country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

ACC621 Auditing And Professional Practice For Chartreuse Enterprises

tag 0 Download14 Pages 3,274 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Questions:

Prepare a report for the audit senior, which addresses the 5 issues below.
 
1. The audit partner has suggested that the preliminary assessment of materiality for the financial report as a whole be set at $15,000. Comment on the appropriateness of this figure for your client. Provide evidence to support your view. Include a brief discussion of the effect that changing the preliminary assessment would have on the
audit budget.
 
2. Prepare an analytical review (in the form of a trend analysis) using the income statement items from the trial balance. Note: Present your analysis in table format; comments on the results are not required for requirement 2.
 
3. Use the trend analysis to identify 4 income statement accounts that appear to be atrisk of material misstatement. Provide justification for why these accounts should be subjected to significant audit testing. In your explanations, identify an assertion that is likely to be at-risk for each account (i.e. identify 1 assertion per account; 4 in
total).
 
4. For each account and assertion identified in requirement 3, design and describe an audit procedure that would provide relevant evidence for this (i.e. describe 1 procedure for each account; 4 procedures in total). Note: you need to explain the procedures in your own words with as much detail as possible (for example, if applicable, identify the sampling frame and specific documents required for your procedure). 
 
5. The audit partner has suggested that fraud risk should not be considered for this client, as he feels that the client’s staff are all very trustworthy. Comment on the appropriateness of the audit partner’s suggestion. Identify whether there are any indications of fraud evident in the analytical review.

 

Answer:

Introduction 

In the given case, an audit is to be conducted for one of the small client named Chartreuse Enterprises and hence the audit partner of the company has requested the audit assistant to prepare an audit plan for the same based on the trial balance of the client given below. The Trail balance is to be studied and the significant audit accounts which need immediate attention and checking needs to be highlighted. In the report below, the materiality to be taken for the audit of the client has been revisited and calculated (Goldmann, 2016). The preliminary analytical review of the company has been done and trend analysis has been done to find out the risk of material misstatement and a brief justification has been provided as to why these accounts are eligible for audit testing. The audit procedure that would be required in each of the above cases to find out audit evidences has also been mentioned. Finally, the fraud risk analysis of the client has been done based on the analytical review.

 

Discussion and Analysis 

The trail balance of the client, Chartreuse Enterprises has been shown below:

Chartreuse Enterprises

Trial Balance

 

Particulars

 

Jul 1, 2016 - Apr 30, 2017

 

Jul 1, 2015 - June 30, 2016

 

Debit

Credit

 

Debit

Credit

Cash at Bank

 

         85,000

 

 

             80,000

 

Accounts receivable

 

       118,340

 

 

          111,000

 

Inventory

 

       187,500

 

 

          174,000

 

Machinery

 

         71,000

 

 

             65,000

 

Accumulated Depreciation

 

 

      30,959

 

 

      24,375

Motor Vehicles

 

         66,000

 

 

             66,000

 

Accumulated Depreciation

 

 

      27,308

 

 

      21,000

Furniture

 

            7,400

 

 

               7,400

 

Accumulated Depreciation

 

 

         2,820

 

 

        2,220

Bank Loan

 

 

    230,000

 

 

   230,000

Sales

 

 

    157,500

 

 

   187,450

Cost of sales

 

         57,917

 

 

             63,595

 

Consultancy fees

 

 

      49,375

 

 

      57,000

Interest income

 

 

               40

 

 

              50

Bank charges

 

               290

 

 

                   350

 

Depreciation

 

         13,492

 

 

             15,863

 

Interest expense

 

            9,583

 

 

             11,500

 

Printing

 

               210

 

 

                   250

 

Repairs and Maintenance

 

            1,200

 

 

               5,050

 

Wages

 

         40,000

 

 

             53,000

 

Superannuation

 

            2,967

 

 

               4,770

 

Total

 

       660,898

    498,002

 

