AUDITING FOR THE PERFECT PIES (PP) LTD

AUDITING



Identify the unresolved problems which need to be addressed and discuss why each is a problem for as auditor and the potential impact of each on the financial statements.

Although the financials of the company are very good and represent that company is in good position for further investment and diversification. The Perfect Pies (PP) ltd can encounter a number of problems in auditing. Following are the issues which must be addressed specifically:

Loan to related company 120 20

Finished products 18 39

The gross profit margin has been decreased while stock and relevant distribution cost didn't present any such cause for the increase. The increased costs are:

Gross Profit %                                                                            32.9%                         34.5%

Which meant that cost of inventory sold last year is less then cost this year. Similar minor issues present there like excess reserve and debts management.

Gathering sufficient audit evidence

The adequacy and property in Perfect Pies (PP) ltd are interrelated and apply to the audit evidence obtained from both tests of control and substantive procedures. Sufficiency is the measure of the amount of audit evidence; the property of Perfect Pies (PP) ltd is the measure of the quality of audit evidence and its relevance to a particular assertion and its reliability. Ordinarily, as an auditor, it necessary to rely on audit evidence is persuasive rather than conclusive and often seeks audit evidence from different sources or of a different nature to support the same assertion. (Robert R. Davis, 2004, pp. 84-95)

For Perfect Pies (PP) ltd, audit evidence is more persuasive when items of evidence from different sources or of a different nature are consistent. In these circumstances, as auditor may obtain a cumulative degree of confidence that is higher than would be obtained from items of audit evidence when considered individually.

Designing audit programs and planning engagement

At Perfect Pies (PP) ltd, Comprehensive Audit Program is detailed outline of the research and the procedures used during the implementation phase, which determines the extent and timing of their implementation, and working papers are to be developed. The audit activity is implemented through the use of audit programs, which are detailed schemes in advance of work to be done and among others, contain objectives and procedures guiding the development. In preparing and implementing comprehensive audit programs should be taken into account that they are aligned with the objectives of the audit initially established, and if they can ensure the adequacy and relevance of evidence. (Robert R. Davis, 2004, pp. 84-95)

Comprehensive audit program will be tailored by line audit, which must be built according to the nature, business processes and operations of each control subject. When in accordance with the characteristics of the work, the Management Department or Central level support required to implement specialized procedures audit supervisors central or departmental level, to coordinate this activity through the Departmental Manager.

Confirming accounts receivable

The audit of Perfect Pies (PP) ltd was to review the operational objectives of accounts receivable, to classify the obstacles to achieving the goals and practices under review ...