ACC385补作业名单

Additional Assignment
Student ID	Last Name	First Name	Current Grade	学号	姓名
11814679	Tang	Yidan	AA	0318012209836	唐一丹

ACC385补作业要求

ADDITIONAL ASSIGNMENT – ACC385 – Auditing and Assurance Services

Due Date: Tuesday, 27^th August 2024

Length: 2,500 words +/- 10%

Value: 30%

Submission: Email to FOBJBS-Subject-Admin@csu.edu.au

TASK:

Background

You are the audit manager of Hoog, Herman & Esler (HHE). HHE is a medium sized firm which provides audit and assurance related services across a range of industries. During July 2024 you met with the audit senior of HHE, Adam Slater to discuss several findings related to some of HHE’s clients.

Impact of business risk at Bullus Ltd

Adam tells you he is planning the June 30 audit of Bullus Ltd, an exporter of furniture to countries such as India, Sri Lanka and Bangladesh. Bullus makes its furniture from wood which is obtained from timber cutters hired under contract who provide the raw materials for Bullus’s processing facility. The furniture is then transported to destination countries on rented ships, which make one trip each month. The raw materials (logs) are procured on ninety acre lots from a mix of certified sustainable plantations and native forests. In the past, 80% of the wood was sourced from the certified sustainable plantations, however this has fallen to 35% in the current year. The corresponding increase in wood sourced from native forests has increased the attention of environmental groups who have been holding protest demonstrations at several forests where Bullus obtains its timber. These protest demonstrations have slowed production and frustrated the contracted wood cutters, who are paid only when set amounts of timber are delivered to Bullus’s processing facility. These issues have meant that several shipments of furniture have been delayed, angering the Indian customers who are threatening to cut 15% from the amounts they owe as compensation for their stockouts. A recent downturn in the Indian furniture industry is also impacting on future orders, which have fallen by 12%. Adam also says that one of Bullus’s customers, Jain Ltd, is asserting that the most recent batch of furniture it received was made of timber which had been contaminated with a fungus. This fungus affects the structure of the timber, reducing its strength and durability and making the timber unsuitable for heavy duty items such as tables, chairs, shelving and cabinets. Jain Ltd is also refusing to pay its debts, which are already four months overdue. Bullus Ltd has launched an investigation into the fungus issue but has not been able to substantiate any facts as yet.

Sufficiency and appropriateness of audit evidence at Hughs Ltd

Adam then tells you that he has been examining the audit of accounts payable of Hughs Ltd, a health services provider which owns a number of nursing homes, physiotherapists, podiatrists and private hospitals and has a 30 June balance date.  Adam says he visited the head office of Hughes in in early July 2024, undertook the below two (2) accounts payable tests and drew the following conclusions:

Test	Result	Conclusion
1	Adam obtained the year end list of creditors. He then selected 17 suppliers at random. Adam traced the final balances owed to invoices and goods-received notes to make sure that goods arrived before 30 June 2024. For 2 of the creditors (out of the sample of 17 selected) the balance was overstated, but only by a relatively small amount.	As no material errors were found the final amounts have been accepted.
2	Adam selected 20 creditors invoices at random and examined them to ensure that the prices and discount conditions had been checked and approved by the manager of the purchases department. 3 of the 20 invoices contained errors with the discounts which had been granted and contained no evidence of proper approval. Adam's subsequent follow-up of the invoices with the errors did not find any pattern or reason for the deviations from prescribed controls.	As discounts given were immaterial the reported amounts have been accepted.

Howat Ltd

Adam is also planning the 30 June audit of Howat Ltd, a company that runs a chain of retail stores selling appliances, linen and clothing in regional New South Wales and Victoria. Using the company’s financial statements, as well as his broader understanding of Howat as per ASA315, Adam has compiled the following preliminary information:

Ratio	2024	2023	2022	2021	2020
Current Ratio	2.22	1.79	1.98	1.92	1.98
Quick Ratio	0.76	1.06	1.44	1.39	1.30
Times interest earned	1.98	2.53	3.25	4.20	5.62
Receivables Turnover	3.32	4.36	3.25	4.28	4.43
Days in receivables	68.80	52.75	70.48	53.51	51.61
Inventory turnover	1.43	1.46	2.12	2.65	2.66
Days in inventory	160.53	157.05	110.20	86.51	86.00
Net Sales/Tangible Assets	0.47	0.51	0.58	0.55	0.53
Profit Margin	0.08	0.10	0.13	0.12	0.11
Return on Assets	0.06	0.07	0.09	0.08	0.07
Return on Equity	0.03	0.05	0.08	0.08	0.09

Howat obtains all their products via import from China and Europe. Occasionally items are sourced from South and North America. The company typically operates with a strategy of having low gross margins, which means that substantial sales volumes are needed to cover overhead costs and generate profits. The low gross margins also mean that overheads need to be kept under control to ensure that profits result from operations. Howat failed to equal industry benchmarks for profitability in 2023, so to do better in 2024, management planned to keep costs down in relation to sales while allowing its gross margin to drop, hoping to generate larger quantities of sales. Management of Howat also wants to improve its working capital management by reducing levels of inventory and receivables. Howat has budgeted for a drop in liabilities, indicating that it expected to produce a healthy cash flow to enable it to repay some debts.

