- What accounts and assertions are informed by the confirmation of accounts receivable? ?
- What sampling approach is likely to be used when confirming accounts receivable? ?
- Professional scepticism is defined in auditing standards as "an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence". Reflect upon, and note down, some behaviours that you think reflect professional scepticism (e.g., to understand the biases that may underlie management judgments). If you wish, you may use the testing around accounts receivable confirmations to place your response into some context (e.g., be conscious of the motivation of those completing the confirmation to diligently fill out the information), but this is not essential (i.e., you may note down broader comments that impact several areas of the audit). Please note that this requires some reflection and considered thought based on what you now know about the conduct of an audit.
Preparation for Workshop Assuming the role of a graduate auditor, you will be completing the audit work relating to the confirmation of accounts receivable for Instrumair Limited. You should note the senior on the audit has reminded you of the importance of professional scepticism. In the workshop you will be working on the final seven confirmations that have been returned (these are available under the Case Material heading (Case Confirmations). You should print these before the workshop. You should specifically consider the following questions and submit your preparation notes via Turnitin; What accounts and assertions are informed by the confirmation of accounts receivable? What sampling approach is likely to be used when confirming accounts receivable? . Professional scepticism is defined in auditing standards as "an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence". Reflect upon, and note down, some behaviours that you think reflect professional scepticism (e.g., to understand the biases that may underlie management judgments). If you wish, you may use the testing around accounts receivable confirmations to place your response into some context (e.g., be conscious of the motivation of those completing the confirmation to diligently fill out the information), but this is not essential (i.e., you may note down broader comments that impact several areas of the audit). Please note that this requires some reflection and considered thought based on what you now know about the conduct of an audit. Remember that, in order to be eligible for the 1 mark workshop preparation for this topic, you must submit your preparation notes before the commencement of your workshop via the Turnitin link. Submissions made after the start of the workshop will be considered late and receive a mark of zero.Instrumair Limited Acknowledgement This case is adapted from the Bud's Big Blue Manufacturing. case published in: Beasely, M.S., Buckless, F.A., Glover, S.M., and Prawitt, D.F. 2015. Auditing Cases: An Integrative Learning Approach. Upper Saddle River, NJ .: Pearson. Instrumair Limited, based at Camden Airport, manufactures stande ight instruments for small aircraft. Instrumair's primary market consists of small aircraft manufacturers and aircraft repair companies. You are a newly graduated auditor having started work at the audit rm (Graham Layton) two months ago. This week you have been assigned to work on the Instrumair Limited audit, which is nearing completion. The graduate auditor who was working on the Instrumair audit has just been assigned to a new out-of-town client. As you arrive at the client's headquarters, you are met by the audit senior assigned to the Instrumair audit, Jenna Checketts. Jenna has asked y0u to start by nishing the evaluation of accounts receivable balances. Conrmations were mailed to selected customers a few weeks ago. The staff auditor who was previously working on the client had completed an evaluation of all but seven of the receivables conrmations before having to y out to the new client. These seven conrmations are available on the Moodle course website. The risk of material misstatement for accounts receivable assertions of 'existence', 'accuracy, valuation and allocation' and 'cut-o' is high. She has reminded you of the importance of professional scepticism in reducing audit risk to an appropriately low level. Instrumair Limited Accounts Receivable Confirmation Log Confirmation Customer Date Date Difference Is the noted Has sufficient appropriate evidence been Tracking Sent Received noted by difference an audit obtained? If no, describe additional procedures Number customer? difference (i.e., not you believe should be performed (Yes/No) a timing difference)? Private Planes 71 Plus 12/7/15 Manufacturing 72 New Heights Pty Limited 12/7/15 73 Pilots Passion 12/7/15 74 High Flyer Corporation 12/7/15 75 Bird Buddies 12/7/15 76 High Flyers Manufacturing 12/7/15 Aviation 77 Assemblers Pty 12/7/15 Limited WINSTRUMAIR LIMITED 146 Airport Drive Camden Airport Camden 2664 Australia 12 July, 2015 Private Planes Plus Manufacturing 72 Straus Avenue Port Macquarie NSW 2742 Attn: Sandy Donner With regard to our annual audit, please complete the bottom portion of this letter and return the entire letter to our auditors, Graham Layton, GPO Box 4532 Sydney NSW 2000. Our records indicate your balance with our company as at 30 June 2015 amounted to $257,449. If the amount listed above is in agreement with your records, please mark "A" below. If the amount listed above is not in agreement with your records, please mark "B" below. After making the appropriate response, please sign and date this confirmation letter and return it directly to our auditors in the enclosed reply paid envelope. This is not a request for payment; PLEASE DO NOT SEND PAYMENT TO OUR AUDITORS. Sincererly Patty Rice Patty Rice Financial Controller Intrumair Limited. A. The above balance agrees with my records. B. XMy records show a balance of $ 207,449 The difference may be attributable to the following: Our records show that we made