Question 1

You are the auditor for Mito Hotels (Mito), for the financial year ending 30 June 2020. Mito is a hotel chain that owns and operates hotels across Australia. You are in the process of planning the Mito audit, and you have noticed that there has been an increasing incidence of corporate clients prepaying for their employees' accommodation. Mito has recorded these prepayments as revenue when they receive the payments for the bookings.

Required

Relying on the information provided above only , in relation to Mito's Hotel revenue account,

1. a)Identify the key assertion at risk. (1m)
2. b)Explain why this represents a risk to the auditor. (1.5m)
3. c)Outline a practical, appropriate substantive test that addresses the risk. (1m)
4. d)Outline a specific, practical preventive control that would directly address the risk. (1m)
5. e)Outline how you would test the control recommended in d) above. (1m)
6. f)Outline a specific, practical detective control that would directly address the risk. (1m)
7. g)Outline how you would test the control recommended in f) above. (1m)

Question 2

You are the auditor for Peru Pty Ltd (Lima), a large technological services provider business based in Sydney, for the financial year ending 30 June 2020. During the year, Peru has embarked on a large- scale software development project in the current year to internally develop a communication and collaboration platform for its clients. A significant amount ($18m) has been capitalised as software development during the year. Your preliminary review indicates that this amount potentially includes repairs and maintenance costs incurred in relation to a range of Peru's hardware during the year.

Required

Relying on the information provided above only, in relation to Peru's Intangible asset (Software) account,

1. a)Identify the key assertion at risk. (1m)
2. b)Explain why this represents a risk to the auditor. (1.5m)
3. c)Outline a practical, appropriate substantive test that addresses the risk. (1m)
4. d)Outline a specific, practical preventive control that would directly address the risk. (1m)
5. e)Outline how you would test the control recommended in d) above. (1m)
6. f)Outline a specific, practical detective control that would directly address the risk. (1m)
7. g)Outline how you would test the control recommended in f) above. (1m)

Question 3

You are an audit graduate assigned to the XYZ Ltd (XYZ) engagement. You are reviewing your notes documenting the XYZ's control activities from your recent site visit to XYZ. For each of the controls noted, identify the key assertion in relation to the provided account that the control addresses.

A. Payroll expense: Human resources department to notify payroll department of any promotions and their effective dates

B. Accounts payable: Supplier invoices are matched against quantities on receiving reports and

contract prices prior to being paid.

C. Travel expense: Travel expenses incurred by each employee are review by the relevant department manager on a monthly basis and compared to employee's calendars and travel plans.

D. Inventory: The warehouse manager undertakes month end stocktakes and ensures that

inventory held on consignment are not included in the inventory counts.

E. Accounts receivable: The receivables clerk undertakes a monthly reconciliation of dispatch

notes to the receivables ledger to ensure that all customers have invoiced for goods that

have been dispatched to them.