Empire Investigation Influence Qualitative -Myassignmenthelp.Com

Question: Discuss About The Empire Investigation Influence Qualitative? Answer: Introduction Audit planning refers to the process of how the audit procedures are carried out during the whole process of audit. In other word audit plan helps the auditor to plan ahead of the audit process which is to be carried out by the auditor and also stick to the schedule of the plan on the basis of which the whole audit process is to be carried out. The auditor is required to prepare a detailed audit plan which the auditor must follow in order to satisfy the objectivity of the audit and also avoid any misunderstanding which might arise with the client(Arens, Elder and Mark 2012). An effective audit plan also ensures that the risks of audit are kept at minimum and also keep a track of the audit process in a systematic manner. The core benefits of audit planning for the auditor is to help the auditor in identifying the sources of sufficient audit evidences, keeps a budget of the audit costs and also maintains the same at a reasonable level and also ensures that there are no misunderstanding between the client and the auditor(Christensenet al. 2014). Analytical Review Analytical Review is a technique which is used by the auditor in order to analyze the financial ratio of the company and also checks the if there are any significant changes. The purpose of using analytical review as an audit procedure is to help the auditor to have an understanding of the business environment(Messier Jr, Simon and Smith 2012). Analytical review analyzes the various risks which are associated with the business and are determined on the basis of nature, timing and extent of the audit procedures(Abbott, Parker and Peters 2012). The application of audit procedures in an audit program helps in the overall audit planning process. Preliminary Judgement on Materiality The concept of materiality is very important term in audit. The materiality concept of audit states if any transaction or item is significant or if it is complex or of significant amount, which can affect the decisions of the investors than the auditor must focus on such items and apply audit procedures on it(Stewart and Kinney Jr 2012). Preliminary judgement on Materiality is on the basis of the auditors judgement on the materiality of an item when conducting an audit either to ensure that the financial statements are represented fairly or not. The identification of materiality on the part of the auditor is solely based on the professional judgement of the auditor. The various factors which are affect the judgement of the auditor on the materiality of the items are the complexity of the item, consistency of the item, nature of the business in relation to the item and other minor factors as well (Emby and Pecchiari 2013). First Account Selected- Gross Profit Margin Gross profit margin of the company depends on the total sales figure which the company has achieved during a year. The sales figure of the company as per the trial balance of the MJC company shows a figure of 147000 in 2017 which has reduced from the previous year figure of sales of 187450 in 2016. The decrease in the sales figure as compared to previous year figure has gone down by 21.58%. This will naturally be affecting the gross profit margin of the company as shown in the income statement of the company. The gross profit as shown in the income statement is 92944 which has significantly decreased from the previous year gross profit figure. Assertion and Explanation The gross profit of the company depends on the sales of the company. In the case of MJC Company the sales have decreased sharply, due to which the gross profit of the company has also fallen. As the sales of the company decreases, the cost of sales will also decrease. In the case of MJC Company, the decrease in sale and decrease in cost of sales are not in proportion with each other and thus it suggests that a material discrepancy might have occurred (Kumar and Sharma 2015). Thus the audit procedure has to be applied to this to confirm or deny the presence of any discrepancy. Recommended Audit Procedures The auditor needs to verify the income statement of MJC Company in order to get an understanding of the items which are deducted from the sales in order to get the gross profit of the company. The auditor has to check the nature of the expenses and ensure that there is no miscomputation or any item is not missed in the income statement. The auditor also needs to check the accuracy of the stated figure of the income statement. Second Account Selected Net Profit The net profit of the MJC Company for the year 2017 is 75840. The net profit figure of the company has decreased from the previous year which was 90122 in 2016. The net profit of the company is calculated by deducting the expenses which are incurred by the company from the gross profit figure. There has been a decrease in the net profit rate in comparison with the previous net profit figure by 15.85% Assertion and Explanation The net profit of the company is a key indicator of the performance of any company. The net profit of the company depends on the total sales of the company and also on the total expenses which is incurred by the company. As per the income statement of MJC company, both the sales and gross profit of the company has fallen from the previous year figures. The decrease in the net profit of the company by 15.85% is evidence enough that the sales of the company is on a declining trend. The total expenses of the company has also decreased from the