Background: You are part of the audit team assigned to the audit of Maidenhair Enterprises for the year ended 30 June 2020. The trial balance for this client is shown below. Maidenhair Enterprises Trial Balance June 30, 2020 Current year Prior year June 30, 2020 June 30, 2019 Dr Cr Dr Cr Cash at bank 37,525 36,271 Accounts receivable 36,365 34,642 Inventory 175,295 173,034 Machinery 141,000 140,900 Accumulated depreciation 30,750 23,250 Furniture 11,000 11,000 Accumulated depreciation 2,623 2,050 Accounts payable 12,450 13,450 Bank Loan 240,000 240,000 Sales 241,470 230,520 Cost of sales 130,250 135,501 Consulting revenue 53,645 37,890 Interest income 56 32 Other income 1,434 5,075 Bank charges 515 350 Depreciation 8,073 7,944 Interest expense 12,343 10,092 Printing 501 896 Wages 55,260 54,005 Superannuateon 5,349 5,095 Equity (net) 31,048 57,463 613,476 613,476 609,730 609,730 Notes from last year's audit file indicated that internal controls around revenue and current assets are strong, while controls around other accounts are generally weak. Tests of controls confirmed this is also the case for the current year. The preliminary assessment of materiality has been set at $5,000.Question: Your task is to prepare a working paper/s to be included in the audit file, for the a specific account. The working paper/s must address the four points below. 1. Consider which assertions are likely to be most at risk for this account. Identify 2 to 3 relevant assertions, and briefly explain why these assertions are likely to be at-risk. In doing so, you should consider whether the account has increased or decreased compared with the prior year and consider the key risks generally applicable to this type of account. 2. Describe an audit procedure/s which would provide sufficient appropriate evidence for the identified assertions. #Ensure that your working paper clearly identifies the account being tested, a relevant audit objective, relevant assertions, and the procedure/s to be used. 3.The senior auditor has asked you to select a sample of 5 transactions from your general ledger account for vouching. Access the general ledger detail for your account and identify 5 specific entries to make up your sample. Consider the impact of your sample selection technique on the audit budget. Describe/illustrate your sample selection process. Provide a brief statement justifying your sample selection approach with reference to the Australian auditing standards. 4.Comment on whether you think vouching these 5 transactions will provide sufficient appropriate evidence for this account. Consider how material the account is and the level of detection risk that would be appropriate for this account. Consider the direction of testing, and whether it is appropriate for your assertions.
