BFA713 Assurance and Audit Services

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Assignment 2 (40%) – Systematic review (Group) - Detailed guidelines

Due by Friday, 22nd September 2023, 11:00am
Submit via Upload files to Assignment 2 on MyLO
Things to submit 1.)    Response to all the questions (please enter a cover page with names and student IDs of all group members)2.)    Peer review form (one for each group member)
Word limit 4000 +/- 10%
Total marks 100

BACKGROUND INFORMATION ABOUT THE ASSESSMENT

You would have selected a company and registered it with your group mate (2 students in one group). Please use the same company for this part of your assignment. You must research this company well. Please use the company website, publicly available information, annual reports, investor presentations, broker reports and any other documents that are publicly available on the official company website. You can also use news articles that are written about the company in the recent past (reputed sources only).

For some of the other parts of this question, you may need to conduct broader research into the industry. For this, you will need to conduct more rigorous research by reviewing journal articles around the industry. Journal articles are a reliable source of information that is well-researched. You can also look at some industry reports that you are able to gather looking at the library resources. Please look through reports from reliable sources – such as Gartner and IBISWorld and some of the newspaper sources available on the library database. You must use journal articles when researching on the appropriate audit theories in response to the assignment questions.

Deliverable for this assignment: You need to answer each part A – D of the assignment. There is no requirement to provide a formal report.

Required:

A.    Introduction

You must present an introduction of the client. This is your opportunity to discuss key information about the client, including its business operations, nature of revenue, product and services, market and competition and regulatory environment. Discuss these elements considering the audit and assurance knowledge gained so far. Please feel free to present your understanding in tables or graphs (if relevant) so that you can effectively communicate your results. These tables should present your understanding of the company and industry and not tables or graphs directly from the company reports. Please also look at the United Nation Sustainable Development Goals (SDGs) and identify which goals the company reports against. You can use this template to track the 17 goals (relevant to the case organisation) and show how they have reported their performance against such standards. Even if your case study organisation does not use SDGs, review their non-financial information pages and try to link them to the SDGs (see table format below).

United Nation Sustainable Development Goal Information from the case study organisation that relates to the goals
E.g. Goal 8 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all e.g. “Company” has reported that they are trying to reach ‘zero fatalities’ (reference X, 2022) to eliminate workplace injuries.

Add more rows as required.

Word limit – approx. 800 words

B.    Inherent risks

From the research you have conducted about the company, identify what you consider to be the ‘key’ inherent risk factors that may lead to any material misstatements in the client’s financial statements for the financial period.

You must identify at a minimum 4 (four) inherent risk factors from the research that you have conducted. To answer this question, you will need to identify the risk, explain which accounts are mostly at risk, and how you identified it as a risk and justify by thoroughly explaining why you believe that issue that you have identified may create a risk of misstatement in the financial statements of your client organisation. Specifically identify which accounts, balances or transactions and disclosures you believe are most likely to be materially misstated because of the identified inherent risks. You could use a simple template to outline your response in this section:

Word limit – approx.800 words

C.    Internal control, audit risk model and evaluating auditing theories.

From the wider research that you have conducted on the industry, identify some of the possible key internal control issues associated to the company/industry. Since you will not have access to the company’s internal information, this question will be marked based on your reasonableness and sound research on the industry to identify any plausible internal control risks that could arise in the company/the industry the company operates in. You must identify at least two internal control risks that may possibly lead to misstatement in the financial statements of your client. (Note: It is ok for you to assume that the internal control risk is HIGH or LOW based on your research).

Based on your analysis in questions 1 and 2, prepare an audit risk matrix to map out the Detection risk matrix (Refer to textbook pg. 154 Exhibit 4.2)

  • Inherent risk
  • Control risk
  • Detection risk

Use these tables to summarise and then elaborate on your findings.

Once you have identified the Detection risk, evaluate the importance of assurance risk in establishing a sustainable business practice. Use the auditing theories (agency theory, insurance hypothesis or information hypothesis) to explain your selected detection risk and how it will help in ensuring the sustainability of the business.

Word limit – approx. 1200 words

D.   Develop an audit plan and execution of audit

Now that you have identified the inherent risks and control risks that may impact the financial statements of the client, you are required to develop and overall audit strategy/plan. For each of risks that you have identified, please specify which types of testing procedures should be employed for planning the audit.

When discussing the need for testing, you must link to the theories of audit and the relevant literature to justify and clearly explain why such rigorous testing is required.

To score well in this question, you must conduct sufficient research in this area (using journal articles) to justify the need for such extensive audit work using relevant theory.

Word limit – approx. 1200 words

Quality of research conducted

In this assignment you will rely heavily on the research that you have conducted. Please ensure to use the company website, financial statements and all publicly available information. To score well, you must have quality research conducted by relying on journal articles that provide reliable information on the wider industry and the theories of audit that will be of interest in this assignment.

Language and referencing

Overall use of professional language, sentence structuring, appropriate referencing and grammar and spellings.

Peer Review

Complete the peer review form for each group member excluding yourself. If you have completed this work in a group, then you must submit a peer review form for your team member. This is not graded, but in the event of a conflict in the group, this document will be relied upon for further discretion.

IMPORTANT INFORMATION

  1. There is no report format required, just answer the questions in the order suggested. There is no requirement to provide a conclusion.
  2. This is a group assignment, so only one of the students will submit on behalf of the group.
  3. All students to submit their PEER REVIEW FORMS for your team member.
  4. Plagiarism will not be tolerated. Please refer to the unit outline for more details.
  5. Late submissions will be penalised. Please refer to the unit outline for more details.

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