previous year figure. Recommended Audit Procedures The auditor of the company will be applying audit procedures in estimating the accuracy of the items which are present in the financial statements. The auditor will be examining the expenses and determine the nature of the expenses and if they are relevant to the company(Eilifsen and Messier Jr 2014). The auditor needs to verify the income and expenses of the company as shown in the income statement with every record which the company maintains. Third Account Selected Account Receivable The account receivable figure of any company signifies a key part of the current assets of the company. This represents the credit sales which the company has and also forms a part of the total sales figure as shown in the balance sheet. This an important area where most of companies have tried to manipulate in order to make a suitable financial report. Therefore the auditor has to check the accuracy and appropriateness of the item(Hermanson, Smith and Stephens 2012). Assertion and Explanation As per the income statement of the Company, there has been an increase in the account receivables of the company from the previous year figure. The Account receivable of the business has increased from 111000 in 2016 to 118340 in 2017. The increase percentage is around 6.61% which signifies that the companys credit sales has increased over the year. The sales figure of the company has decreased and the credit sales of the company has increased which means the cash sales of the company has certainly fallen assuming that the majority of the figure of account receivable consist of credit sales. Thus the auditor need to check the item in order to confirm or deny the presence of any manipulations. Recommended Audit Procedures The auditor needs to check the records of sales to determine and verify the transaction which are related to credit sales. The audit then needs to check the accuracy of the figures as shown in the balance sheet of the company. The auditor needs to verify the sales records, ledgers, invoices and also relate the same with cash collected and still outstanding from the account receivable figures(Fukukawa and Mock 2012). The auditor can also ask for external confirmation with the debtors to confirm the figures. Fourth Account Selected Inventory The balance sheet of MJC company shows the inventory figure of the company from last year has increased. The inventory of the company was 174000 in 2016 which has risen to 187500 in 2017. The increase in the inventory in contrast with the previous year figure is by 7.76%. Assertion and Explanation In any business, the relevance of inventory and the verification of the inventory. Inventory is an item which the business must strictly control, as in many cases frauds and manipulations takes place in this item in the balance sheet. Moreover different methods of valuation of inventory are used by different business as per the requirement of the business and thus the auditor needs to check this. Recommended Audit Procedures The auditor needs to verify the inventory records and even physically verify the store to determine the opening and closing stock of the inventory of the company(Mersereau 2013). In addition to this the auditor needs to check all the requisitions slips of inventory will be issued out of stores and also ensure that a proper internal control exists for the purpose of inventory control.Fifth Account Selected Repairs and Maintenance The repairs and maintenance expenses of the company is shown at 1120 in 2017 which is much more than the previous year figure. There has been decrease in the expenses from previous year, however some manipulations still might exist. Assertion and Explanation The repair and maintenance expenses of the company forms apart of expenditure which are not incurred on a regular basis and thus as the expenses in incurred in both the years and more or less of significant amount, the auditor must check for any discrepancies. Recommended Audit Procedures The auditor needs to ensure that the expenses which the company has incurred in respect to repair and maintenance are appropriate or not. The auditor also needs to identify the asset on which such an expense was incurred. The fixed assets of the company represent the backbone of the company. These are the used for generating revenues for the company over the useful life of such assets. In most cases the value of these fixed assets are overstated and misrepresented. In the case of MJC company, the fixed assets of the company are recorded at historical costs and the depreciation is accumulated on these. The company records the fixed assets of the company at historical costs and the accumulated depreciation is shown in the balance sheet. Most of the discrepancies arises in the valuation and method of charging depreciation by the company. Recommended Audit Procedures The auditor must check the valuation of the assets of the company and also check the method of depreciation which is adopted by the company(Kausar, Shroff and White 2016). Different companies follow different methods like straight line method and diminishing balance method depending on the nature of the business. Reference Abbott, L.J., Parker, S. and Peters, G.F., 2012. Internal audit assistance and external audit timeliness.Auditing: A Journal of Practice Theory,31(4), pp.3-20. Arens, A.A., Elder, R.J. and Mark, B., 2012.Auditing and assurance services: an integrated approach. Boston: Prentice Hall. Christensen, B.E., Glover, S.M., Omer, T.C. and Shelley, M.K., 2016. 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