a payment in the amount of $50,000 on 29 June 2015. Sardy Donner (Signed by) 19/7/2015 (date)INSTRUMAIR LIMITED 146 Airport Drive Camden Airport Camden 2664 Australia 12 July, 2015 New Heights Pty Limited Hanger 15 Dubbo Regional Airport Dubbo NSW 2154 Attn: James Kindel With regard to our annual audit, please complete the bottom portion of this letter and return the entire letter to our auditors, Graham Layton, GPO Box 4532 Sydney NSW 2000. Our records indicate your balance with our company as at 30 June 2015 amounted to $177,821. If the amount listed above is in agreement with your records, please mark "A" below. If the amount listed above is not in agreement with your records, please mark "B" below. After making the appropriate response, please sign and date this confirmation letter and return it directly to our auditors in the enclosed reply paid envelope. This is not a request for payment; PLEASE DO NOT SEND PAYMENT TO OUR AUDITORS. Sincererly Patty Rice Patty Rice Financial Controller Intrumair Limited. A. X The above balance agrees with my records. B. My records show a balance of $ The difference may be attributable to the following: James Kindel (Signed by) 5 August 2015 (date)INSTRUMAIR LIMITED 146 Airport Drive Camden Airport Camden 2664 Australia 12 July, 2015 Pilots Passion. 65 Boundary Road Bankstown Airport NSW 2500 Attn: Paula Sutton With regard to our annual audit, please complete the bottom portion of this letter and return the entire letter to our auditors, Graham Layton, GPO Box 4532 Sydney NSW 2000. Our records indicate your balance with our company as at 30 June 2015 amounted to $257,449. If the amount listed above is in agreement with your records, please mark \"A\" below. If the amount listed above is not in agreement with your records, please mark \"B\" below. Aer making the appropriate response, please sign and date this conrmation letter and return it directly to our auditors in the enclosed reply paid envelope. This is not a request for payment; PLEASE DO NOT SEND PAYMENT TO OUR AUDITORS. Sincererly Patty Rice Financial Controller Intrumair Limited. A. E The above balance agrees with my records. B. [I My records show a balance of $ The difference may be attributable to the following: PauLa Sutton (Signed by) 215/2015 (date) Via E-MAIL Jenna Checketts From: Carl Metser [cmets@highflyer.com] Sent: Monday, August 10, 2015 11:46AM To: Subject: jenna.checketts@grahamlayton.com.au A/R Confirmation Jenna: I received your email address from Patty. This is to confirm that our outstanding balance with Instrumair per our books matches the balance noted in your letter. Best regards, Carl Metser High Flyer Corporation Controller cmets@highflyer.comINSTRUMAIR LIMITED 146 Airport Drive Camden Airport Camden 2664 Australia 12 July, 2015 Bird Buddies 53a Trade Park Road Canberra Airport NSW 2298 Attn: Victoria Holman With regard to our annual audit, please complete the bottom portion of this letter and return the entire letter to our auditors, Graham Layton, GPO Box 4532 Sydney NSW 2000. Our records indicate your balance with our company as at 30 June 2015 amounted to $343,810. If the amount listed above is in agreement with your records, please mark \"A\" below. If the amount listed above is not in agreement with your records, please mark \"B\" below. Aer making the appropriate response, please sign and date this conrmation letter and return it directly to our auditors in the enclosed reply paid envelope. This is not a request for payment; PLEASE DO NOT SEND PAYMENT TO OUR AUDITORS. Sincererly Patty Rice Financial Controller Intrumair Limited. A. E The above balance agrees with my records. B. I] My records show a balance of $ The difference may be attributable to the following: Wiom (Signed 133') 30/7/2015 (date) INSTRUMAIR LIMITED 146 Airport Drive Camden Airport Camden 2664 Australia 12 July, 2015 High Flyers Manufacturing. 35 Mountain Road Lillyfield NSW 2885 Attn: Phillip Bramwell With regard to our annual audit, please complete the bottom portion of this letter and return the entire letter to our auditors, Graham Layton, GPO Box 4532 Sydney NSW 2000. Our records indicate your balance with our company as at 30 June 2015 amounted to $98,033. If the amount listed above is in agreement with your records, please mark "A" below. If the amount listed above is not in agreement with your records, please mark "B" below. After making the appropriate response, please sign and date this confirmation letter and return it directly to our auditors in the enclosed reply paid envelope. This is not a request for payment; PLEASE DO NOT SEND PAYMENT TO OUR AUDITORS. Sincererly Patty Rice Patty Rice Financial Controller Intrumair Limited. A. The above balance agrees with my records. B. My records show a balance of $ The difference may be attributable to the following: Seems Reasonable Phillip Bramwell (Signed by) 26/7/2015 (date)INSTRUMAIR LIMITED 146 Airport Drive Camden Airport Camden 2664 Australia 12 July, 2015 Aviation Assemblers Pty Limited. 55 Kingsford Smith Avenue Mascot NSW 2375 Attn: Jason De Vue With regard to our annual audit, please complete the bottom portion of this letter and return the entire letter to our auditors, Graham Layton, GPO Box 4532 Sydney NSW 2000. Our records indicate your balance with our company as at 30 June 2015 amounted to $302,717. If the amount listed above is in agreement with your records, please mark "A" below. If the amount listed above is not in agreement with your records, please mark "B" below. After making the appropriate response, please sign and date this confirmation letter and return it directly to our auditors in the enclosed reply paid envelope. This is not a request for payment; PLEASE DO NOT SEND PAYMENT TO OUR AUDITORS. Sincererly Patty Rice Patty Rice Financial Controller Intrumair Limited. A. The above balance agrees with my records. B. X My records show a balance of $ 302,177 . The difference may be attributable to the following: Jason Devue (Signed by) 14 July 2015 (date)
