Case
The external auditing standards require the auditor to obtain an understanding
of controls that are relevant to the audit process and assess whether they are
sufficiently designed to prevent or detect material misstatements that might be
made in the financial statements. Then the auditor is also required to test
whether these controls have been implemented and work effectively to prevent
or detect such material misstatements.
Furthermore, the auditing standards require auditors to identify where and how
the financial statements may possibly carry a higher risk of being materially
misstated. The auditor uses that understanding to help design what further audit
procedures might be effective in detecting any material misstatement that may
exist.
Given the above, you have been selected as a member of the audit team
responsible for auditing the financial statements of Holiday Cruises, a company
operating leisure cruises since a few years ago from ports on the Arabian Gulf
and North Africa. Holiday Cruises sells cruises bookings to individuals and
travel agents. The majority of these sales transactions are mainly conducted via
its website and some using traditionally sales offices located in the main cities.
All cruises are paid in advance, with a 10% deposit on booking and the
remainder collected at least four weeks before sailing. Travel agents collect
money from their customers, deduct their commissions and forward the
remainder to the cruise company before the deadline. Holiday Cruises company
provides additional discounts for large groups bookings, and these discounts are
solely identified and approved by Mr Talal, the supervisor for large group
bookings. The audit team has made a preliminary assessment that the client has
low control risk over sales transactions and the accounts receivable and plans to
conduct supporting extensive testing of controls over sales and accounts
receivable areas to support this assessment.
The preliminary assessment of controls over operations revealed that the
operations supervisor employs new casual (temporary) staff to do the catering
and other supporting work whenever seasonal demand increases. He sets their
hourly pay rate based on his assessment of their experience. He asks new staff
to write their bank account details on their first timesheet to transfer the wages
payments to them electronically. At the end of the day, he collects timesheets
(which are not sequentially numbered from each casual employee and hands
them to the payroll officer. For some casual employees, English is not their first
language, so the supervisor regularly needs to adjust the timesheets before giving
them to the payroll officer to ensure they are correct. Question 1
As part of understanding the client's environment, the audit team can
conduct a general PESTEL and SWOT analysis for the client
company mentioned above. Explain the factors assessed by these
analyses by giving relevant examples for each factor for the company's
line of business.
The external auditing standards require the auditor to obtain an anertanding of controls that are relevant to the audit process and assess whether they are sufficiently designed to prevent or detect material misstatements that might be made in the financial statements. Then the auditor is also required to test whether these controls have been implemented and work effectively to prevent or detect such material misstatements Furthermore, the auditing standards require adiners to identify where and hone the financial statements may possibly carry ty a higher risk of being materially mintated. The auditor uses that understanding to help designs what further audit procedures might be effective in detecting any material tinatatement that may exist. Given the above, you have been selected member of the wait team responsible for auditing the financial statement of Hoday Cruises, a company operating leisure cruises since a few years ago from ponts on the Arabian Gulf and North Africa. Holiday Cruises sells Cruises booking to individuals and travel agents. The majority of these sales transactions are mainly conducted via its website and some using tradisonally sales offices located in the main cities, All cruises are paid in advance, with a 10% deposit on booking and the reminder collected at least four weeks before sailing Travages collect money from their customers, deduct their commissions and forward the remainder to the cruise company before the deadline. Hoiday Cruises company prwvides additional discounts for large groups bookings, and these discounts are solely identified and apprewed by Mr Talal, the supervisor for lange moup bookings. The audit cam has made a preliminary assessment that the client has low control risk over sales transactions and the accounts receivable and plans to conduct supporting extensive testing of control over sales and accounts 2 receivable areas to support this assessment The preliminary assessment of control over operaties tevealed that the operations supervisor employs tes casual (temporary staff to do the catering iniciother supporting work whenever seasonal demand increases. He sees their hourly pay rate based on his assessment of their experience. He asks new staff to write their bank account details on their first timesheet to transfer the ages payments to them clectronically. At the end of the day, he collectimesheets (which are not sequentially numbered from each cual employee and hands them to the pumil officer. For some canal employees, English is not their fint language, so the supervisor regularly needs to adjust the timesheets before going them to the payroll officer to ensure they are correct. 1. As part of understanding the client's environment, the audit team can conduct a general PESTEL and SWOT analysis for the client company mentioned above. Explain the factors assessed by these analyses by giving relevant examples for each factor for the company's line of business. The external auditing standards require the auditor to obtain an anertanding of controls that are relevant to the audit process and assess whether they are sufficiently designed to prevent or detect material misstatements that might be made in the financial statements. Then the auditor is also required to test whether these controls have been implemented and work effectively to prevent or detect such material misstatements Furthermore, the auditing standards require adiners to identify where and hone the financial statements may possibly carry ty a higher risk of being materially mintated. The auditor uses that understanding to help designs what further audit procedures might be effective in detecting any material tinatatement that may exist. Given the above, you have been selected member of the wait team responsible for auditing the financial statement of Hoday Cruises, a company operating leisure cruises since a few years ago from ponts on the Arabian Gulf and North Africa. Holiday Cruises sells Cruises booking to individuals and travel agents. The majority of these sales transactions are mainly conducted via its website and some using tradisonally sales offices located in the main cities, All cruises are paid in advance, with a 10% deposit on booking and the reminder collected at least four weeks before sailing Travages collect money from their customers, deduct their commissions and forward the remainder to the cruise company before the deadline. Hoiday Cruises company prwvides additional discounts for large groups bookings, and these discounts are solely identified and apprewed by Mr Talal, the supervisor for lange moup bookings. The audit cam has made a preliminary assessment that the client has low control risk over sales transactions and the accounts receivable and plans to conduct supporting extensive testing of control over sales and accounts 2 receivable areas to support this assessment The preliminary assessment of control over operaties tevealed that the operations supervisor employs tes casual (temporary staff to do the catering iniciother supporting work whenever seasonal demand increases. He sees their hourly pay rate based on his assessment of their experience. He asks new staff to write their bank account details on their first timesheet to transfer the ages payments to them clectronically. At the end of the day, he collectimesheets (which are not sequentially numbered from each cual employee and hands them to the pumil officer. For some canal employees, English is not their fint language, so the supervisor regularly needs to adjust the timesheets before going them to the payroll officer to ensure they are correct. 1. As part of understanding the client's environment, the audit team can conduct a general PESTEL and SWOT analysis for the client company mentioned above. Explain the factors assessed by these analyses by giving relevant examples for each factor for the company's line of business
