Hi, could you please help me with the 4 questions about auditing in the attachment? Thanks!

Question 1 - Substantive Testing Part A When the auditor conducts substantive tests each side of the journal entry is affected, i.e. double entry accounting. For each of the following substantive tests, (and related assertion) indicate one other account, and one specific assertion relating to that account, for which evidence is also being provided. Substantive Test and Related Account Balance (related assertion) Example: Accounts Receivables Testing revenue/sales for overstatement (occurrence) 1. Testing accrued salaries for understatement (completeness, valuation & allocation) 2. Review repairs and maintenance for correct classification (accuracy, classification) 3. Ensuring that the writedown for obsolete stock under the 'lower of cost and net realisable value' rule is adequate (accuracy, completeness) 4. Testing that all purchases are recorded and are not understated (completeness, accuracy, cut-off) 5. Ensuring that all bad debts that are legally bad have been written off (completeness, accuracy) Specific Assertion Existence Part B Your firm is auditing Rainbow Paints Ltd, a large manufacturer of painting products. You have been assigned the audit of property, plant and equipment (PPE) for the yearended 30 June 2014. Rainbow Paints Ltd maintains a computerised fixed assets register. The company has three main classes of PPE: (1) Freehold Land & Buildings, (2) Manufacturing Machinery, Plant & Equipment, and (3) Motor Vehicles. You are concerned that the depreciation rates for Motor Vehicles may be inadequate. You are also concerned that the recent revaluation of Freehold Land and Buildings by 20% is too high in the current economic climate. Required: For each management assertion listed in the table below, provide one substantive audit procedure specifically in relation to one of the above PPE accounts that would be used to gather sufficient appropriate audit evidence. Management Assertion Audit Procedure Existence Recorded PPE assets represent productive assets in use at the end of the reporting period Completeness PPE includes all applicable assets used in operations at year-end Valuation & Allocation PPE are stated at cost or a valuation less accumulated depreciation Classification & Understandability PPE is properly classified in the financial statements Rights & Obligations The entity owns or has rights to all recorded PPE assets at the end of the reporting period Question 2 - Audit Reports The following are three independent situations. For each case, state the type of audit opinion that should be expressed and provide a brief explanation to justify your choice: 1. The auditors of Smith Ltd were refused access to six months of the minutes of the directors' meetings (held monthly) because they contained discussions of a highly confidential matter. No alternative procedures could be performed. 2. Due to the recent downturn in the Australian economy, Jones Ltd has made substantial losses for the last three quarters and now has a negative working capital balance. The auditor of Jones Ltd has concerns over the entity's ability to continue as a going concern in the short to medium term. Management of the company believe that the company is fully solvent and have not disclosed these matters in the financial statements. 3. Brown Ltd has reported a net profit after tax of $5m, which represents an increase of 25% over the previous year. However, the Directors' Report states the increase in net profit from the prior year is more than 40%. As the annual report has been printed, the directors are not prepared to correct the error. Question 3 - Auditor's Legal Environment AAA & Associates (audit firm) issued an unqualified auditor's report on the 2013 financial reports of Good Fortune Limited, a listed company. These financial statements were included in the company's annual report and were distributed to shareholders. The lead partner on the audit of Good Fortune Limited failed to detect a material misstatement in the financial reports as a result of negligence in the conduct of the audit. Based on the audited financial reports, Sam Wang purchased shares in Good Fortune Limited which, shortly afterwards, experienced a drastic downturn and subsequently went into liquidation. Sam began proceedings against AAA & Associates for damages caused by their negligence. Required: (a) List four (4) factors Sam might use to prove negligence against AAA & Associates. (b) Will Sam recovers his losses? Explain why or why not, citing legal case(s) to support your argument. (c) List two defenses the auditor might use against the legal action. Question 4 - Audit Planning Part A You are engaged as an audit senior in the public accounting firm of Dynasty and Partners. As part of the planning process for the audit of Mystic Ltd for the financial year ended 30 June 2014, you requested the minutes of the Board of Directors meetings for the financial year and noted the following: Date of Extract from Board of Directors Meetings for the year 2013-14 Meeting 1/9/2013 The board agreed that in order to attract new customers and therefore increase sales, any new customers from 1/9/2013 would receive three months credit before their debt becomes overdue, rather than the one month credit previously allowed. 1/11/2013 The board agreed that a new 'bonus scheme' would be implemented from 1/11/2013, which would provide directors with a 5% bonus on profits if they could exceed last year's profit by 20%. 1/6/2014 The board agreed to revalue land and buildings upwards by 50% in the financial statements at 30/6/2014, in accordance with a property valuation undertaken at the company's request. Required: Discuss the potential risk of each of the above items from the board of directors meetings and the impact each would have on your audit plan for 30 June 2014. 1. 1/9/2013 ___________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ 2. 1/11/2013 __________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ 3. 1/6/2014 __________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Part B Preliminary analytical procedures are also performed as part of the planning process to assist the auditor in gaining an understanding of the entity and its environment (ASA 315 'Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment'). Required: From the three rows of data shown below for Morgan Jones Manufacturing Pty Ltd: (a) what conclusions would you draw from the ratio analysis (i.e. interpret any movement in the ratio and discuss the audit risks that could be present); and (b) what areas would you then emphasise in conducting the audit in relation to the risks identified in your conclusions. Morgan Jones Manufacturing Pty Ltd 201 201 2012 201 4 3 1 1. Inventory Turnover 2.40 2.21 3.66 4.64 2. Current Ratio 1.85 1.89 2.28 2.51 3. Days Sales in 109 96 100 72 Receivables 1. Inventory Turnover - Conclusions: - Audit Emphasis: 2. Current Ratio - Conclusions: - Audit Emphasis: 3. Days Sales in Receivables - Conclusions: - Audit Emphasis: Industry 2014 3.88 2.20 70