AUDIT

I need someone to help me to finished the question 2 only ?400-500words?And to help me at the beginning and end of the second question to add about the question 1 and 3 the transitional sentence?Just a few words

(1) Given only the information presented in the scenario, identify the specific factors the auditor would evaluate in formulating an opinion on the required public reporting of internal control.

2) Identify areas of inherent risk and control risk, with a focus on the control environment factors.

(3) Develop an audit program that could be used for auditing the marketable securities for the current year.

this is the case

Appendix 1Your CPA firm is the external auditor of Tip Top Manufacturing. The principal activity of thecompany is providing components for the automobile industry. The company is publicly tradedon the Bursa Malaysia. Over the last 3 years Tip Top had been earning minimal returns. Mira,the CEO is intent on turning the company around. She has analysed the situation and decided thatthe best opportunities for superior returns lie in investments in high-risk marketable securities.When questioned on this strategy during a board meeting, she cited finance literature that, sheasserted, shows greater returns are consistent only with greater risk. However, the risk can beminimized by appropriately diversifying the investment portfolio. Given Mira?s knowledge of thesubject and quick grasp of the company?s situation, the board gave her complete control over allaspects of management. She personally manages the investment portfolio. Moreover, the boardwas so impressed with her analysis that she was given an incentive pay contract with an annualbonus based on a percentage of profits in excess of the previous year?s profits. In addition, shereceived share options.The company has an internal audit department that reports directly to the CEO (Mira). Althoughthere is an audit committee, it exists more in form than substance and meets with the director ofinternal audit only occasionally. The internal audit program for the year is determined by thedirector of internal audit in conjunction with Mira and is strongly influenced by two factors: (1)Mira?s perception of areas needing review and (2) areas of potential cost savings.Mira has let it be known that all units of the company must justify their existence, and if the internalaudit department expected future budget increases it must generate recommended cost savings inexcess of the current internal audit budget.During the preliminary planning for the audit, you note the following:1. The investment account has grown from approximately 7% of total assets to approximately30% of total assets.2. The investment portfolio includes some long term investments in company shares; however,many of the shares held in the portfolio are high risk shares (with hopes of greater returns)3. The remainder of the investment portfolio consists of a wide variety of financial instruments,including junk bonds, collateralized mortgages, and other similar instruments.4. Broker fees have increased dramatically. There is also a new line item for investmentconsulting fees. It appears that most of these fees are owed to a company that might besomehow related to Mira.5. Most of the securities are held by the brokerage firm, but a few are held by the investmentconsulting company, and a few others are held directly by the company.6. The company has shown a 25% increase in reported net income during the past year.7. The company?s share value has appreciated more than 20% during the past year.

