Aud Materiality

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AUD 610 QUESTION 24 (JUNE 12, Q3B) QUESTION 26 (DEC 13, Q4A) MUHAMMAD IRSYADUDDIN BIN SUMAIL MOHAMAD NUR RAFIQ BIN RAHIM AYU FARIDAH BINTI NOR AZMAN FATIMAH ZAHRA BINTI MOHD ZAN IFFAH HAZIRAH BINTI MOKHTAR NURUL SYAFIKA BINTI MOHD GHANI NOR HIDAYU BINTI ISMAIL

Transcript of Aud Materiality

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AUD 610QUESTION 24 (JUNE 12, Q3B)QUESTION 26 (DEC 13, Q4A)

MUHAMMAD IRSYADUDDIN BIN SUMAILMOHAMAD NUR RAFIQ BIN RAHIMAYU FARIDAH BINTI NOR AZMANFATIMAH ZAHRA BINTI MOHD ZANIFFAH HAZIRAH BINTI MOKHTARNURUL SYAFIKA BINTI MOHD GHANINOR HIDAYU BINTI ISMAIL

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QUESTION 24 (JUNE 12, Q3B) PAGE 52

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I) DESCRIBE THE AUDIT RISK ARISING FROM THE ABOVE SCENARIO. The company may difficult to manage since they just opened 2 new

branch in JB and Penang En Halim was appointed as new chief executive in December 2012. This

position may risk to company since he not very familiar with company and the decision made by En. Halim may not align with the company’s goal.

The 3 years period of purchasing exclusive right to distribute of Sany Phone was too long. The android technology easy out-to-date as the technology speedily advance.

Extreme phone Bhd has exclusive rights to distribute another android phone. This issue will give effect on the Fantastic’s sales.

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II) BRIEFLY DISCUSS FOUR AUDIT PROCEDURES THAT YOU NEED TO PERFORM IN THE AUDIT OF FANTASTIC PHONE BHD.

Observation and enquiries of information from management and third partyThe auditor need to observe the company’s policy and procedures. The

auditor need to observe and ask questions the related employee regarding the internal control of the company such as the purchases cycle, the sales cycle and others. Auditor also can require information from third party such as supplier and bank to ensure the completeness of data.

Inspection of record and assetInspection of documents, records and physical asset such as the auditor need

to inspect whether the two branches are exist or not by doing site visit. Besides, the auditor will check a sample of items from the inventory sheets to the physical inspection of inventory to ensure that the inventory recorded on the sheets actually exists

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Analytical procedures1) As risk assessment procedure. The auditor must understand the Fantastic

Phone Bhd. and its environment to assist in planning the nature, timing and extent of other auditing procedures (lead schedule)

2) As substantive procedures. To obtain audit evidence about particular assertions related to account balances or classes of transactions by doing test of details and making selection to make vouch and compare one year to the previous one in the working paper

3) As an overall review of the financial information in the final review stage of the audit

Recalculation and re-performance. Consists of mathematical accuracy of documents or records. While re-performance involve the independence execution of procedures or controls that were originally performed by company’s personnel.

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III) DIFFERENTIATE BETWEEN MONETARY UNITS SAMPLING AND ATTRIBUTE SAMPLING AND PROVIDE AN EXAMPLE FOR EACH

MONETARY UNITS SAMPLING ATTRIBUTE SAMPLING• Use attribute sampling theory and

technique to estimate the monetary amount after misstatements for a class of transaction or an account balance.

• Valuation of monetary unit sampling are known as probability-proportional-to-size sampling and cumulative monetary among sampling

• For example, auditor usually use monetary unit sampling to sample and test account receivables, loan receivables, and inventory

• Estimates the proportion of a population that possesses specified characteristics

• The most common use of attribute sampling is for test of control.

• For example, the auditor may want to gather evidence that a credit check is perform of customer orders before distribution

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QUESTION 26 (DEC 13, Q4A) PAGE 53

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FOUR TYPES OF CONTROL ACTIVITIES & EXAMPLES: Performance Reviews:

Independently check the performance of the individuals or processes in the accounting system. Example: comparing the actual performance with budget.

Information Processing Controls: On how information in each transactions was generated and processed. Example: sequence check to determine if input data are in proper numerical or alphabetical sequence.

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Physical control:Physical security of assets. Example: periodic physical counting of assets such as inventory in the store.

Segregation of duties:Entity should segregate the authorization of transactions, recording of transactions and custody of related assets. Example: in purchasing cycle. The person in charge in ordering materials, authorizing the payment and the storekeeper should be the different person.

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THANK YOU