MAA303 Auditing Trimester 3, 2018 Assessment 2, Part B– Case study DUE DATE AND TIME: Week 8, 10/1/2019, before 11:59PM PERCENTAGE OF FINAL GRADE:20% WORD COUNT: XXXXXXXXXXwords (maximum) without...

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Answered Same DayJan 11, 2021MAA303Deakin University

Answer To: MAA303 Auditing Trimester 3, 2018 Assessment 2, Part B– Case study DUE DATE AND TIME: Week 8,...

Soumi answered on Jan 12 2021
155 Votes
MAA303 AUDITING
ASSESSMENT 2, PART B– CASE STUDY
Table of Contents
Introduction    3
a) Materiality Concept and its Significance    3
b) Analytical Review of Company’s Performance    3
c) Control and Inherent Risks    4
Conclus
ion    5
References    6
Introduction
Audit is an independent examination of the books of accounts of an entity with a view to provide an opinion on the true and fair view of the books of account. The auditor is required to enquire into the entire item in the books of account. The material items should be taken into consideration properly as it may affect the true and fair view of the auditor. Auditors use ratio analysis as a tool to analyse the financial statement of the company.
a) Materiality Concept and its Significance
According to Weygandt, Kimmel and Kieso (2015), the Materiality concept by GAAP states that every small information and accounting detail must be entered in the financial statements and any critical information must not be withheld or concealed from investors, lenders or regulators.
Stances that are important enough to be reported to the audience are the Material Items under the Materiality concept. A firm may not have to create a provision in its accounts for the items if that is immaterial. The Materiality concept is important because:
· To give the picture of the financial condition of a firm through its Annual report.
· Lenders opinions and Bond ratings must not be concealed.
· Potential Mergers and Acquisition and their net impact must be accounted and reported.
The material items are the one, which have an impact on the financial items. According to Lisowsky, Minnis and Sutherland (2017), there are various benchmarks for considering materiality. The company has decided the material benchmarks. The materiality value for sales is 0.5%-1%, 1%-2% for total assets and 5%-10% for net profits. Therefore, a sales item will be considered as material, if the value is greater than $80,000. Similarly, assets will be considered as material if its value is greater than $272500. On the other hand, if there is an item amounting to $4550, it will be considered as material. The auditor should use his judgment to audit the items, which are greater...
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