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Essay Instructions: Auditing Standards Research Assignment

1. You can choose to do a summary of either one of the following two auditing standards: AU314 (or SAS 109): Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, and AU318 (or SAS 110): Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained. Find AU standards at AICPA website (http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx ).

2. Your paper is limited to one and half pages single-spaced with one inch margins. Use a size 12 point font.

3. Format for abstract:
Standard: Standard Number, Title, and AU Section number
Abstract by: Your name(s)
Part 1: Summary of the audit standard (main issues addressed and/or new concepts) using complete paragraphs and sentences.
Part 2: Comments on how implementation of this standard will affect the way auditors conduct audit engagements using complete paragraphs and sentences.
4. You will be graded on the quality of your research, format, writing style (including grammar, spelling, etc.) and originality of your work. (If you quote from the standard, be sure to use proper footnote or endnote notations. You should not simply string together a series of quotations to write your abstract.)
5. Due date as indicated on syllabus.

There are faxes for this order.

Essay Instructions: Audit Assignment
Inherent Risk and the Audit Plan
Words: 2500
References 6-8


Introduction
The information environment facing accountants has changed radically. In the past accountants were largely concerned with collecting and processing data; but no longer. Today, vast amounts of information are collected and processed automatically and the challenge for accountants is to select and communicate useful and relevant data. The assignment provides students with this challenge.
Your role is that of external auditor. You have been assigned by the audit partner to investigate the inherent risks that impact on the Financial Report audit, the information you gather will be the basis for the Audit Plan.

Procedure
Select one company listed on the ASX. Choose a company that is easy to understand like a retailer or a manufacturer. Do not do J&B Hi-Fi. Avoid financial institutions unless you have a particular interest in this type of company.
In preparation for the 2009 Audit (year end 30/06/09)

Part 1 40%
Collect and analyse information on the quantitative aspects of inherent risk. This process is called Analytic Review. Information should be acquired from the FinAnalysis data base in the library (http://www.deakin.edu.au/library/search/) and from the company’s annual report (including notes). No calculation of ratios is required or permitted. Do not submit any data in this section unless it is discussed in the report. Be specific about what potential misstatements might exist in the financial reports, and relate these to specific accounts and assertions where possible.

Here the following is to access FinAnalysis database:

http://www.deakin.edu.au/library/

You should see "articles from journals, newspapers" in the middle bottom. Just choose All EBSCOhost databases. Click Go

After that,
Login details:

Family Name: guan
ID: x9055
password: terrytao


Part 2 40%.
Collect and analyse period relevant information on non-quantitative aspects of inherent risk for your client. See Appendix 1 of ASA315 for guidance. Information should be acquired from, for example, the business press like the Australian Financial Review or the business section of the Age (search for your company name). Information is also available in the company’s Annual Report, though this is a biased source. Information must be relevant to the period in question. Make sure you identify the particular assertions, accounts or other aspects of the financial reports that are likely to be misstated, and so of interest to the auditor. As part of this section, make sure that you discuss the influence of the current tight credit markets and the global recession on the inherent risk of the audit of your company. Again, be specific about accounts and assertions as far as possible.

Part 3 20%.
Draw on the research and analysis in parts 1 and 2 to write a memo* to your Audit Partner about specific areas of risk that are important to the Audit Plan. Do not discuss specific audit procedures in this memo, only areas of risk that require special attention in the audit. Your aim in this section is not to provide a simple summary of parts 1 and 2, but to focus the audit plan and resources on key risks.

*A memo is an informal internal report; don’t worry about the structure of the memo, just make sure it’s sensible and clear. Normally, there are four parts to the memo’s heading: Date: To: From: and Re:

Caution: This assignment is about inherent risk relating to the financial report: that is, matters that have an impact on audit planning, audit procedures and the auditor’s opinion, it is not about business risk in general. In the past students have done great business risk analyses, but not mentioned audit risk or the audit ??" and failed. You need to identify how the risks are likely to lead to specific errors in the financial reports, Eg if inventory is particularly subject to theft, like in a jewellery store, then this risk is likely to result in overstatement of inventory because some reported inventory items will not exist.

