Reference no: EM131757970
Project Assignment
ASSIGNMENT:
For this assignment you are to assume the manager role for the Blue Devils audit firm and you are assigned to create the audit plan for Amazon or Costco. You will be required to obtain the last two years' worth of financial statements and the current years audit report. You are going to assess the overall audit risks and revenue audit plan. You will prepare the audit plan in a memo to your engagement team. Your memo will be a MAXIMUM of 4 pages single spaced, Times New Roman 12 pt. Font, 1 inch margins all around.
Specifically, you are charged with the following tasks.
1. Calculate materiality and explain the level of planning materiality you plan to use for this year'saudit.
A. Suggest three potential materiality bases and percentage ranges for each range that you believe should be considered in establishing planningmateriality.
B. Based on your analysis in part 1A choose the best approach for planning materiality for the current year audit engagement and document your recommendation using arguments that you believe would be most defensible to internal and external stakeholders.
C. For the benefit of enhancing audit efficiency during the engagement, calculate tolerable misstatement you will use when auditing revenue and how you chosethis number.
2. Determine risk factors based on analysis of audit risk, audit evidence, and financial statementassertions.
A. Calculate the following ratios for the past three (3) years: 1. Working capitalratio,
2. Quick Ratio, 3. Earnings per share, 4. Price-Earnings Ratio, 5. Debt to Equity Ratio, 6. Return on Equity, 7. Current Ratio, 8. ProfitMargin
B. Describe three (3) major business risks relevant to this year's audit and the possible effect on the audit, one (1) of these must be tied into your ratio work completed inpart 2A.
C. Identify three (3) risk factors related to REVENUE for the current year auditinclude:
• Briefly describe the riskfactors,
• if they increase or decrease your inherent risk assessment for revenue,and
• Assess the overall inherent risk for this account (high, moderate, orlow)
3. Develop strategies to mitigate potential risk factors using organizational internal controls. Using your understanding of internal controls analyze revenue transactions for potential risk factorsinclude
• what risks need to be documented,and
• if you plan to test internal controls to reduce your substantivetesting.
4. Create a sampling program or the audit universe for revenue transactions including analytical procedures, substantive testing, and use information from the revenue dashboard provided.
5. Describe how your firm will implement technology into the audit plan to reduce your detection risk overall. Be sure to address if the use of technology replaces or supplements your other substantivetesting.