Auditing ACCT 3000

Assignment 2 - Auditing ACCT3000 (Tri 2A, 2015)
1. AmCal Ltd is a family-owned company operating chemist shops in Albany. Majority of the sales transactions are done in cash. AmCal is planning to expand to Denmark and Walpole. It is applying for a loan from the bank to get funding for the expansion. Before granting the loan, the bank requires AmCal to provide them with the audited financial statement.
2. You are recently appointed as the auditor for Sprinter Ltd. The accountant of Sprinter has been notorious for finding loopholes in the legislations in order to make its clients’ financial statements look presentable as desired by the clients themselves. In the past few years, Sprinter has always been required by the Australian Tax Office to provide additional supporting information after the lodgement of its tax returns.
3. QualitySteel Ltd has been the largest metal pressing machine manufacturer in Australia since 2002, when it introduced a machine with technologies few years more advanced than those offered by its competitors. From thereon, QualitySteel has been driving out competitors out of the market by providing higher quality products at highly competitive prices. However, a new entrant to the industry has recently introduced its latest innovation. Based on the competitor- advertisements, you are aware that the competitor- product is highly likely to be of better quality than QualitySteel- and due to their high end machinery, their production costs are expected to be significantly lower. QualitySteel- management has predicted that to the competitor- product, their demand will drop by at least 40%.
Required
(a) Identify and discuss why the above situation represents a risk.
(b) By applying auditing knowledge, identify the main account or group of accounts affected by this risk in the audit plan.
(c) Identify how the audit plan will be affected by the risks and recommend specific audit procedures to address these risks.

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