ACC4247 AUDITING AND ASSURANCE 1 Individual assignment (20%) Obtain a copy of annual report and relevant auditor's report which is modified. Required: Each individual should select different organization for this assignment purpose. For the selected auditors' report: a) Describe the information that is included in the selected audit report and how the users might perceive the information provided thereon. (10 marks) Identify the type of audit opinion and discuss the circumstances which led to the type of opinion. (10 marks) b) Top, bottom, left and right margin 1\" Font Arial, size 12 and line spacing 1.5\" All answers must be electronically prepared. Word count: 1,000 words to 1,500 words. Plagiarism is a serious offense. An assignment that shows evidence of plagiarism will result in a grade of zero for the assignment. 5. References to any sources must be cited accordingly. 6. Due date: i. Mid check point is on week 12. ii. Full submission is on week 13. 1. 2. 3. 4. Question 2 The auditor ought to consider the evaluated levels of inherent risk and control risk in deciding the nature, timing and degree of substantive strategies that are required to diminish audit risk to an acceptably low level. This will ensure that the various loopholes that exist in the internal controls are effectively sealed. According to the scenario, there are eight problems about this company, which will affect both the inherent risk and control risk. First and foremost, the organizations' top level management has conquered the organization. This implies that they have excess control over the organisation in terms of decision making. This is risky because if this power is unchecked, the executives may end up making inappropriate decisions that benefit themselves rather than the organisation. They can feel comfortable doing this due to the excess powers they wield thus none may be willing to question their misconduct because they have no say and perhaps fear losing their positions if they voice out their concerns. Secondly, the \"Turnaround\" document seems to be agreeable on taking high risk for completing an improved reported return. The document makes the company more vulnerable to losses as a result of its approval of taking high risks. Whenever such risks occur, they usually lead to extensive losses which may either prove irrecoverable or difficult to recover. So in the long run, the so called Turnaround document may be a prominent source of financial woos for the company if in any case its suggestions are implemented. It doesn't mean all investment programs that look pompous may be beneficial to the organisation; rather it is the return that such investments will bring to the company thus increasing the wealth of shareholders. Thirdly, the audit committee's performance was not that effective. Moreover, the conventionality of the internal audit is not improved by the audit committee as well. Flouting internationally set requirements for audit may provide an avenue for siphoning the company`s resources. This is because such standards are have been tested and proven to be suitable for curbing dangerous practices that may increase the risk of unexplained lose resources from the company`s premises. The key business of the organization is slowly changing from manufacturing to investment with high risks. So, it means that the organization is making insufficient investments. This may be an unwise decision which may bring trouble in future. Increasing the risk profile of the company without any necessity for doing so may put the company under financial distress. This is because the surety of investment returns is relatively unpredictable due to the constant changes in the discount rates. The firm may end up losing a lot of resources due to interest rate fluctuations as well as inflationary pressures. High risks investments occurs because top level management has cost-effective incentive pay. The cost effective incentive pay bring a about a moral hazard as the top management out of the complacency brought about by the pay, they do not consider taking the necessary precautionary measures to avoid taking high risks. As agencies to their principles (shareholders) it is their fiduciary responsibility to act to the best interest of their bosses that is they should not take high risks that bear extensive damages wherever and whenever they occur. Decisions that are made without much consideration can prove risky if their expected earnings are not achieved.. The investment accounts have increased from 7% to 30%, it means that it contains high fliers. This does not arguer well with what should take place under normal circumstances. Such a rapid rise in investments may as well plunge the organisation into liquidity crisis. There is no assurance that when money is injected into investments, the investment will flourish there is always a chance that things may not turn out as expected and this may terribly affect a company`s profitability. A wide-ranging of junk bonds and new financial instruments were found in the investment account. These financial assets are unprofitable and hence less preferred for boosting profitability. Assets such as junk bonds are unsuitable for investments as they less preferred by investors. The operation and control of securities is not sufficient. This is a very important component of ensuring accountability and transparency. If the system of checks and balances is not adequate enough, it may be very easy for unscrupulous employees and business executives to misuse the resources of the company. This may put the organisation at a very high risk of losing its reputation too to the outsiders. As a result, potential employees will shy away from seeking recruitments in such firms fearing the carelessness in the organisation may plunge it into financial doom any moment in the future. Inherent risk is the vulnerability of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material either individually or when aggregated with other misstatements. The factors that can lead to inherent risks can be described as diverse and the scope is no longer confined to the enterprise accounts, financial statements itself. According to the case, Mira said, \"The risk can be minimized by appropriately diversifying the investment portfolio.