Assignment Task:

Assessment Description

As part of the planning process for this year's audit, your audit partner, Bill Murray, has had preliminary discussions with the audit committee and the Chief Financial Officer (CFO), Jayne Brewster. He has handed you the notes from that meeting as well as key financial information. The notes focus on the following issues:

  • A new international company is planning to launch into the Australian market within the next 6 months. This company aggressively slashes prices to gain market share and has decimated competitors in other markets it has entered. E&B also faces intense competition from local retailers, forcing it to spend more on advertising and promotions, as well as enhancing product offerings and the availability of customer credit;

  • Recent issues over the underpayment of part-time and casual staff have been identified. 9 staff were underpaid a total of $50,000;

  • E&B conducts a large part of its business online and is therefore exposed to the recent significant increase in cyber-attacks;

  • In 2018, the company incurred foreign exchange losses of $1.3 million on its purchases of finished goods. To minimize exposure to such risks, E&B enters into foreign exchange forward contracts.

  • New versions of existing products (such as the iPhone, iPad, laptops, and HDTVs) are being released on an increasingly shortened cycle.

Question 1

Using all of the information provided above, prepare a preliminary planning report for Bill Murray that: 

  1. Undertakes analysis of E&B Ltd's draft financial statements, that provides:

    1. A simple comparison of the 2018  and 2017 financial information.

    2. A common size statement of the Income Statement and the Balance sheet.

    3. Ratio analysis of E&B Ltd’s profitability, liquidity, solvency, and efficiency.

    4.  includes a summary of the background and additional information on E&B Ltd to provide context for the rest of the report.

    5. identifies three account areas, other than cash and the equity accounts, which might be at risk of material misstatement. 

    6. justifies the account areas selected in (c) using the analysis of the background information and the financials from parts (a) & (b). 

    7. identifies and justifies two key assertions for each accounting area identified in (c). 

    8. assesses the going concern position of E&B Ltd.

The report is to include a cover page, an executive summary (optional), a contents page, an introduction, responses to the above requirements with appropriate headers/sub-headers, and a conclusion.

Required:  

Prepare a report for your audit partner that identifies and justifies:

  1. Ten (10) control strengths over Bilbo's purchases and accounts payable process.

  2. A test of control for five (5) of the ten (10) controls identified in (a). 

  3. The three (3) audit assertions most at risk. 

  4. Five (5) control weaknesses and the potential impact on the key audit assertions. 

  5. Five (5) control improvements that Bilbo could implement to address the weaknesses identified in (d).  

The report is to include a cover page, a contents page, an introduction, responses to the above requirements with appropriate headers/sub-headers, and a conclusion. 

 

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  • Uploaded By : Alex Cerry
  • Posted on : April 11th, 2019

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