ACC5218 Auditing Practice, S1 2015

  • ACC5218 Auditing Practice, S1 2015
    Assessment: Assignment 1
    Description Wtg (%) Due/ submission instructions Type Word limits
    Assignment 1
    25 Submission*:
    Submit via Drop Box on Study Desk Individual
    1500 words
    Submission Instructions:
    • Due 20 April
    • The front style for your answer should be set to “Time New Roman” size 12 with 1.5 line spacing, 2.5cm margin & A4 page layout.
    • The assignment should be typed and a complete assignment cover sheet attached. Assignments with no cover sheet will attract 5% panalty of the maximum mark (i.e. 1 mark out of 20).
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    Assignment Coversheet
    School /Faculty: School of Commerce, Faculty of Business, Education, Law and Arts
    Course: ACC5218 Auditing
    Assignment Description/Number: Assignment 1
    Date Submitted: Assignment Due Date:
    Declaration: By submitting this assignment, I declare that:
    First Name Family Name/ Surname Student ID

  • University of Southern Queensland
    • No part of this assignment has been copied from any other person’s work except where due acknowledgement is made in the text, and
    • No part of this assignment has been written for me by any other person except where such collaboration has been authorised by the examiner concerned.

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    • An examiner has and may exercise the right not to mark this assignment without the above declaration.
    • If the above declaration is found to be false, action will be taken in accordance with USQ regulations.
    Please start your assignment here.

  • This assignment consists of THREE parts.
    Part 1 (20 marks)
    According to ASA 520 analytical procedures are defined as follow:
    …the term means evaluations of financial information through analysis of plausible relationships among both financial and non-financial data…
    Identify and explain the most important reasons for performing analytical procedures.
    Part 2 (60 marks)
    You are the audit senior on the audit of 21st Century Accessories Pty Ltd, a large distributor of technology accessories, whose main market lies in the 18-24 age group.
    This is the first year your audit firm has performed the audit. As part of the planning work, you have performed analytical procedures on an annualised basis and compared the results to industry averages and lasts year’s audited financial information. The results are given below:
    Industry Average 21st Century Accessories Pty Ltd
    Ratio 2014 2013 2014 2013
    1. Current ratio 2.84 3.27 1.89 2.24
    2. Accounts Receivables turnover 4.9 4.6 6.3 7.0
    3. Inventory turnover ratio 3.7 3.8 5.0 5.5
    4. Return on assets 7% 5% 13% 11%
    5. Profit margin 0.06 0.06 0.04 0.04
    6. Gross profit per cent 20% 26% 20% 18%
    Based on the information given:
    (i) explain the general meaning of each of the above ratios;
    (ii) discuss the conclusions that you can draw about 21st Century Accessories Pty Ltd financial position; and
    (iii) identify potential audit risks to be investigated further.
    Your answer must be presented in a three-column format as follows:
    What the ratio means Conclusions to draw Potential risks to be investigated

  • Part 3 (20 marks)
    ASA 500 mentions that the auditor should obtain sufficient appropriate audit evidence.
    Explain what is meant by sufficient appropriate audit evidence. Discuss what you understand by reliability of audit evidence and how the reliability of audit evidence may be influenced.