\" However, the more complex the process of economic business processing, the greater the possibility of error For example, because the calculation of a wide variety of financial instruments is more complex than single method, the valuation or allocation of the leased asset is more likely to be inaccurate than the same determination of accumulated depreciation. Control risk is the risk that a misstatement that could occur in an assertion about a class of transaction, account balance or disclosure and that could be material either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control. This risk is independent of the size of the inherent risk. It is a function of the effectiveness of the internal control system or degree of the audited entity. Effective internal control will reduce the risk of control, and ineffective internal control will increase the risk of control. However, the performance of the audit committee is not effective. The independence of the department of internal audit is not enhanced by the audit committee. Although there is an audit committee, it exists more in form than substance and meets with the director of internal audit only occasionally. In addition, control risk is considered to be high where the audit entity does not have adequate internal controls to prevent and detect instances of fraud and error in the financial statements. Question 2 The auditor ought to consider the evaluated levels of inherent risk and control risk in deciding the nature, timing and degree of substantive strategies that are required to diminish audit risk to an acceptably low level. This will ensure that the various loopholes that exist in the internal controls are effectively sealed. According to the scenario, there are eight problems about this company, which will affect both the inherent risk and control risk. First and foremost, the organizations' top level management has conquered the organization. This implies that they have excess control over the organisation in terms of decision making. This is risky because if this power is unchecked, the executives may end up making inappropriate decisions that benefit themselves rather than the organisation. They can feel comfortable doing this due to the excess powers they wield thus none may be willing to question their misconduct because they have no say and perhaps fear losing their positions if they voice out their concerns. Secondly, the \"Turnaround\" document seems to be agreeable on taking high risk for completing an improved reported return. The document makes the company more vulnerable to losses as a result of its approval of taking high risks. Whenever such risks occur, they usually lead to extensive losses which may either prove irrecoverable or difficult to recover. So in the long run, the so called Turnaround document may be a prominent source of financial woos for the company if in any case its suggestions are implemented. It doesn't mean all investment programs that look pompous may be beneficial to the organisation; rather it is the return that such investments will bring to the company thus increasing the wealth of shareholders. Thirdly, the audit committee's performance was not that effective. Moreover, the conventionality of the internal audit is not improved by the audit committee as well. Flouting internationally set requirements for audit may provide an avenue for siphoning the company`s resources. This is because such standards are have been tested and proven to be suitable for curbing dangerous practices that may increase the risk of unexplained lose resources from the company`s premises. The key business of the organization is slowly changing from manufacturing to investment with high risks. So, it means that the organization is making insufficient investments. This may be an unwise decision which may bring trouble in future. Increasing the risk profile of the company without any necessity for doing so may put the company under financial distress. This is because the surety of investment returns is relatively unpredictable due to the constant changes in the discount rates. The firm may end up losing a lot of resources due to interest rate fluctuations as well as inflationary pressures. High risks investments occurs because top level management has cost-effective incentive pay. The cost effective incentive pay bring a about a moral hazard as the top management out of the complacency brought about by the pay, they do not consider taking the necessary precautionary measures to avoid taking high risks. As agencies to their principles (shareholders) it is their fiduciary responsibility to act to the best interest of their bosses that is they should not take high risks that bear extensive damages wherever and whenever they occur. Decisions that are made without much consideration can prove risky if their expected earnings are not achieved.. The investment accounts have increased from 7% to 30%, it means that it contains high fliers. This does not arguer well with what should take place under normal circumstances. Such a rapid rise in investments may as well plunge the organisation into liquidity crisis. There is no assurance that when money is injected into investments, the investment will flourish there is always a chance that things may not turn out as expected and this may terribly affect a company`s profitability. A wide-ranging of junk bonds and new financial instruments were found in the investment account. These financial assets are unprofitable and hence less preferred for boosting profitability. Assets such as junk bonds are unsuitable for investments as they less preferred by investors. The operation and control of securities is not sufficient. This is a very important component of ensuring accountability and transparency. If the system of checks and balances is not adequate enough, it may be very easy for unscrupulous employees and business executives to misuse the resources of the company. This may put the organisation at a very high risk of losing its reputation too to the outsiders. As a result, potential employees will shy away from seeking recruitments in such firms fearing the carelessness in the organisation may plunge it into financial doom any moment in the future. Inherent risk is the vulnerability of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material either individually or when aggregated with other misstatements. The factors that can lead to inherent risks can be described as diverse and the scope is no longer confined to the enterprise accounts, financial statements itself. According to the case, Mira said, \"The risk can be minimized by appropriately diversifying the investment portfolio.\" However, the more complex the process of economic business processing, the greater the possibility of error For example, because the calculation of a wide variety of financial instruments is more complex than single method, the valuation or allocation of the leased asset is more likely to be inaccurate than the same determination of accumulated depreciation. Control risk is the risk that a misstatement that could occur in an assertion about a class of transaction, account balance or disclosure and that could be material either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control. This risk is independent of the size of the inherent risk. It is a function of the effectiveness of the internal control system or degree of the audited entity. Effective internal control will reduce the risk of control, and ineffective internal control will increase the risk of control. However, the performance of the audit committee is not effective. The independence of the department of internal audit is not enhanced by the audit committee. Although there is an audit committee, it exists more in form than substance and meets with the director of internal audit only occasionally. In addition, control risk is considered to be high where the audit entity does not have adequate internal controls to prevent and detect instances of fraud and error in the financial statements