How do I do this question? PART 4

this is the company i am doing my assignment on. Abacus real estate and this is how part 1 was done

Part 2 Question

Review the last audited financial statements and identify and justify FIVE (5) specific areas you think they should receive special emphasis during your audit?

1. Revenue

Finance Income Revenue is recognised as interest accrues. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate. Sale of inventory revenue from property development sales is recognised when the significant risks, rewards of ownership and effective control has been transferred to the purchaser which has been determined to occur upon settlement and after contractual duties are completed.

2. Loan receivables

Abacus maintains a range of interest-bearing loans and borrowings. The sources of funding are spread over a number of counterparties and the terms of the instruments are negotiated to achieve a balance between capital availability and cost of debt

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Cash and cash equivalents comprise cash balances and call deposits.

3. Credit risk

   Credit risk is the risk of financial loss to the Fund if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Funds receivables from bonds and deposits on the subdivisions of the land. Given the nature of the receivables, credit risk is considered to be low. Notwithstanding this, the receivable balances are monitored on an ongoing basis with the result that the Funds exposure to bad debts is not significant.

   Prudent liquidity risk

4. Liquidity management focus is on maintaining sufficient cash and marketable securities, the availability of funding through an adequate and diverse amount of committed credit facilities and the ability to close out market positions. The Funds policy is to maintain an available facility with a related party capable to meet expected development costs.

5. 5. Financial Risk Management The Funds financial risk management focuses on mitigating the unpredictability of the financial markets and how it affects the financial performance of the Fund. The Board reviews and agrees policies for managing each of these risks. The main purpose of the financial instruments

This is how part 3 is done and it is linked to the question that is asked above.

Sales and Account receivable

Sales

* An auditor tests the controls you have set up for the sales cycle to determine how strong and reliable they are.If they are strong, the auditor can reduce the amount of transaction testing he must do

* Common internal controls over the sales cycle include numbered sales invoices, purchase order authorization over a certain limit and authorization over receivables write-offs

* The auditor selects a random sample of transactions and examines the related purchase orders, invoices and customer statements

* Eg:The auditor ensures that all numbers in a section are accounted for and that none are missing

Account receivable

* Controls over accounts receivable really begin with the initial creation of a customer invoice, since you must minimize several issues during the creation of accounts receivable before you can have a comprehensive set of controls over this key asset

* Controls then span the proper maintenance of accounts receivable, and their elimination through either payments from customers or the generation of credit memos

Purchase and Account Payables

Purchase

* Purchasing function is performed in accordance with managements policies and procedures

* Purchasing is performed in an effective, efficient, and economical manner

* Purchasing function protects the best interests of the company in getting the highest quality product at the lowest price

* Purchasing function ensures continual supply of needed materials

* The auditor should understand the purchasing system and its relationship to the other parts of the procurement system.

* Review the department policies and procedures including any conflict of interest or morality policies

Account payable

* Accounts payable controls are designed to help mitigate loss risk in the accounts payable function

* Payables controls are broken down into three categories: the obligation to pay, entering the payables data into the system, and paying suppliers

Pay control

a)Invoice approval

* The person who has the authority to approve payment signifies that he or she approves of the supplier invoice

* This control is relatively weak if the approver only sees the supplier invoice, as there is no way to tell if the goods or services were received

b)Purchase order approval

* The procurement department issues a purchase order for all purchases the company makes

* The control requires a decent amount of work from the purchasing staff, they will likely ask staff members to request items with a formal purchase requisition form

