Tno Inc Audit Case
Question 1 - Risks surrounding the identified accounts
The Audit of TNO Ltd has highlighted number of risks. The risks highlighted in the audit are discussed throughout the report. Below is a table of the risks and tests to carry out, based on the five accounts highlighted as being of risk. The common assertion that is common to the five accounts is valuation and allocation.
Account Assessment of Risk Substantive audit procedure
Accounts Receivable Account Receivable has increased while sales has decreased. Days in receivables ratio has also increased considerably. This highlights a high risk of overstatement of the assets. • Subsequent assessment of sales receipts, aged receivable trial balance, and follow up on amounts that are overdue.
• Inquiry with key persons as to how and when overdue balances are classified as bad debts.
Current Investments The decrease in current investments needs investigating, as well as why it has been impaired and has the impairment correctly been done. • Review the share certificates, to vary they are held, and how many are held.
• Review the share prices used in the balance to the ASX listed prices.
Property Assets Due to the property market being …show more content…
The decrease in the property market ultimately decreases the value of assets in TNO Ltd and such presents the risk of overstatement of the value, or understatement of the impairment of the property. This influences the current liquidity ratios, and may be the reason for an increased ratio (Appendix B), when there should be a decline as indicators have presented. This is mainly apparent in the director 's valuation of investment properties. (Note 8 of the financial reports). One property has not decreased from the previous year, and one was purchased in the current year. This could be an indication of a fraudulent
The Audit of TNO Ltd has highlighted number of risks. The risks highlighted in the audit are discussed throughout the report. Below is a table of the risks and tests to carry out, based on the five accounts highlighted as being of risk. The common assertion that is common to the five accounts is valuation and allocation.
Account Assessment of Risk Substantive audit procedure
Accounts Receivable Account Receivable has increased while sales has decreased. Days in receivables ratio has also increased considerably. This highlights a high risk of overstatement of the assets. • Subsequent assessment of sales receipts, aged receivable trial balance, and follow up on amounts that are overdue.
• Inquiry with key persons as to how and when overdue balances are classified as bad debts.
Current Investments The decrease in current investments needs investigating, as well as why it has been impaired and has the impairment correctly been done. • Review the share certificates, to vary they are held, and how many are held.
• Review the share prices used in the balance to the ASX listed prices.
Property Assets Due to the property market being …show more content…
The decrease in the property market ultimately decreases the value of assets in TNO Ltd and such presents the risk of overstatement of the value, or understatement of the impairment of the property. This influences the current liquidity ratios, and may be the reason for an increased ratio (Appendix B), when there should be a decline as indicators have presented. This is mainly apparent in the director 's valuation of investment properties. (Note 8 of the financial reports). One property has not decreased from the previous year, and one was purchased in the current year. This could be an indication of a fraudulent