Materiality used determining audit procedures and sample selections

ACC305- Auditing and Assurance Services

Guide of Case Study Assignment- Audit Planning- Cloud 9 Pty Ltd (total marks 40)

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W&S Partners use the following percentages as starting points for the various bases:

Part 1- Materiality
Required
Answer the following question based on the information presented for Cloud 9 in the appendix to this case study.

(a) Using the 30 September 2011 trial balance (appendix to this case study) calculate planning materiality and include the justification for the basis that you have used for your calculation. (10 marks)

(5 marks for the above computation- If a student has computed four of the above items or lines, he/she should be given 5 marks.) Students should select Revenues or Turnover as the basis for calculating PM.

Note: The students can select any answer from the three options given above except net loss. The planning materiality can be computed out of Revenue (Turnover) or total assets. They need to write about two paragraphs justifying their answer. (5 marks for the computations and 5 marks for the reasons- Total 10 marks).

Note: 6 marks to be given for the above worksheet. The students need to compute a minimum of 6 ratios out of 10 ratios given above. 4 marks should be given for the above comments.

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2. 4 marks to be given for the above comments.

(c)Which specific areas do you believe should receive special emphasis during your audit? Consider your discussion of the analytical procedures results, comments on the common-size statement and as well as your preliminary estimate of materiality. Prepare a memorandum to Suzie Pickering, Audit Senior outlining potential problems areas (that is, where possible material misstatements in the financial report exist) and any other special concerns (for example, going concern). Specify the accounts and related assertions that would require particular attention. (10 marks).

6.Overall liquidity and solvency and profitability
7.Inventory balance
8. PPE
9.Increase in payables
10.Special disclosures
Note: 1 mark for each of above points. The students need to write only 10 points to get the total marks

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