Financial Auditing; preparedness stage

Aug 16th, 2016
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Dakota State University
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The Peak Sawmill Limited (Peak) operates a timber sawmill in a large regional town. It sources its raw material (pine logs) from a number of local growers and from its own plantations. Logs are transported on large trucks that are weighed in on the company's weighbridge and weighed out after dropping their loads in the storage area. Logs are then debarked and sawn to size in the cutting area of the mill. You are a senior on the audit. In the planning stage of the audit, you perform analytical procedures. In the current audit period, the average number of days to pay creditors has declined significantly from the average recorded over the past three financial years. Required (a) List two key assertions at risk in relation to accounts payable. (b) Provide your justification for each assertion. (c) For each assertion, outline one substantive test of detail to obtain sufficient appropriate audit evidence.

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FINANCIAL AUDITING1Financial Auditing; Auditing Planning Stage ProceduresStudents NameInstitutional AffiliationDateFINANCIAL AUDITING2Assertion RisksFinancial assertions are implicit put forward by the management in preparing thecompanys financial statement. An auditor needs to obtain the management assertions whendrafting the audit report on the companys financials. The auditing framework follows theassertions to obtain the confirmed financial transactions the company has made. The relianceon this assertions is essential given that companies have to comply with the formulated andaccepted framework (i.e., IFRS). The Peak Sawmill Limited management is making riskassertions in relation to accounts payable.This assertion risks cropping up at the management level is a clear indication ofimminent lawsuits, slowed production and diminishing trust within the stakeholders of thecompany, who happens to be the 90% reflection of the account payable. From an auditing pointof view, two major assertions risks can be identified from the Companys report. From the lookof events at the saw miller, the risk assertions of accuracy and valuation are clearly identifiable.AccuracyThe Company has significantly reduced the average time was taken to make paymentson accounts receivable, the saw miller has failed in its assertion on the timing and accuracy. Thevalue of delivery notes and the invoice received should be a problem with effectivecommunication in pl

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