MT HOOD FURUNITURE MINI AUDIT PROJECT
Advanced Auditing 367904
Semester 2 2014
The aims of this case study are.
To demonstrate the different phrases of an audit.
To illustrate specific audit techniques.
To work as an audit team in discussing issues and solving problems
On completion of this case study, you should be able to:
Evaluate audit risks exposure.
Critically analyse situations which will impact on the audit process. Analyse strengths/weaknesses in internal controls.
Evaluate audit evidence.
Document audit findings.
SCHEME OF WORK:
The case documentation is presented in two segments:
Introduction and background to the company.
Assignments, together with any additional documentation necessary for their completion.
For each question, students should prepare fully detailed and written answers as though they are for inclusion in an audit working paper file.
Detailed instructions will be given for each section of the work required to be completed.
Mt Hood Furniture Ltd – Mini Audit
The group project is worth 40% of the total mark for this paper. Students are required to complete the requirements of the following questions:
Question 1: New client acceptance & Risk assessment
Question 2: Assessment of internal controls in sales cycle
Question 3: Accounts receivable confirmations and allowance
for doubtful debts
Week 10 workshop
Week 11 workshop
HOW TO STUDY THE AUDIT CASE
An audit case is in many ways similar to a workshop case study. If you are going to benefit fully from the arguments and discussions about the case, not to mention give a good account of your own opinions, you must be well prepared before the workshop discussion. In effect, you must place yourself in the role of the senior on the audit engagement. You must plan the audit, design the programs and perform the work as called for by the facts as you interpret them. You must also be able to identify and discuss important practical auditing issues arising from the assignment.
There are several common techniques of case writing which are important for you to understand. These techniques are necessary as the case writer has in effect represented you at the meetings and discussions with the client. Since you were not present to judge the facts for yourself, the case writer must signal to you the quality of the evidence, or information that was obtained, on which you must base your decisions.
Any simple factual statement such as "the company was incorporated in 19xO", or that "the company manufactures furniture" may be accepted as "true" in the sense that the facts are readily ascertainable and verifiable. Whereas, a statement such as "costs and calculations are performed by Mr XXX" is more likely to be what you would have been told if you were there. it may or may not be true - audit tests will have to be performed to prove the statement. Similarly a statement such as "the stocks were properly counted" is only the opinion of the observer based on what was seen. It does not guarantee that no errors were made.
Quotations by or statements attributed to a person can be accepted as having been made by the person, but not necessarily as true. Further evidence may have to be sought elsewhere on the case documentation before the opinions can be accepted as true or false. Generally statements attributed to the audit team have more reliability than those attributed to the client or third parties. Documentation presented with the case or debtors confirmations can be accepted as genuine unless there is evidence to the contrary.
Steps in the Study of the Audit Case
Read the information provided, general instructions and preparations through once very quickly to familiarise yourself with the company and the characters involved. Briefly review the requirements for each...
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