          657,778

   522,095

 

 

 

 

 

 

 

Materiality is something, which is very important and critical from the auditor’s perspective. Some information, misstatement, error or omission is said to be material in individual or in aggregation if the same has the capability or the ability to change the economic decision of the user(Belton, 2017). It serves a very important purpose in the audit as it helps in classifying what is material and what is not, thereby helping the auditor in focusing in critical and significant areas only. In the case of the given company, the preliminary materiality level has been set at $15000, which is very high considering the financials of the company (Islam & Islam, 2011). The IASB as well as the accounting board and firms have prescribed and set many norms for the determination of the materiality limits, which has been explained below with the example. The materiality limits can be in the range of 0.5-1% of gross revenue, 1-2% of the total assets or the gross profit, 5-10% of the net profit, 2-5% of the shareholder’s return, etc. The materiality level as per the below working should be in the range of $787.5 to $157 as if any other limit is being chosen, lot of material accounts would be missed out in the process and from the ambit of the audit (Werner, 2017). Considering the given materiality limit, the accounts, which would not be ignored, is the interest expenses, superannuation account, repairs and maintenance, depreciation, etc.

(in $)

Chartreuse Enterprises

Quantitative estimate of materiality

Criterion

Base

Amount

Materiality level/range

0.5% to 1% of gross revenue

Gross Revenue

157,500.00

787.5 to 1575

1% to 2% of the total assets

Total Assets

474,152.93

4741.53 to 9483.06

1% to 2% of the gross profit

Gross Profit

59,583.33

595.83 to 1191.67

2% - 5% of the shareholders’ equity

Equity

NA

NA

5% to 10% of the net profit

Net profit

81,256.67

406.28 to 812.57

The analytical review has been done in the form of the trend analysis and the preparation of the common size balance sheet for the years 2017 and 2016. Each of the line items of the profit and loss account has been represented as a percentage of the sales(Trieu, 2017).

Chartreuse Enterprises

Income Statement

Particulars

         2,017

 % of sales

         2,016

 % of sales

Sales

    157,500

76.1%

    187,450

76.7%

Consultancy fees

      49,375

23.9%

      57,000

23.3%

Interest income

               40

0.0%

               50

0.0%

Total Revenue

    206,915

100.0%

    244,500

100.0%

 

 

 

 

 

Less: Expenses

 

 

 

 

Cost of sales

      57,917

28.0%

      63,595

26.0%

Bank charges

            290

0.1%

            350

0.1%

Depreciation

      13,492

6.5%

      15,863

6.5%

Interest expense

         9,583

4.6%

      11,500

4.7%

Printing

            210

0.1%

            250

0.1%

Repairs and Maintenance

         1,200

0.6%

         5,050

2.1%

Wages

      40,000

19.3%

      53,000

21.7%

Superannuation

         2,967

1.4%

         4,770

2.0%

Total Expenses

    125,658

60.7%

    154,378

63.1%

 

 

 

 

 

Net Profit

      81,257

39.3%

      90,122

36.9%

 

 

 

 

 

 

Chartreuse Enterprises

Income Statement

Particulars

               2,017

               2,016

 Variance

Sales

          157,500

          187,450

-         29,950

Consultancy fees

             49,375

             57,000

-           7,625

Interest income

                     40

                     50

-                 10

Total Revenue

          206,915

          244,500

-         37,585

 

 

 

 

Less: Expenses

 

 

 

Cost of sales

             57,917

             63,595

-           5,678

Bank charges

                   290

                   350

-                 60

Depreciation

             13,492

             15,863

-           2,372

Interest expense

               9,583

             11,500

-           1,917

Printing

                   210

                   250

-                 40

Repairs and Maintenance

               1,200

               5,050

-           3,850

Wages

             40,000

             53,000

-         13,000

Superannuation

               2,967

               4,770

-           1,803

Total Expenses

           125,658

           154,378

-         28,720

 

 

 

 

Net Profit

             81,257

             90,122

-           8,865

Net Profit %

                       0

                       0

                     0

As per the trend analysis above, we can see a number of accounts which are at risk in the given trail balance and there is a risk of material misstatement in a few of them and thus they need significant audit attention.

