Students are required to:
1.1- Identify and distinguish between tests of controls, substantive tests of transactions
and substantive tests of balances.
1.2- Identify and understand when the auditor will undertake substantive audit
procedures in response to specific assessed risks of material misstatement.
1.3- Understand how assertions relate to account balances
1.4- Understand how to select the most efficient and effective combination of audit
procedures that allows them to achieve the audit objective
1.5– Active participation in an “audit team context” with professional group
1.6- Co-operation with fellow students to produce a joint assignment in a report format
on time and to a high standard along with power-point slides.
The aim of this group assignment is to provide you with an opportunity to design a “risk-based”
audit program for a real world company and focus on the “Substantive tests of balances”, which
involves substantiating the ending balance of an account(s), which is comprised of multiple
transactions, as at a certain year-end date.
Assignment Requirements and Structure
1. Students are required to form groups of 4 – 5 students and inform their session lecturer of their
group members by completing the “HA3032 Group Form details”.
2. If you have difficulties forming such groups, please contact your lecturer ASAP.
3. Each group of students will select, or have selected for them, a unique ASX listed company to use
for progressive analysis in this group assignment.
4. Final approval of the company/client – i.e. any company listed on the ASX and which has not
already been selected by another group – is required by your lecturer.
5. Prepare a detailed audit program Report [3,000 words] for the client/company in a group of 4 – 5
students. Students must use a Report Format with an Executive Summary and Table of Contents.
6. Use publicly available online resources for research purposes.
7. Prepare a 10mins oral presentation in class using power-point slides and graphics (10 marks).
Detail Assignment Tasks: Developing an Audit Program for a selected listed Company
1. Select a listed company from the current ASX List or this will be allocated to your group.
2. Gain an understanding of the nature of the entity and its industry and then identify key business
risks. After this is completed, assess where the risks of material mis-statements could be in the
financial report. Consider the factors affecting both Inherent Risk and Control Risk. Finally, apply
the Audit Risk Model [AR = f ( IR , CR , DR )] to the selected company. Which risk rating would
you apply (Low, Medium or High) to the company’s inherent risk assessment and control risk
assessment? How does this affect your assessment of Detection Risk and Audit Risk?
3. Perform analytical procedures of the Statement of Financial Position and of Financial
Performance over the last three years using appropriate ratios and/or metrics. Select four key
ratios and provide a brief explanation in the report. This should be presented in a table format.
4. Discuss with your group members which account balances are considered “material”. Explain how
you calculated materiality for planning purposes and provide appropriate justification for your
(Note – Use a table format to structure your answers to questions 5, 6, 7 & 8)
5. Select up to ten different material account balances, at least five assets and five liabilities.
6. For each material account balance selected, list the relevant financial report assertions and
explain why the selected assertions are applicable to each account.
7. Design a comprehensive set of audit work steps for each material account balance, which
addresses the selected assertions and which will result in sufficient and appropriate audit
evidence being collected for your selected client company. (Assume that a predominantly
substantive approach is being adopted)
8. Include a sampling plan, which details how you will use sampling for each material account
balance to be tested. How many items will be tested for each test?
Page 3 of 5
9. Refer to some or all of the following websites for further information and research processes:
http://www.auasb.gov.au/Home, http://www.asic.gov.au/, www.cpaaustralia.com.au,