Background: You are an intermediate member of your firms audit team and the audit partner has asked you to assist with the planning stage of the audit for a small client. You have access to the preliminary trial balance for the client and would like to use this to identify accounts that are likely to require significant audit attention. To access the trial balance for your client, open the document named Trial balances for task 2 and follow the directions to the appropriate worksheet. Your task: Prepare a report for the audit senior, which addresses the 5 issues below. 1. The audit partner has suggested that the preliminary assessment of materiality for the financial report as a whole be set at $15,000. Comment on the appropriateness of this figure for your client. Provide evidence to support your view. Include a brief discussion of the effect that changing the preliminary assessment would have on the audit budget. 2. Prepare an analytical review (in the form of a trend analysis) using the income statement items from the trial balance. Note: Present your analysis in table format; comments on the results are not required for requirement 2. 2 3. Use the trend analysis to identify 4 income statement accounts that appear to be atrisk of material misstatement. Provide justification for why these accounts should be subjected to significant audit testing. In your explanations, identify an assertion that is likely to be at-risk for each account (i.e. identify 1 assertion per account; 4 in total). 4. For each account and assertion identified in requirement 3, design and describe an audit procedure that would provide relevant evidence for this (i.e. describe 1 procedure for each account; 4 procedures in total). Note: you need to explain the procedures in your own words with as much detail as possible (for example, if applicable, identify the sampling frame and specific documents required for your procedure). 5. The audit partner has suggested that fraud risk should not be considered for this client, as he feels that the clients staff are all very trustworthy. Comment on the appropriateness of the audit partners suggestion. Identify whether there are any indications of fraud evident in the analytical review.

Amaranth Enterprises Trial Balance Jul 1, 2015- Apr 30, 2016 Debit Jul 1, 2014 June 30, 2015 Debit Credit Credit Cash at Bank Accounts receivable Inventory Machinery Accumulated Depreciation Motor Vehicles Accumulated Depreciation Furniture Accumulated Depreciation Bank Loan Sales Cost of sales Service fees (revenue) Other income Interest income Bank charges Depreciation Interest expense Printing Miscellaneous Wages Superannuation 99,251 1,21,820 1,89,000 65,000 1,02,503 1,12,000 1,75,000 65,000 46,141 24,375 65,000 65,000 26,650 20,150 7,500 7,500 3,000 2,16,000 2,03,125 2,250 2,16,000 1,87,450 54,471 63,595 48,959 1,000 40 58,000 25,000 50 290 29,016 9,000 210 2,000 46,816 4,447 350 15,590 10,800 250 53,000 4,770 Amaranth Enterprises Trial Balance Jul 1, 2015- Apr 30, 2016 Debit Jul 1, 2014 June 30, 2015 Debit Credit Credit Cash at Bank Accounts receivable Inventory Machinery Accumulated Depreciation Motor Vehicles Accumulated Depreciation Furniture Accumulated Depreciation Bank Loan Sales Cost of sales Service fees (revenue) Other income Interest income Bank charges Depreciation Interest expense Printing Miscellaneous Wages Superannuation 99,251 1,21,820 1,89,000 65,000 1,02,503 1,12,000 1,75,000 65,000 46,141 24,375 65,000 65,000 26,650 20,150 7,500 7,500 3,000 2,16,000 2,03,125 2,250 2,16,000 1,87,450 54,471 63,595 48,959 1,000 40 58,000 25,000 50 290 29,016 9,000 210 2,000 46,816 4,447 350 15,590 10,800 250 53,000 4,770