Sl. No.

Account Name

Audit Assertion and risk

1.

Sales

The overall revenue has declined by 15.37% and the direct sales has declined by 15.98%. The net profit has also been on the lower side as compared to the last year by 9.84% and it needs to be checked if it is due to the fall in prices or fall in quantity or it is due to the some other external reasons. In terms of the common size statement, the sales percentage has been more or less same (Saeidi, 2012).

2.

Depreciation expenses

It can be seen that the percentage of depreciation expenses has remained 6.5% of revenue in each of the years. Furthermore, it has declined by almost 15% as compared to the last year. Being a fixed expense, it should not have gone down so estimations and judgement of the management in this regard, the useful lives, etc. needs to be checked. It also needs to be seen if the company or management has made any major acquisition or disposal of the assets (Jefferson, 2017).

3

Wages

Wages being a direct expenses, was expected to decrease in the proportion of the sales whereas in the given case, the same has fallen by around 24.53% and in case, the expense is measured as a percentage of the overall sales for the year, it is seen that it was 21.7% of sales in 2016 and dropped to 19.3% in 2017. It needs to be checked if the number of labour resources have been cut or the wages have been declined (Sithole, et al., 2017).

 The audit assertions for each of the given accounts has been explained in detail in the above question. Now the audit procedures to be employed for checking each of these accounts are shown below:

Sales: Here pareto analysis can be employed to do the audit of sales, vouching of the invoices should be done, besides the prices and the quantity sold for both the years needs to be checked(Knechel & Salterio, 2016). The top contributing part number or the products can be considered for the audit purposes and it needs to be checked if the revenue recognition policy and standards have been adhered to.

Depreciation: Careful scrutiny needs to be done by the audit team in this regard. It needs to be checked if the acquisitions or disposals have been done during the year and is there a change in the method of depreciation or the rate of depreciation(Raiborn, et al., 2016). The auditor should also check if the proper accounting standard has been used for accounting of the depreciation expenses and if the management has conducted physical verification of assets during the year.

Wages: Since wages is direct expenses, it should have fallen in proportion of the sales but it has fallen more in proportion of the sales and therefore it needs to be checked if the number of labourers has been reduced or the wage per hour has been reduced(Bizfluent, 2017). It also needs to be checked if the Minimum Wages Act has been adhered too and if the company is giving adequate security to its labourers.

Conclusion & Recommendation 

  1. In the given case, the audit partner of the firm has suggested that the fraud risk checking is not to be conducted for the given client Chartreuse Enterprises as the company is a very professional and authentic one and can be trusted(Dichev, 2017). This instance is against the principle of professional scepticism, as per which even if the client has maintained all the work ethics and has prepared and presented the annual accounts in the best possible manner, even then he should be checked and audited thoroughly with respect to the audit. Furthermore, from the preliminary audit analytical procedures, it can be seen that there are many areas in which audit can be conducted and which a deviation from the normal course of business are. There has been a sharp decline in the sales, cost of sales and also the profitability and hence the entity should be checked for fraud risk factors. Some of the heads under which fraud analysis can be done are as follows:
  2. The superannuation expenses has decreased by more than 37% as compared to the last year and therefore it is expected that a large number of employees would have left the company, the same needs to be checked from employee register.
  3. There is a sharp decline in the repairs and maintenance expenditure and it needs to be seen if accounting has been done correctly and all the present year expenses has been booked and not shifted to future years(Choy, 2018).
  • Finally, there is also a significant decline in the interest expense by 16.67% as compared to the last year, which shows that either the company is using less debt or it has made repayment of the debt in the current year(Linden & Freeman, 2017).