As a guideline, if you have not mentioned the audit in any one paragraph of your report, that paragraph is probably irrelevant and will receive no marks.
Additionally, examine your answer to make sure it is relevant to your company. No marks will be given for general observations that might be relevant to the audit of any company. This assignment is about a specific job that you might be assigned when you are hired by an audit firm. General information is of no use. Theoretical information is of no use and will attract no marks. You can assume your audit partner knows more about auditing than you do.

Essay Instructions: Auditing and Assessing Financial Condition
The regular examination of financial documents goes a long way toward establishing trust with stakeholders such as board members, clients, patrons, and funding agencies. As you have been reading throughout this course, financial and budgeting functions are integral parts of an organization?s success, and auditing and assessing financial condition are vital parts of the fiscal functioning of an organization. Assessing the financial condition of an organization involves finding out whether it has the cash to meet its operations (from taxes, fees, and other revenue), and determining if its assets exceed its liabilities.
In this Application, you will evaluate the financial condition of a hypothetical town by considering trends and what they could mean.
To prepare for this assignment:
Focusing on the function of audits within an organization and how financial reports give a picture of the overall financial condition of an organization.
Review the presentations from the Association of Local Government Auditors Web site, focusing on auditing best practices.
Consider how the finances of public organizations are evaluated.
Consider the role of auditing and assessment of financial condition in finance and fiscal matters in public organizations.
Think about how public organizations can use data from audits and assessments to increase their effectiveness.
The assignment: (1?2 pages)
Support your Assignment with specific references to all resources used in its preparation

Auditing and Assessing Financial Condition


Swobodaville is a hypothetical town that provides the context for this Assignment. What follows is a table that presents 5 years of data.
Evaluate Swobodaville?s financial condition based on the partial list of factors given. That is, consider any observable trends in the data and what they could potentially mean. To compare the data, in some cases it is best to convert dollar figures to percentages. The best approach to analyzing this table is to look at changes from year to year. Then explain what types of recommendations you would make to the city.
YEAR
FACTOR 1 2 3 4 5
Revenue per household $321 $318 $329 $329 $328
Sales tax as a percent of total revenue .938 .936 .935 .935 .933
Expenditures per household $321 $321 $333 $334 $334
Low-income, sales tax-exempt households as a percent of population
.139
.139
.142
.155
.156

Consider the following:
Analyzing revenue structure will help identify the following types of problems.

? Deterioration of revenue base
? Internal procedures or legislative/board policies that may adversely affect revenue yields
? Over-dependence on obsolete or external revenue sources
? User fees that do not cover the cost of services
? Changes in tax burden
? Lack of cost controls and poor revenue estimating practices
? Inefficiency in the collection and administration of revenues

Analyzing an expenditure profile can reveal the following:

? Excessive growth of overall expenditures as compared to revenue growth or growth in wealth (personal and business income)
? Undesirable increases in fixed costs
? Ineffective budgetary controls
? A decline in personnel productivity
? Excessive growth in programs, which create future expenditures

Community needs and resources encompass economic and demographic characteristics, including population, employment, personal income property value, and business activity. An examination of demographic and economic characteristics can identify the following:

? A decline in the tax or revenue base
? A need to shift public or customer service priorities
? A need to shift policies because of a loss of competitive position

Web Sites
Association of Local Government Auditors: 2006 presentation on Audit Committee and Auditor Independence
http://www.governmentauditors.org/images/stories/advocacy/SanDiegoPresentation.ppt
Association of Local Government Auditors: 2005 Financial Management Seminar: City Audits - The Benefits and the Barriers - Establishing Independent Audit Committees and Supporting Independent Performance Auditors
http://www.governmentauditors.org/images/stories/advocacy/mar07updateofDec%2005Leaguepresentation.doc

Essay Instructions: Audit failure is an instance where an auditor comes to a wrong conclusion about the financial statements of an entity. SunBeam company is an example of audit failure.
Use SunBeam company and and with the help of the internet or any other resources available to you write a paper describing the company, the nature of material misstatement
In its financial statements and the resulting implications to the company and its audit firm. Describe in your opinion, why the audit failed and how the failure could have been prevented.