(3) You have been provided with an Aged inventories listing, Identify audit procedures that you would use to gain assurance over the valuation of the inventory.
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Case Study Financial Management Auditing and Assurance
The following assignment is to be presented in a word document totalling 3,000 words (excluding Abstract, Tables, list of references and Appendices) + or – 10%.
The cover page should include the relevant word-count.
All pages should be numbered.
All sources must be correctly cited, using Harvard Referencing. ALL internet material must be referenced in the bibliography section. Students are encouraged to use the Harvard Referencing Standard supplied by the Library. To use other author`s written or electronic work is illegal (plagiarism) and may result in disciplinary action. Students may be required to undergo a viva (oral examination) if there is suspicion about the validity of their submitted work.
Ensure that your assignment contains the following:
- Project /Assignment Cover page – available from student portal.
- Main body of text, using paragraphs as appropriate, start new sections on a separate page.
Delta Phone Ltd. is a distributer of mobile phones and accessories in Ireland. It is March 2018 and the year end for Delta Phone was 31st of December 2017. Delta Phone’s current auditor is retiring and as the managing director has asked your firm, Marigold Ltd., to audit the accounts of Delta Phone Ltd. However, the managing director and most of the members of the Board have only recently been appointed, as the previous managing director and several Directors have retired. Delta Phone has grown rapidly over the last 10 years to one of the largest distributors of mobile phones to the market.
The managing director has only recently joined Delta Ltd. and has never held a managing director position previously. He is not sure that he understands the details of what the audit is and what his responsibilities are in terms of the audit. He also wants to know what input Delta Phone Ltd. has into the terms of the contract between the audit firm and Delta Phone Ltd. He would like the audit performed as quickly as possible as this would cause the least disruption to the firm. He also wanted to know if a bonus be paid to the audit firm for completion of the audit earlier than planned.
The inventory at the end of December is considerably higher than the inventory at the end of the prior year. A number of new phone models have been launched including the Apple iPhone X and the Samsung Galaxy S8, but there is still considerable stock of the Samsung Galaxy J7 and Apple iPhone 6 and Apple iPhone 7. The Samsung J7 Prime and the Apple iPhone 6 are selling for € 216 and €269 respectively at this point in time.
The following documents have been taken been provided to you:
- Unaudited statement of financial position as at 31st December 2017.
- Aged inventory list as at 31st December 2017.
(1) Draft a letter to the management team, explaining the term audit, and the limitations of the audit, the responsibilities of the auditor and management, the purpose of the engagement letter and its contents. (30 Marks)
(2) In a separate memorandum to the audit partner:
(a) Outline the ethical threats you have identified, referencing the relevant standard and the appropriate safeguards, including recommendations of appropriate safeguards that could be implemented. (20 Marks)
(b) Any audit risks for Delta Phone Ltd, including your assessment of why they are an audit risk and the relevant financial statement assertion; (20 Marks)
(c) Outline which, if any, of the above audit risks should be assessed as a significant risk, including the rationale for your answer. (10 Marks)
(3) You have been provided with an Aged inventories listing, Identify audit procedures that you would use to gain assurance over the valuation of the inventory. (10 Marks)
(4) Overall layout and content. (10 Marks)