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Week 8

A. Risk of Material Misstatement at the Overall Financial Statement Level - Risk that relates
pervasively to the financial statements as a whole and potentially affect a number of different
transactions and accounts.

Influencing factors: 
 Deficiencies in management’s integrity or competence 
 Ineffective oversight by the board of directors 
 Inadequate accounting systems and records 

Risk of Material Misstatement at the Assertion Level 


 Inherent risk: represents the auditor’s assessment of the susceptibility of an assertion
to material misstatement, before considering the effectiveness of client’s internal
control.
 Control risk : represent the auditor’s assessment of the risk that a material
misstatement could occur in an assertion and not be prevented or detected on a timely
basis by the client’s internal control

B. Key assertion at risk for both inherent and control risk:

It includes the following: 

1. Inquiries of management and others 


2. Analytical procedures 
3. Observation and inspection 
4. Discussion among engagement team members 
5. Other risk assessment procedures

C.

Week 10

a. Human Help Ltd - In this case, we can see that the entity has recorded expenses for
which we can find no supporting evidences. We can see that 55% of the expenses are
of those category which donot have vouchers or any other supporting bills.
b.
c. Since more than 55% of the expenses are not substantiated with vouchers / receipts,
authenticity of the expenses booked in the financial statement is in doubt. As an
auditor, the report should be disclaimed saying that we could
d. Issues Audit Opinion Explanation Not kept voucher and receipt more than 55% of
expense Adverse We will give adverse opinion because misstatement is material and
pervasive to financial statement. Jj king ltd allocate low cost which boost its profit an
Q4 – week9

The purpose of communicating key audit matters is:

A. Enhancing the communicative value of the report of the auditor by offering better
transparency about the audit which was executed.

B. It offers additional information to users of such financial statements in assisting them to


understand those matters which in the professional judgment of the auditor, were of critical
importance in the audit of financial statements of the relevant period.

C. It might also assist the users of such financial statements to understand the entity and also
help in understanding the areas of crucial management judgment in such audited financial
statements.

Accordingly,

1. Where the company is going for private placement on 15 August.


    a.   These are non adjusting events, since the conditions of private placement did not
existed on the balance sheet date 30 June.

   b. These requires no adjustments to the financial statements, however the fact of proposed
private placement may be disclosed separately for the sake of the stakeholders.

2. Where the contract of private placement is due to be signed on 15 August:

  a. These are non adjusting events, since the conditions did not existed on the balance sheet
date.

 b. The fact of signing the contract Should be disclosed in the financial statements, since these
are being signed before 20 August.

3.

 a.  These are adjusting events since it seems to be a claim against the company from the
past periods 1990s and the conditions existed on the balance sheet date.

b.  Since the claimant has new scientific evidence that counters company's defence, the
estimates of loss should be disclosed as contingent liabilities in the financial statements.

4.
 a. These are adjusting events, since the conditions relates to the balance sheet date, as the
debtors already recorded have turned bad and few debtors already recorded as doubtful have
now turned good.
b. These requires adjustments in the financial statements to record the updated value of
debtors, so as to give true and fair view of the company's affairs.