For the purpose of the assignment, you assume the role of an auditor and your firm has recently been appointed as external auditor of an entity. As required by Auditing Standard ASA300, you are assisting your Audit Manager in preparing an audit plan for the audit of the entity’s financial statements. You are required to download the 2019 annual report of PWR Holdings Limited (https://www.pwr.com.au/reports) Using information in the company annual report and other relevant information, preparing a report for your Audit Manager. The report should include the followings: 1. Introduction (4 marks) 2. A summary of the client’s operations (10 marks) 3. Five (5) accounts you consider most at risk of being materially misstated (10 marks) 4. Assess the audit risk for each of the five (5) accounts selected (10 marks) 5. Conclusion (4 marks) 6. Appendix/references (2 marks) Useful information The following additional information is useful for the purpose of the assignment: 1. The summary of the client’s operations should include: brief information on their financial position and performance for the year, applicable financial reporting framework, industry in which the client operates and economy wide factors affecting the client. 2. Use analytical procedure – simple comparison to identify accounts most at risk of being materially misstated. In general, accounts with significant movement in the balance between two financial years are most at risk. 3. Use the audit risk model to assess the audit risk of the selected accounts. The audit risk model: AR = IR x CR x DR where AR = audit risk; IR = inherent risk; CR = control risk; and DR = detection risk. Generally, where IR and CR have been assessed as high, auditor must reduce DR to a low level in order to reduce AR to a low level.
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