ACC30010 Auditing Assessment Outline Assistance

Q1. ACC30010 Auditing Fixed Assets

You are planning the audit of Goanna Ltd, for the year ended 30^th June 2021. Goanna is a large, multinational technology company operating out of Sydney, Australia, with substantial fixed assets.

Required:

In your own words thoroughly explain the audit objective related to Existence in the context of fixed assets at Provide both a definition and an illustrative example.
Provide one example, made up by you and therefore in your own words, of an internal control that could be implemented by the management at Goanna to safeguard the existence of their fixed assets.
Provide one example, made up by you and therefore in your own words, that would put the

Existence assertion for fixed assets “at risk” at Goanna.

Explain how the auditor could test whether the internal control you listed above effectively safeguards the Existence assertion for fixed assets at at Goanna.

[4 x 2.5 marks = 10 Marks]

Q2. ACC30010 Auditing B2C Sales

You are the audit senior at Zong & Zhang and are conducting the audit of Biggs Proe (Biggs) for the year ended 30 June 2021. Biggs is an online retailer of bags, with business booming during the coronavirus pandemic. As per the audit plan, the junior auditor has undertaken tests of controls over the B2C sales system, selecting a sample from the sales journal to test whether:

the order details are confirmed by the buyer before the sale is finalised and processed;
the credit/debit card details provided by the buyer are verified before the sale is finalised and processed;

the online sales are interfacing with the general ledger sales account as intended;

the shipping of goods was triggered by the sale being finalised.

Required:

For each of the above tests, explain the purpose/objective of the control.
For control (i) above, explain:
- how the auditor could test the control;
- what the result would be if the control was working as intended;
- what the result would be if the control was not working as intended.
For control (ii) above, explain:
- how the auditor could test the control;
- what the result would be if the control was working as intended;
- what the result would be if the control was not working as intended.

[4 + 3 + 3 = 10 Marks]

Q3. Using Generalised Audit Software for Substantive Tests

Hamilton Ltd is an Australian retailer of pharmaceuticals, located in Hawthorn, Victoria. The company brands itself as offering discounted prices for pharmaceutical products, supplements, and weight loss products. Hamilton maintains a computerised inventory system which includes the following fields for each of their product lines:

Stock code (alpha-numeric field);
Product description (alphabetical field);
Use-by Date (date field: dd/mm/yyyy);
Quantity in stock (numeric field);
Unit cost (numeric field);
Total value on hand (calculated field);
Date of last sale (date field: dd/mm/yyyy);
Year to date sales quantity (numeric field);
Last year’s year to date sales quantity (numeric field).

Required:

Using generalised auditing software in relation to the inventory of Hamilton:

Describe one substantive procedure related to the existence assertion.
Describe two substantive procedures related to the valuation and allocation assertion.
Describe two exception reports that could be generated to provide insights into potential problems with the data file.

[2 + 4 + 4 = 10 Marks]

Q4. Sampling

Maria Zamora is auditing the accounts receivable of Bishop Ltd for the year ended 30^th June 2021.

Bishop’s accounts receivable balance was recorded at $5,500,000 and comprised more than 1,500 customer accounts. However, Bishop’s 10 largest customer balances comprised a high percentage of the recorded accounts receivable (more than $1,000,000 or 30%). As a result, Maria is considering using Dollar Unit Sampling.

Based on prior audits and other judgments, Maria has established the following parameters:

Risk of Incorrect Acceptance	5%
Tolerable Error	$335,000
Expected Error	$180,000

Required:

Using the appropriate “Statistical Sample Sizes” Tables in your Textbook, determine the required sample size that would be used by Maria in the audit of Bishop Ltd. Explain how you arrived at this sample size – marks will be based on your workings/logic/approach, as well as the sample size – marks will be based on your workings/logic/approach, as well as the sample size specified.
Calculate the sampling interval – show all workings.
In your own words explain the concept of tolerable error in dollar unit sampling – this must be written in your own words.

[6 + 2 + 2 = 10 Marks]

Q5. Audit Opinions

You are auditing Barro Imports Ltd for the year ended 30^th June 2021. The company is incorporated in Australia and imports a variety of products from Spain, such as flamenco guitars and clothing, and Spanish knick-knacks. Consistent with previous years, Barro accounts for inventory on a last-in, first- out (LIFO) basis, and has a policy of waiting one year after the ‘last sale’ date before writing stock down. Unfortunately the coronavirus pandemic has meant an end of year stocktake was not performed, and you have been unable to apply other procedures to validate the existence of the inventory at balance date.

Required:

Using the Framework for Audit Opinions studied in this unit, explain the most appropriate auditor’s opinion for Barro Imports for the year ended 30^th June 2021. Justify all aspects of your response.

[10 Marks]

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