Pettifer Ltd

The next client Adam tells you about is Pettifer Ltd, where Adam is evaluating the internal controls in the sales and receivables areas. Pettifer manufactures batteries used to store solar power, which are sold to retailers, with a year ending 30 June 2024. Adam has performed his initial evaluation of internal controls and has found the following procedures.

Sales are made on credit, and accounts need to be settled within 21 days. Retailers can buy the solar batteries from Pettifer by emailing or phoning in their initial purchase order. Upon receiving a customer’s request, a salesperson prepares a sales order. Sales orders are then manually assigned a pre-number and produced in triplicate. The first copy of the sales order is sent to the shipping department, the second is sent to the invoicing department and the third is filed in the sales department.

Upon receiving the sales order in the shipping department, the shipping clerk gets the items from the warehouse, packages them, prepares a shipping note and arranges delivery. Shipping notes are also pre-numbered, with a duplicate copy being produced. The original shipping note is sent to the invoicing department, and the duplicate copy is filed in the shipping department by the shipping clerk. The shipping clerk also copies the information from the shipping note to a delivery docket, which is also pre-numbered and produced in triplicate. Two copies of the delivery docket are given to the carrier and one of these is retained by the customer, while the other is signed by the customer and retained by the carrier. The shipping clerk forwards the third copy of the delivery docket to the invoicing department.

Within the invoicing department, an invoicing clerk ensures that the details on the purchase order, the shipping note and the delivery docket all match and then creates the sales invoice. Sales invoices are also pre-numbered and have three copies. The first copy of the sales invoice is sent to the customer, the second is forwarded to the accounting department, and the third is filed by the invoicing clerk.

Within the accounting department, the accounts clerk uses the sales invoice to make the entry into the sales journal. This entry also updates the sales ledger and the accounts receivable subsidiary ledgers. The sales invoice is then filed by the customer’s name.

Payments are received via cheque and are mailed to Pettifer with a remittance advice. Two staff are assigned to process the receipt of these payments. The first person opens the mail and records the receipt of the payment on a list of received cheques. The second person takes physical custody of the cheques and compares the detail of the cheque to the information on the remittance advice before forwarding the cheques to the accounts receivable clerk. The accounts receivable clerk then updates the subsidiary ledger. Bank reconciliations are performed monthly by an accounting clerk, who has no role in receiving payments. Sales returns are processed only after the financial controller has authorised them. Bad debts are only written-off with the authorisation of the financial controller, after discussion with the credit manager.

Limbach Ltd

Finally, Adam tells you about Limbach Ltd, a client with a diverse set of operations and a June 30 balance date.  During Adam’s audit of Limbach he found the following:

· Limbach processes sugar which it exports to Indonesian confectionary companies. Of late, the Indonesian currency (rupiah) has declined relative to the Australian dollar and a number of Limbach’s customers are unable to pay their accounts on time. By the end of the 2023/24 financial year, Limbach was predicted to have outstanding receivables of more than $1.5 million.

· Limbach also manufactures confectionary items. Part of Limbach’s arrangement with its distributors is that it will supply vending machines and advertising signs for the distributors to use. The vending machines are rented to the distributors and recorded as fixed assets on Limbach’s balance sheet. Most distributors are shopping malls.

· Limbach has recently been finding it difficult to recruit and retain highly skilled people to work in its factories. As a result, senior management at Limbach have decided to implement a new bonus scheme where the method for allocating bonuses is based on a range of factors such as length of service, pay grade, rank within the organisation and an overall estimate by senior management of the employee’s contribution to the profitability of Limbach.

Question 1 (15% of available marks)

Required:

Identify and elaborate on the business risks in relation to Bullus Ltd. Identify the accounts and the related assertions (with justifications) most likely affected by the these business risks.

You can use the following table to format your response.

Business risk (with elaboration)	Assertion (with justification)	Account affected (with justification)

Question 2 (20% of available marks)

Required:

For the two accounts payable tests undertaken by Adam for Hughes Ltd, determine:

1. Whether the test is a test of control or substantive test.

2. The key assertion addressed by each test, including a justification.

3. The reasonableness of the conclusion reached for each test.

4. Additional audit procedures, if any, that need to be performed.

You can use the following table to format your response.

Test	Type of test	Key assertion, including justification	Reasonableness of conclusion	Additional audit procedures
1.
2.

Question 3 (25% of available marks)

Required:

Regarding Howat Ltd, based on the ratios and other information provided:

· The conclusions that can be drawn about the potential of Howat to continue as a going concern.

· Two (2) account balances that could be at risk of material misstatement and would require special attention during the audit. You should provide Adam with a justification as to why these two (2) accounts are at risk and a statement as to whether they are likely to be overstated or understated.

· For each of the two (2) account balances identified above, one (1) key assertion that is at risk and an explanation as to why it are at risk.

You can use the following table to format your response.

Conclusions that can be drawn about the potential to continue as a going concern.	Two account balances at risk, whether understated or overstated, including justification	For each account balance key assertion that is at risk and an explanation as to why it is at risk.

