You are a new staff member of Monet & Associates, a mid-sized accounting firm and have been assigned to an engagement team that is conducting the financial report audit for Harrisons Ltd (Harrisons). The engagement team, under the guidance of the engagement partner, Vince Mater, is currently performing a preliminary risk assessment of the audit client. The following documents have been provided to you: Memo from audit partner, Vince Mater, dated 6th January 2020 which includes a summary of the initial audit procedures undertaken by the engagement partner for the 31 December 2019 audit. A relevant industry outlook report provided by the Australian Construction Industry Forum published on 7 November 2019.
You are a new staff member of Monet & Associates, a mid-sized accounting firm and have been assigned to an engagement team that is conducting the financial report audit for Harrisons Ltd (Harrisons). The engagement team, under the guidance of the engagement partner, Vince Mater, is currently performing a preliminary risk assessment of the audit client. The following documents have been provided to you:
- Memo from audit partner, Vince Mater, dated 6th January 2020 which includes a summary of the initial
audit procedures undertaken by the engagement partner for the 31 December 2019 audit. - A relevant industry outlook report provided by the Australian Construction Industry Forum published on 7 November 2019.
REQUIRED:
You have been asked to assess the inherent risk of the client and perform preliminary analytical procedures as part of the audit planning process in obtaining an understanding about the client’s business and indicate where there is an increased likelihood of misstatements.
Refer to the information provided (see photos attached) and answer the following question:
- Refer to Harrisons’ Income Statement data which is located in Appendix B to the Partner’s Memo and record your answers to the following questions:
- Perform analytical procedures for the completeness assertion of advertising expense, security expense and
bad debts expense and indicate whether you believe that there is a concern about material misstatements in each account.
- Perform analytical procedures for the completeness assertion of advertising expense, security expense and
2. Suggest an appropriate substantive procedure to test the completeness of security expense.
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