres to the given format.
Accurately employs specialised language and terminology.
Meaning is easy to follow. Information, arguments and evidence are structured and sequenced clearly and are logical.
Occasional minor errors present in spelling, grammar and/or punctuation.
Communicates coherently and concisely in a manner that adheres to the given format.
Accurately employs a wide range of specialised language and terminology.
Engages audience interest. Information, arguments and evidence are structured and sequenced in a way that is, clear and persuasive.
Spelling, grammar and punctuation are free from errors.
Communicates eloquently. Expresses meaning coherently, concisely and creatively within the given format.
Discerningly selects and precisely employs a wide range of specialised language and terminology.
Engages and sustains audience’s interest. Information, arguments and evidence are insightful, persuasive and expertly presented.
Spelling, grammar and punctuation are free from errors.
Correct citation of key
resources and evidence
Percentage for this criterion = 10%
Demonstrates inconsistent use of good quality, credible and relevant resources to support and develop ideas.
Referencing is omitted or does not resemble APA.
Demonstrates use of credible and relevant resources to support and develop ideas, but these are not always explicit or well developed.
Referencing resembles APA, with frequent or repeated errors.
Demonstrates use of credible resources to support and develop ideas.
Referencing resembles APA, with occasional errors.
Demonstrates use of good quality, credible and relevant resources to support and develop arguments and statements.
Show evidence of wide scope within the organisation for sourcing evidence.
APA referencing is free from errors.
Demonstrates use of highquality, credible and relevant resources to support and develop arguments and position statements.
Show evidence of wide scope within and without the organisation for sourcing evidence.
APA referencing is free from errors.

Editable Microsoft Word Document
Word Count: 2548 words including References


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