Surveys Assignment aims This assignment is designed to consolidate your learning of the key skills and knowledge needed when facing a financial report audit of a company, and how to analyse, research and pinpoint facets of the company that require auditing attention. Background For the purposes of this assignment, you are to imagine that you work as Audit Manager for a company called Amazing Accountants. Your new audit client is a listed company in Australian or Singapore Stock Exchange your choice). The client has asked you to perform their financial report audit for the financial year ended 31 December 2020. Part 4 Question Design FIVE (5) substantive procedures for the transactions and balances discussed in question (3) and justify why you select these substantive procedures for the following scenarios: 1. Your proposed tests of controls in question (3) PASSED. 2. Your proposed tests of controls in question (3) FAILED. Explanation: In this case, it is required to audit the financial report of the year ending at 31 December 2020, and any company cannot prepare its financial report in advance or before the year ended, so only estimations and factors / figures from last year's report can be used for audit Company selected Abacus Property Group, Industry - Real Estate. The audit report credentials and facts from Audit manager: From its financial report which includes its summary of operations, financial statements and Director's report, it can be stated that 1. General and industry-specific economic trends and conditions: Real estate norms has new regulations recently, Implementation of new and modified regulation are in process and on papers. Moreover the company is focusing on sale and resale project while industry from last 7 years is leading in leasing business. The return on investment in the industry is improving since 2015 and decline quarterly in 2016 and 2018. While the company's return on investment steeply declines. Cash flow from operations in the industry in increasing while investing is decreasing which can forecast a recession in real estate 2. Competitive Environment Around Australian Continent, there are almost 70 major real estate corporations which are considered as competitor for Abacus. The major findings by competitor's research and development are an increasing threat. But, according to the director of company "Abacus has refined it strategic direction giving prominence to sectors where we have a clear competitive advantage" (Director's report). The company and marketing team is increasing its focus on self-storage and office markets, as competition increases there with a potential growth year ended 31 Dece Part 3 Question Identify or assume TWO (2) high level/detective internal controls and propose a control test for each control in ANY of the following processes. . Cash receipt and payment Sales and accounts receivables Purchase and accounts payables Inventory and Cost of goods sold Payrolls Non-current assets and Depreciation . . Surveys Assignment aims This assignment is designed to consolidate your learning of the key skills and knowledge needed when facing a financial report audit of a company, and how to analyse, research and pinpoint facets of the company that require auditing attention. Background For the purposes of this assignment, you are to imagine that you work as Audit Manager for a company called Amazing Accountants. Your new audit client is a listed company in Australian or Singapore Stock Exchange your choice). The client has asked you to perform their financial report audit for the financial year ended 31 December 2020. Part 4 Question Design FIVE (5) substantive procedures for the transactions and balances discussed in question (3) and justify why you select these substantive procedures for the following scenarios: 1. Your proposed tests of controls in question (3) PASSED. 2. Your proposed tests of controls in question (3) FAILED. Explanation: In this case, it is required to audit the financial report of the year ending at 31 December 2020, and any company cannot prepare its financial report in advance or before the year ended, so only estimations and factors / figures from last year's report can be used for audit Company selected Abacus Property Group, Industry - Real Estate. The audit report credentials and facts from Audit manager: From its financial report which includes its summary of operations, financial statements and Director's report, it can be stated that 1. General and industry-specific economic trends and conditions: Real estate norms has new regulations recently, Implementation of new and modified regulation are in process and on papers. Moreover the company is focusing on sale and resale project while industry from last 7 years is leading in leasing business. The return on investment in the industry is improving since 2015 and decline quarterly in 2016 and 2018. While the company's return on investment steeply declines. Cash flow from operations in the industry in increasing while investing is decreasing which can forecast a recession in real estate 2. Competitive Environment Around Australian Continent, there are almost 70 major real estate corporations which are considered as competitor for Abacus. The major findings by competitor's research and development are an increasing threat. But, according to the director of company "Abacus has refined it strategic direction giving prominence to sectors where we have a clear competitive advantage" (Director's report). The company and marketing team is increasing its focus on self-storage and office markets, as competition increases there with a potential growth year ended 31 Dece Part 3 Question Identify or assume TWO (2) high level/detective internal controls and propose a control test for each control in ANY of the following processes. . Cash receipt and payment Sales and accounts receivables Purchase and accounts payables Inventory and Cost of goods sold Payrolls Non-current assets and Depreciation