Modern Auditing and Assurance Services
Assignment
Word count: approx. 1,250 words
Weighting: 25%
This assignment has three parts: Part A, Part B and Part C. In this document you will find:
• General information about the assignment,
• Details of your task for Part A,
• Details of your task for Part B,
• Details of your task for Part C,
• A suggested template for your answer, and
• The criteria rubric with which your assignment will be marked.

General information about the assignment
It is critical that you provide complete referencing for any sources of information you use in preparing your
assignment.
This includes both in-text references and a list of references at the end of your assignment. Referencing should
be Harvard referencing.

The word count for each of the three parts provides you with a guide to the approximate number of words that
you should use for each part. The suggested total word count is 1,250 words. However assignments between
1,000 and 1,500 words in length will be considered acceptable.

Part A: Audit Planning (Approximately 500 words)
You are planning the audit of Bob’s Bikes and have accessed the preliminary trial balance for the entity. This is
presented below. You would like to use this trial balance to identify accounts that are likely to require significant
audit attention.
Bob’s Bikes
Trial Balance
Jul 1, 2015 – April 30, 2016
Debit

Credit

Jul 1, 2014 – Jun 30, 2015
Debit
Credit

Cash at Bank
Accounts receivable

98,751
124,320

102,503
112,000

Inventory
Machinery
Accumulated Depreciation
Motor Vehicles

189,000
65,000

175,000
65,000

Accumulated Depreciation
Furniture
Accumulated Depreciation
Bank Loan
Sales
Cost of sales
Consultancy fees
Other income
Interest income
Bank charges
Depreciation
Interest expense
Printing
Miscellaneous
Wages
Superannuation
Owner’s Equity

46,041
65,000

24,375
65,000

26,650
7,500

20,150
7,500

3,000
215,000
201,515
53,271

2,250
215,000
187,450
63,595

47,975
1,000
40
290
28,916
8,958
210
2,000
46,816
4,213

57,000
25,000
50
350
15,590
10,750
250
53,000
4,770

153,024
694,245

694,245

144,033
675,308

675,308

Your task:
You must choose 5 accounts from the trial balance for audit testing. In doing so, you should:

Make a preliminary judgement of materiality,
Complete an analytical review using the trial balance,
Consider whether there are any accounts that should be selected regardless of their quantitative materiality, and
Provide a brief rationale for your selection of each of the 5 accounts.
Please be sure to choose at least 1 revenue account, as this will be required for Part B.
A suggested template for presenting your answer is included later in this document.

Materiality is covered in chapter 10, and analytical reviews are covered in chapter 8.

Part B: Sample Selection (Approximately 600 words)

You are now further into the audit process. You have finished your audit planning, including gaining an
understanding of the entity’s internal control structure. You have decided to adopt a predominantly substantive
approach for the revenue accounts and are now in the substantive testing stage of the audit.
Your task:
• Select 1 of the revenue accounts that you identified in Part A,
• Access the General Ledger detail for that account from the file: GL extract for Part B.doc
• Use one of the following sample selection techniques: random, systematic or haphazard, to select 5
transactions from the ledger account for further audit testing,
• Explain/demonstrate how your chosen sampling technique resulted in the selection of these 5
transactions, and
• Provide an explanation of the benefits of your selected technique (including the limitations of the 2
alternative techniques).
Sampling is covered in chapter 13.
A suggested template for presenting your answer is included later in this document.

Part C: Considerations in Substantive Testing and Collecting Audit Evidence (Approximately 150 words)
Your task:
Please provide an answer to the following questions:
1. What might be your reason for adopting a predominantly substantive approach in Part B?
2. Which of the following assertions are you likely to be more concerned about for the account used in Part
B: occurrence or completeness? Why?
3. Which of the following audit procedures would be more appropriate: tracing or vouching? Why?
4. Please list 1 other assertion that might be relevant for this account.
5. What evidence could you seek for the assertion you identified in question 4? You should list at least 1
example of corroboratory evidence and/or a specific audit procedure.
6. Assume your further testing revealed an error with one of the transactions you selected in Part B,
specifically a misstatement of $20,000.
a. Is this likely to be considered acceptable? Why/why not?
b. Would the magnitude of the misstatement be relevant if you were doing tests of control rather
than substantive testing? Why/why not?
c. What other information would you need to know before projecting your results to the entire
account balance?
7. Under which circumstances might it be considered acceptable to use a part-year trial balance, such as
the one presented in Part A, for substantive testing?
A suggested template for presenting your answer is included below.

A suggested template for your answer
You may wish to format your answer as follows:

Title page
1.0 Part A: Audit planning

It is not necessary to include an
overall introduction.

1.1 Preliminary judgement of materiality
1.2 Analytical review
1.3 Five accounts selected and rationales
2.0 Part B: Sample selection
2.1 Explanation/demonstration of sampling technique
2.2 Benefits of selected sampling technique
3.0 Part C: Considerations in substantive testing and collecting audit evidence
3.1 Question 1
3.2 Question 2
3.3 Question 3
3.4 Question 4
3.5 Question 5
3.6 Question 6
3.6.1 6a
3.6.2 6b
3.6.3 6c
3.7 Question 7
List of references

It is not necessary to include an
overall conclusion.