REQUIRED: PLEASE ANSWER ANY QUESTION SHORTLY AND ACCURATE.

1. The CEO of Budget Pty Ltd, Anne Hale, has indicated that there is nothing to worry about as Premium Ltd has signed an agreement to support the company for as long as it takes to establish a presence in the budget wine market.

Budget Pty Ltd has an internal audit function that is attached to the accounting and finance division, and reports directly to the finance director in his capacity as chair of the audit committee. During your review of internal audit, you have noted the following matters:

(i)The staff of the internal audit function changed significantly during the year. The division employed three new staff to undertake the testing of the financial accounting records, while the more senior personnel who had previously done these tests concentrated on the performance-auditing schedule of the internal audit function. The new staff had no previous audit or accounting experience.

(ii) The work that has been documented appears to be quite thorough and competent. However, for some of the audit tests prescribed, the staff has not prepared detailed documentation of the work that has been completed. They have simply initialed the audit program and noted that the test has been satisfactorily performed.

Required:

(a) Outline your assessment of the appropriateness of the going concern basis for Budget Pty Ltd. Justify your assessment.

(b) Indicate three (3) audit procedures that you would undertake in relation to this going concern issue.

(c) Provide your assessment as to whether the external auditor can rely on the work of internal audit. Give reasons

2. This is the first year in which your firm has performed the audit. As part of the planning work, you have performed analytical procedures on an annualized basis and compared the results to industry average and last year's audited financial information. The results are given below.

	Industry average	Industry average	Easyfitpty limited	Easyfitpty limited
Ratio	2017	2016	2017	2016
Current ratio	2.84	3.27	1.89	2.24
Receivables turnover ratio	4.9	4.6	6.3	7.0
Inventory on total assets	3.7	3.8	5.0	5.5
Return on total assets	7%	5%	13%	11%
Net profit ratio	0.06	0.06	0.04	0.04
Gross margin	0.20	0.26	0.20	0.18

3. You are the audit manager completing planning for your client RAM ltd, RAM is, market leader in the SOFT WAREAND COMPUTER PARTS DEVELOPING industry aimed at designing and developing SOFTWARE assistance.

SIZAR formed in 1970 and after a number of losses making years is now turning a substantial profit in a very competitive market. The company spends considerable amounts on research and development and prides itself on the success rate it has with new robotic designs.

RAM owns a number of very large warehouses in which inventory of small and large EQUIPMENTS and electronic parts are held, along with vast stores of advanced computer technology. The equipment's and parts are manufactured in another nearby security warehouse.

Products are then sold to specialized retailers of variety industries equipment and electronics, often on consignment basis. RAM also has three customers for whom they design and manufacture large custom-made computer parts and processes for these customer own internal uses. There are major contracts which often take nine or ten months to construct and worth millions of dollars. RAM has adopted a percentage completion method of accounting for these contracts.

For the last six months RAM has also been making sales of their major product lines to a few overseas customers. The CEO believes this could be a real growth area for the company in the near future.

RAM has also recently implemented a new top-of -the -range computer inventory system to help them track inventory stocks and individual product line performance in all division. The new system was designed and developed by external computer Consultant Company and so far, has been working well with no major errors noted

Required:

List two accounts as a result of your preliminary planning where you would concentrate audit effort for RAM LTd, AND FOR EACH ACCOUNT:

STATE the most important audit assertion and explain why you chose the particular assertion, and recommend an audit procedure to perform, in order to gather audit evidence for that assertion.