Auditing and Assurance Group Assignment-
Crown Resorts Limited (CWN)
Preliminaries
As a start, students should download CWN's most recent Annual Report from: https://www.crownresorts.com.au/investors-media/annual-reports
CWN is client of a Big 4 accounting firm, Ernst & Young. For this assignment, assume that your group are all recently appointed graduate auditors from Monash University who are required to complete this assignment as part of the ‘client acceptance/continuance decision' and, in particular, ‘the risk assessment phase' of this audit.
Your audit manager (in this case the ACC/ACF 3600 staff member marking this assignment) expects a high quality report that clearly and directly responds to all three parts of the assignment. There is no need to separately provide an executive summary, introduction or summary/conclusion section; just answer the three parts! Having said this, it may be useful to have introductions and summary/ conclusion paragraphs/sections for each part, mindful of the word limit.
Part 1-
(a) ‘ASA 315 (ISA 315) provides guidance on the steps to take when gaining an understanding of a client. In gaining that understanding the auditor will consider issues at the entity level, industry level and the economy level' (Moroney et al. 2014, page 93). In addition, this standard requires that an auditor gains knowledge of the client's business. This knowledge assists the auditor to identify the events, transactions, practices and risks that may have a significant effect on the financial reports particular in the form of material misstatements.
Required
Provide an in-depth understanding of CWN. The discussion should be supported by information from the most recent annual report(s), accounting standards, the media (e.g., newspapers/the financial press), the company's website or other credible sources (e.g., industry reports).
NOTES
(i) Since the latest financial reports (as contained in the latest annual report) have been previously audited by your accounting firm, you are primarily using them to gain further, indepth understanding of this client in planning for the current audit.
(ii) Wikipedia, Investopedia or other such sources should not be used as references
(iii) There are a nember of ‘frameworks' for structuring and presenting your in-depth understanding of this client, including the one used by the prescribed textbook (i.e., understanding the entity, industry and economy).
(iv) Primarily, marks will be awarded for the depth of your understanding, and not for your choice of framework used to gain that understanding.
(b) ‘ASA 520 (ISA 520) Analytical Procedures defines analytical procedures as an evaluation of financial information by studying plausible relationships among both financial and non-financial data' (Moroney et al. 2014, page 139). Further, ‘it is essential that an auditor has clear expectations about their client's results for the reporting period before conducting analytical procedures, so that unexpected fluctuations can be correctly identified and investigated' (emphasis added) (Moroney et al, page 139).
Required
Based on ‘clear expectations', which have been previously derived from your in-depth understanding of this client, as contained in your Part I(a) answer, use analytical procedures, e.g., comparisons, common-size, trends, ratios, others, to identify and fully explain significant and unusual/unexpected/unexplained fluctuations in the final report account balances.
NOTE; Marks will be primarily awarded for the logic of your ‘clear expectations' and the quality of your explanations (i.e., linkage/consistency with your ‘clear expectations'), and not for your choice of analytical procedures or the necessary calculations.
Part II-
‘Analytical procedures are conducted at the risk assessment phase of the audit to: . . . identify the accounts at risk of material misstatement' (Moroney et al. 2014, page 140).
Required
Given your Part I(a) ‘in-depth understanding' of this prospective client and your Part I(b) ‘analytical procedures' results, select and discuss five specific areas of the financial reports that you believe would receive ‘special audit consideration' during the audit - that is, where the risk of material misstatement is ‘significant'. The selection and discussion of your five ‘specific areas of concern'
must be clearly supported by your Part I(a) and I(b) responses.
NOTE; Each ‘specific audit consideration' must be centrered around (i.e., specifiy) (i) an account balance and (ii) the related assertion(s) that would require your audit attention, and (iii) the key audit procedures that would help you identify material misstatements in your set of selected account balances and related assertions. E.g., saying that your ‘special area of concern is with the net profit figure', or ‘. . . with current assets' would be too vague, but nonetheless a useful starting point.