These are few of the major fraud risk factors, which needs to be examined and audited.

 

References 

Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd.

Bizfluent, 2017. Advantages & Disadvantages of Internal Control. [Online]
Available at: https://bizfluent.com/info-8064250-advantages-disadvantages-internal-control.html
[Accessed 13 September 2018].

Choy, Y. K., 2018. Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis. Ecological Economics, p. 145.

Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), pp. 617-632.

Goldmann, K., 2016. Financial Liquidity and Profitability Management in Practice of Polish Business. Financial Environment and Business Development, 4(3), pp. 103-112.

Islam, M. A. & Islam, M. A., 2011. Environmental incidents in a developing country and corporate environmental disclosures: A study of a multinational gas company. Society and Business Review, 6(3), pp. 229-248.

Jefferson, M., 2017. Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland. Technological Forecasting and Social Change, pp. 353-354.

Knechel, W. & Salterio, S., 2016. Auditing:Assurance and Risk. fourth ed. New York: Routledge.

Linden, B. & Freeman, R., 2017. Profit and Other Values: Thick Evaluation in Decision Making. Business Ethics Quarterly, 27(3), pp. 353-379.

Raiborn, C., Butler, J. & Martin, K., 2016. The internal audit function: A prerequisite for Good Governance. Journal of Corporate Accounting and Finance, 28(2), pp. 10-21.

Saeidi, F., 2012. Audit expectations gap and corporate fraud: Empirical evidence from Iran. African Journal of Business Management, 6(23), pp. 7031-41.

Sithole, S., Chandler, P., Abeysekera, I. & Paas, F., 2017. Benefits of guided self-management of attention on learning accounting. Journal of Educational Psychology, 109(2), p. 220.

Trieu, V., 2017. Getting value from Business Intelligence systems: A review and research agenda. Decision Support Systems, Volume 93, pp. 111-124.

Werner, M., 2017. Financial process mining - Accounting data structure dependent control flow inference. International Journal of Accounting Information Systems, Volume 25, pp. 57-80.

OR

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). Auditing And Professional Practice For Chartreuse Enterprises. Retrieved from https://myassignmenthelp.com/free-samples/acc621-auditing-and-professional-practice-for-chartreuse-enterprises.

"Auditing And Professional Practice For Chartreuse Enterprises." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/acc621-auditing-and-professional-practice-for-chartreuse-enterprises.

My Assignment Help (2020) Auditing And Professional Practice For Chartreuse Enterprises [Online]. Available from: https://myassignmenthelp.com/free-samples/acc621-auditing-and-professional-practice-for-chartreuse-enterprises
[Accessed 28 March 2020].

My Assignment Help. 'Auditing And Professional Practice For Chartreuse Enterprises' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/acc621-auditing-and-professional-practice-for-chartreuse-enterprises> accessed 28 March 2020.

My Assignment Help. Auditing And Professional Practice For Chartreuse Enterprises [Internet]. My Assignment Help. 2020 [cited 28 March 2020]. Available from: https://myassignmenthelp.com/free-samples/acc621-auditing-and-professional-practice-for-chartreuse-enterprises.


Presenting a well-crafted dissertation is anything but simple. However, the experts at MyAssignmenthelp.com can simplify the elaborate process for you. They will guide you on diverse dissertation topics, no matter how complex they are. Right from the dissertation proposal to the dissertation conclusion, our writers will take care of every step when you delegate your papers to them. In order to ensure the quality of your papers, they will prepare a clear dissertation structure. They will also present the dissertation methodology accurately. So, if you ever feel confused about how to write a dissertation, you can rely on MyAssignmenthelp.com.

Latest Accounting Samples

BSBFIM501 Financial Management

Download : 0 | Pages : 5
  • Course Code: BSBFIM501
  • University: Victoria University
  • Country: Australia

Answer: Part A The three major types of commercial outlines has been described here-in-below: Company: The Company is a separate legal entity distinct from its owner. There are generally two types of company i.e. Private limited and public limited. Under, this structure the owners have a limited liability up until the face value of shares in case of shares is partly paid. The other advantages includes large pooling of resources and numerou...

