Understanding planning stage of the audit process: Rreview of client business and perform audit risk analysis
Assume that you are audit senior in an accounting firm. Your firm has recently won an audit for a company that you selected in assignment
1. The whole assignment should be prepared based on your selected company in the form of report. The assumptions are that your firm does not have any other clients that operate in this industry and your audit partner is concerned about his lack of knowledge of the industry the company is operating in.
Your audit partner asks you to prepare a memo/ report on the ‘state of the company's industry' and associated risk factors. Your report must cover the requirements below and exhibit effective communication.
a) Prepare a list of three useful sources (the relevant information from the particular source must also be listed) that you can use to obtain the required industry knowledge. An ex of a valid source of research material would be Australian Bureau of Statistics
b) Prepare a memo to the audit partner on the ‘state of the company's industry' and associated risk factors.
c) Identify a relevant general balance-related and a transaction-related audit objective based on the finding from the risk factors in part b). The required audit objectives here must be specific to the company that you are working on and causal relationship with part b) must be established.
d) Perform overall analytical procedures to identify significant changes in the financial positions or results of the business which require detailed investigation and explanation. The overall analytical procedures / risk analysis should at least cover the areas in liquidity, and profitability.