Annual Audit Background Information

Winston and Sampson Partners (W & S) is a mid-tier Australian chartered accounting firm with offices in Melbourne, Sydney, Brisbane, Adelaide, Perth, Canberra and Darwin. W & S Partners has just been appointed as the lead auditor for the 2019 Treasury Wine Estates (TWE) audit.

The audit team consists of the Partner - Hamish McDonald; Audit Manager - Joe Redman; Audit Seniors - Bruce Gibbs and Jack Flash; IT Manager - Philip Walsh; and Audit Juniors - Greg Jones and Ian Wilson.

Assume the 2018 annual audit was conducted by Jackson Partners and in a handover meeting with Hamish McDonald, the senior partner from Jackson Partners stated that there were no issues that should be of concern in relation to accepting the 2019 TWE annual audit.

The relevant background for the 2019 annual audit can be obtained from TWEs 2019 Annual Report. This report can be found online.

a)List and briefly explain three objectives of why Hamish McDonald might test controls over accounts receivables.

b)List four audit tests Hamish could use to achieve the above-mentioned objective.

c)Assume Hamish has now completed these four tests. Discuss the implications for the nature, timing and extent of substantive testing of accounts receivable if the:

(i)controls were shown to be operating satisfactorily.

(ii)controls were not working satisfactorily.