Read More arrow

COAC216 Cost Accounting

Download : 0 | Pages : 7

Answer: Introduction  The aim of the report is to evaluate the roles of the managerial accounting in the business operations by making the use of the latest financial statements which can find from the annual report, company website and from other sources. The company that has been selected for the analysis is Hitachi. Hitachi is one of the well-known Japanese manufacturing conglomerate companies with the headquarters in Chiyoda, Tokyo, ...

Read More arrow

ABD703 Ethical And Professional Aspects Of Business And Management

Download : 0 | Pages : 26
  • Course Code: ABD703
  • University: Abacus Institute Of Studies
  • Country: New Zealand

Answer: Introduction In the era of growing and modernizing economy, it is important for everyone to be upgraded to technological and innovational changes that may provide each one get access to better technology and efficient product. The Product developed for the Venture fund is a Pro and an active product that will be an innovative product for the athletes. The product will offer with various kinds of advanced feature to the athletes and fi...

Read More arrow Tags: New Zealand Auckland Management University of Auckland 

ABD703 Ethical And Professional Aspects Of Business And Management

Download : 0 | Pages : 26
  • Course Code: ABD703
  • University: Abacus Institute Of Studies
  • Country: New Zealand

Answer: Introduction In the era of growing and modernizing economy, it is important for everyone to be upgraded to technological and innovational changes that may provide each one get access to better technology and efficient product. The Product developed for the Venture fund is a Pro and an active product that will be an innovative product for the athletes. The product will offer with various kinds of advanced feature to the athletes and fi...

Read More arrow Tags: New Zealand Auckland Management University of Auckland 

ABD703 Ethical And Professional Aspects Of Business And Management

Download : 0 | Pages : 26
  • Course Code: ABD703
  • University: Abacus Institute Of Studies
  • Country: New Zealand

Answer: Introduction In the era of growing and modernizing economy, it is important for everyone to be upgraded to technological and innovational changes that may provide each one get access to better technology and efficient product. The Product developed for the Venture fund is a Pro and an active product that will be an innovative product for the athletes. The product will offer with various kinds of advanced feature to the athletes and fi...

Read More arrow Tags: New Zealand Auckland Management University of Auckland 
Next
watch

Save Time & improve Grades

Just share your requirements and get customized solutions on time.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,234,343

Orders

4.9/5

Overall Rating

5,066

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

285 Order Completed

99% Response Time

Eugene Baranowski

MBA in Supply Chain

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

798 Order Completed

97% Response Time

Benjamin Blakeman

MSc in Medical Technology

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

93 Order Completed

100% Response Time

Jackson Mitchell

MiM (Masters in Management) in Supply Chain Management

New Jersey, United States

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

1309 Order Completed

100% Response Time

Gemmie Chen

MSc in Nursing

Singapore, Singapore

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

It was great assignment and good work with the description and given before the due date.

flag

User Id: 187468 - 28 Mar 2020

Australia

student rating student rating student rating student rating student rating

HELLO, FOR ME EVERY THING WAS GREAT, BUT MY PROFESSOR GRADED ME 11.5 OUT OF 20. SAYING THAT THERE ARE SOME ERRORS REGARDING GRAMMAR AND PREPOSITIONS.

flag

User Id: 392966 - 27 Mar 2020

Australia

student rating student rating student rating student rating student rating

They did my homework 3 times and each question was not answered correctly. I do not recommend you, very bad service, in the end I had to do it and I could not send the professor a time.

flag

User Id: 392341 - 27 Mar 2020

Australia

student rating student rating student rating student rating student rating

Very professional, I am totally satisfied with the result it will not be my last order, and Thank you

flag

User Id: 389494 - 27 Mar 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?