Reference no: EM133572206 , Length: word count:1200

Professional Auditing

Assessment Task One

Instruction:
You are required to provide comments or explanation regarding the following short answer questions.

Question 1. McGrath Partners is tendering for the audit of Infinity for the 2023 financial year. As part of the audit team at McGrath Partners, you note that McGrath holds an interest in Infinity during your review of an Australian Securities and Investments Commission (ASIC) company extract for Infinity. The interest is material to McGrath.

Required

a) What is the threat to compliance with the fundamental principles?

b) Explain whether any safeguards could be put in place to reduce the threat to an acceptable level.

c) Would it make any difference to your answers if the shares were held by a tax partner in the office, rather than being held directly by McGrath?

Question 2. Assume you are appointed as the engagement manager to be responsible for the financial statement audit of the client, Crest Outfitters. More details about Crest Outfitters are available in the Case Study of the textbook (Moroney, et al. 4th edition, 2020). As an engagement manager, you need to provide preliminary risk assessment concerning investment and accounts payable accounts presented in Crest Outfitters' financial statements.

Required

a) Based on your investigation, you need to make a list of questions to undertake the preliminary assessment of the audit risk. Justify your choices of questions.

b) Based on the understanding of preliminary assessment of the client, determine the risk of misstatement. Explain how the risk factors impact the risk model, audit strategy or audit approach chosen for the audit plan.

c) Explain why the auditor needs to determine materiality in this case. Comments on the approaches adopted to determine materiality in this case.

Referencing:
• You need to find at least 4-8 references to support your arguments or evaluation.
• Harvard Referencing Style is applied.