Question 4 (25% of available marks)

Regarding Pettifer Ltd:

· Two (2) internal controls in Pettifer’s sales and receivables, whether these activities are intended to prevent or detected material misstatements and how this is achieved.

· For each control identified above, one (1) test of control that could be undertaken to verify the effectiveness of the internal control.

· Two (2) weaknesses in Pettifer’s internal controls around sales and receivables, along with an explanation as to why they are weaknesses.

· For each weakness outlined above, one (1) account balance at risk of material misstatement and the related assertion most at risk, along with a justification as to why this account and assertion is at risk.

You can use the following table to format your response.

Two (2) internal control activities and whether these activities are intended to prevent or detect material misstatements and how this is achieved.	For each control, one (1) test of control that could be undertaken to verify the effectiveness of the internal control.	Two (2) weaknesses in Pettifer’s internal controls around sales and receivables, along with an explanation as to why they are weaknesses.	For each weakness, one (1) account balance at risk of material misstatement and the related assertion most at risk, along with a justification as to why this account and assertion is at risk.

Question 5 (15% of available marks)

Regarding Limbach Ltd:

· Three (3) account areas that are at risk of material misstatement.

· For each account area identified above, one (1) key assertion that could be at risk.

· The audit procedures you would perform to gather sufficient appropriate evidence for each assertion.

You can use the following table to format your response.

Three (3) account areas that are at risk of material misstatement.	For each account area identified above, one (1) key assertion that could be at risk.	The audit procedures you would perform to gather sufficient appropriate evidence for each assertion.

PRESENTATION:

Assessment tasks should be submitted as a Microsoft Word document. Do not submit as a PDF document.

· The first page should contain your name, student number, subject code, word count and due date. Please use 12 point font and avoid the use of fancy templates with added colour or graphics.

· Use 1.5 spacing between lines, this makes for easier marking.  

· The assessment tasks should be within +/- 10% of the word limit. The word count is taken from the first word to the last word and includes quotes. Quotes must comprise less than 10% of the total word count.

· Proof-read your work so that it is free of spelling, grammar and punctuation mistakes. Use language that is appropriate to academic and professional tasks. Ensure you use respectful and appropriate terminology. For assistance, see Learning Skills: https://www.csu.edu.au/current-students/learning-resources/build-your-skills/academic-skills-help

· Your reference list should contain all source documents that you refer to, quote or paraphrase from. It must conform to the APA referencing style: https://apps.csu.edu.au/reftool/apa-7

MARKING CRITERIA:

Criterion and weighting	Pass (50-100%)	Fail (0-100%)
Question 1
Analysis of the client's business risk and affected accounts. (15%).	Coherent explanation of the impact of fraud on business risk and audit risk.	Minimal to no explanation of the impact of fraud on business risk, minimal to no connection to audit risk.
Question 2
Appraisal of the sufficiency and appropriateness of evidence. (20%).	Demonstrates an adequate understanding of the sufficiency and appropriateness of evidence for most given scenarios.	Demonstrates a lack of basic understanding of the sufficiency and appropriateness of evidence for most of the given scenarios.
Question 3
Analysis of ratios and other information demonstrating audit risk assessment skills and critical and reflective judgement  (25%).	Most interpretations of ratios and other provided information accurate, demonstrating an understanding of how the ratios can be used to analyse the audit risks.	Most interpretations of ratios and other provided information are inaccurate and demonstrate a limited understanding of their usefulness in identifying the audit risks.
Question 4
Identification and appraisal of the client's internal controls. Development of relevant tests of control and identification of associated accounts and assertions at risk (25%).	Mostly coherent identification of internal controls and internal control weaknesses that most significantly impact audit risk. Clear development of tests of control and identification of accounts and assertions at risk.	Minimal to no identification of internal controls and explanation for the choice of internal control weaknesses that most significantly impact audit risk. Lacks development of basic tests of control and identification of accounts and assertions at risk.
Question 5
Identification and justification of relevant account areas, assertions and development of a substantive audit procedure. (15%).	Clear identification and justification of relevant accounts and assertions, but with some lacking relevance. Development of a suitable substantive procedure.	Minimal to no identification and justification of accounts and assertions, with several lacking relevance. Lacks development of a basic substantive procedure.
Professional communication  * Arial 10pt or TNR 12 pt. font; * 1.5 or double line spacing; * accurate spelling, grammar, punctuation, and word choice.	Intelligible statements are organised into paragraphs that convey a single idea or argument and a coherent perspective despite minor spelling, grammar and punctuation errors.	Unintelligible statements are structured into a response that may contain spelling, grammar and punctuation errors
Appropriate resources and correct referencing	Supported arguments with evidence from one or more credible, relevant sources.    All work has been referenced within the body of the answer and in the reference list. Occasional formatting errors and/or omissions of information do not comply with APA (7th ed.) but do not affect transparency or traceability of source material.	Supported argument lacks evidence from the text. Others’ work is not always acknowledged. Frequent formatting errors and/or omissions of information do not comply with APA (7th ed.) which affects transparency or traceability of source material.