Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.
Audit Scope
The scope of audit work identifying different areas of investigation is set out in the following which would be carried out upon agreement with the company’s owner and CEO Mr. Ronald Trump.
Risk Assessment: The audit will identify and investigate accounting and reporting issues that may be considered as high, medium and low risks areas and may result in material misstatement (PCAOB, 2002)
Process Compliance: The audit will ascertain the sufficiency and accuracy of systems and procedures within the company so that their complacency levels for detecting fraud can be assessed. Overall evaluation of the working environment will be part of this as well (PCAOB, 2002).
Output Compliance: The audit will determine the relevance of information according to the various accounting assertions.
Integrity of Performance Reporting: The audit will evaluate the quality of information prepared by the company for internal usage.
Audit Activities
To meet the objectives of the scope of audit laid out above the following audit activities will be conducted:
- The financial statements including the Balance Sheet, Income Statement, Cash Flows, and Changes in Equity of Torpus will be subject to examination.
- The working papers used for the preparation of financial statements of the company will be examined.
- Both manual and computerized accounting and reporting systems will be tested.
- Different internal reports generated will be thoroughly checked.
- Any internal control system that the company has in place will be evaluated.
- Overall assessment of the business as a going concern will be established.
To carry out these activities the auditor will undertake both analytical and substantive testing procedures to form an independent opinion and duly submit it to the bank along with audit findings.
Information subject to Audit
Torpus’s financial statements are not audited therefore the auditor must subject the following information to audit procedures which would help in forming a final audit opinion:
- The company’s balance sheet as of December 31, 2011, indicates the existing loan arrangement of the company for an amount of $56.772. The terms of the loan and related accounting records shall be examined to assess the company’s ability to meet its debt obligations and interest payments.
- The horizontal analysis of the company’s balance sheets for the period 2011 to 2012 indicates a rise in inventory value by $35,990.00. The increase in value may be considered as a risk area and it will be subject to substantive testing for ensuring its existence and value.
- The accounting treatment of different elements of the company’s financial statements will be checked by the principles and guidelines of FRSs. Furthermore, the accounting records maintained on information systems will be examined for the loss of information and compatibility with paper records.
Conducting Interview & Collecting Evidence
Interviews conducted for evidence collection during audits are typically aimed at recording both verbal and non-verbal cues using concrete, unambiguous and descriptive language for asking questions and responding. The interviews are aimed at staff who has considerable knowledge of the issues under review during the audit. Interviews allow auditors to gather responses regarding issues that require explanation and clarification to assess the sufficiency and appropriateness of the information. Non-verbal cues are no less important as they could allow auditors to grasp the reactions of interviewees to different questions and replies and probe further by asking additional questions. Evidence will be collected about identified risk areas from the examination of inventory, financial statements, internal documents, and information systems. As auditor observed that Mr. Ronald’s credit card did not work at the restaurant therefore further confirmation could be sought from the card issuing bank. The auditing standards provide guidelines for auditors to gather reliable and sufficient evidence by conducting the inquiry, observation, inspection, and analytical procedures based on an open vision and understanding of the risk issues to address them correctly.
Evaluation of Audit Evidence
The audit evidence collected through different techniques and testing forms the basis for the auditor’s opinion. It is the responsibility of the management to provide sufficient and credible information to the auditor and further accountability is suggested by reporting on the internal controls of the company. The evidence will be assessed for any form of materiality and possible risks of misstatement. From the evidence collected during the audit of Torpus it could be found that the company lacked internal controls and accounting information had been lost either through direct deliberation or system problem. Therefore it is difficult for the auditor to form an opinion on the financial statements of the company. To add to the difficulty the accountant of the company left for a holiday on the same day which suggests that the CEO does not want the auditor to investigate thoroughly and the accountant is not available to provide a duplicate of the income statement which implies that the evidence will be incomplete. The auditor must have sufficient evidence that will then be assessed according to different accounting standards and guidelines. The auditor’s intuition and judgment also plays important role in assessing the levels of risk associated with different issues. The overall objective is to form a high level of assurance which is subjective to information provided to the auditor.
References
PCAOB. (2002). AU Section 316: Consideration of Fraud in a Financial Statement Audit. Public Company Accounting Oversight Board. Web.
Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.