Sheridan AV Question for help.
Sheridan AV is a new client of your firm and you were appointed as Audit Senior for Sheridan AV's audit for the financial year ended 31 March 2021. Perform the following tasks: 1. Identify a significant inherent risk at the industry and entity levels that could potentially increase the risk of material misstatement in Sheridan AV's financial statement. Name the accounts and assertions, and the level of inherent risks in Working paper A1. W/p ref: A1 Prepared by: Date prepared: Sheridan Audio Visual Limited Financial year ending 31 March 2021 Inherent Risk (IR) Assessment IR description Accounts Assertions IR assessment (2 x 2= 4 marks) (2 x 1 = 2 marks) (2 x 1 = 2 marks) (likelihood & materiality) (2 x 1 = 2 marks) 1. Industry level 2. Entity level (4 + 2 + 2 + 2 = 10 marks) 2. Assessing the control risks of Sheridan AV for the following assertions and write your conclusion in the Working Paper A2. W/p ref: A2 Prepared by: Date prepared: Sheridan Audio Visual Limited Financial year ending 31 March 2021 Control Risk (CR) Assessment Accounts / Assertions CR description CR assessment (8 x 2 = 16 marks) (likelihood & materiality) (8 x 2 = 16 marks 1.Sales / Occurrences 2.Sales/ Completeness 3.Sales/ Accuracy 4.Accounts receivables/ Existence 5.Accounts receivables Completeness 6.Accounts receivables/ Valuation 7.Cash/Existence 8.Cash/Completeness (16 + 16 = 32 marks) 3. Identify two poor internal controls and propose two recommendations you would raise in the management letter to David Sheridan. (16 marks) 4. Identify two strong internal controls and propose a control test for each control. (16 marks) 5. Based on your results of question 1 and 2, complete Working Paper A5 to determine the overall risk assessment (ORA) and acceptable detection risk (DR). Provide your assessment if each item is "high", 'low" or "medium".W/p ref: A5 Prepared by: Date prepared: Sheridan Audio Visual Limited Financial year ending 31 March 2021 Assessing Detection Risk Account/Assertion Inherent risk Control Risk Overall Risk Assessment Detection Risk (IR) (8 x 0.5 = (CR) (8 x 0.5 = (ORA) (8 x 0.5 = 4 marks) (DR) (8 x 0.5 = 4 marks) 4 marks) 4 marks 1.Sales / Occurrences 2.Sales/ Completeness 3.Sales/ Accuracy 4.Accounts receivables/ Existence 5.Accounts receivables/ Completeness 6.Accounts receivables/ Valuation 7. Cash/Existence 8.Cash/Completeness (4 + 4 + 4 + 4 = 16 marks) 6. Design one substantive audit procedure for each account/assertion that would address the DR identified in question (5). Documenting your work in Working paper A6. W/p ref: A6 Prepared by: Date prepared: Sheridan Audio Visual Limited Financial year ending 31 March 2021 Sales and Cash Receipt process -Substantive Procedures Account/Assertion Audit objective Substantive procedure description (8 x 0.5 = 4 marks) (8 x 2 = 16 marks) 1.Sales / Occurrences 2.Sales/ Completeness 3.Sales/ Accuracy 4.Accounts receivables/ Existence 5.Accounts receivables/ Completeness 6.Accounts receivables/ Valuation 7.Cash/Existence 8.Cash/Completeness (4 + 16 = 20 marks)
