Auditing in Society Assignment

This assessment covers the following learning outcomes from the module. Knowledge

1. An understanding of the nature and importance of auditing in society.

2. An understanding of the role and responsibilities of directors, auditors and others within the corporate framework.

3. An understanding of the audit framework in the UK.

4. An understanding of the different types of audit and their roles in corporate governance.

5. An understanding of the global issues in audit and accounting.

Skills

An ability to apply the key management accounting concepts and techniques in order to contribute to successful decision making in an organisation.

Students are required to submit their assignments through Turnitin on Canvas then to JIRA. Only assessments submitted through JIRA and Canvas will be marked.

Requirements: You must answer both questions. Each question carries a maximum mark of 50% Assignment Brief:

Please note that this is an individual assignment and the policy of the University on “Policy on Cheating, Collusion and Plagiarism” applies.

Please write your Tutor’s name clearly on the front of the assignment.

Required:

(a) Comment on the external auditors' responsibility with regard to the detection of fraud and from the information provided, critically explain why it was 'perhaps understandable' that they did not detect the fraud which was perpetrated against Rock Star Ltd.

(b) State and explain FOUR inherent limitations of internal control.

(c) Identify and evaluate THREE factors which influence the reliability of audit evidence

(d) Describe and explain the main methodologies the auditors can use to gather sufficient evidence

(e) Analyse the following components of audit risk

i. inherent risk

ii. control risk

iii. detection risk

You are an audit supervisor of Caving & Co and you are planning the audit of Hurling Co, a listed company, for the year ending 31 March 20X7. The company manufactures computer components and forecast profit before tax is $33·6m and total assets are $79·3m.

Hurling Co distributes its products through wholesalers as well as via its own website. The website was upgraded during the year at a cost of $1·1m. Additionally, the company entered into a transaction in February to purchase a new warehouse which will cost $3·2m. Hurling Co’s legal advisers are working to ensure that the legal process will be completed by the year end. The company issued $5m of irredeemable preference shares to finance the warehouse purchase.

The company has launched several new products this year and all but one of these new launches have been successful. Feedback on product Luge, launched four months ago, has been mixed, and the company has just received notice from one of their customers, Petanque Co, of intended legal action. They are alleging the product sold to them was faulty, resulting in a significant loss of information and an ongoing detrimental impact on profits. As a precaution, sales of the Luge product have been halted and a product recall has been initiated for any Luge   products sold in the last four months.

Assignment Requirements

Hurling Co’s finance director has informed the audit engagement partner that one of the company’s non-executive directors (NEDs) has just resigned, and he has enquired if the partners at Caving & Co can help Hurling Co in recruiting a new NED. Specifically he has requested the engagement quality control reviewer, who was until last   Hurling Co, assist the company in this recruitment. Caving & Co also provides taxation services for Hurling Co in the form of tax return preparation along with some tax planning advice. The finance director has recommended to the audit committee of Hurling Co that this year’s audit fee should be based on the company’s profit before tax. At today’s date, 20% of last year’s audit fee is still outstanding and was due to be paid three months ago.

Required:

Describe FIVE audit risks, and explain the auditor’s response to each risk, in planning the audit of Hurling Co. Note: Prepare your answer using two columns headed Audit risk and Auditor’s response respectively.

(i) Critically explain FIVE ethical threats which may affect the independence of Caving & Co’s audit of Hurling Co; and

(ii) For each threat, suggest a safeguard to reduce the risk to an acceptable level. Note: The total marks will be split equally between each part. Prepare your answer using two columns headed Ethical threat and Possible Safeguard respectively. (25 marks)

Complete all the tasks in order. Consult with your tutor if you are uncertain about any aspect of the assignment.

Submission Policies:

· You are required to submit your work within the bounds of the University Infringement of Assessment Regulations.

· Your assignment must be submitted to Canvas for Turnitin and JIRA in electronic form withan accurately and clearly completed title page.

· All Students must submit a Turnitin© report along with their assignment to JIRA. If under any circumstances the assignment is submitted without this, the final mark will be withheld and there will be potential delays.

· Students may submit drafts through Turnitin and generate reports prior to submission. The last submission prior to the deadline will be deemed to be the final submission for assessment purposes. Please note that you need to allow 24 hours between submissions through Turnitin to generate a fresh/new/different report so please do not leave submission to the last moment.

· All works submitted MUST be original. If under any circumstances a student is found to be violating any of the 'Academic Integrity' rules, the university deserves the right to take legal and disciplinary actions against the individual.