After the half-year audit, the engagement partner in charge of the audit has identified potential financial fraud
Question:
After the half-year audit, the engagement partner in charge of the audit has identified potential financial fraud and misstatements presented in the accounting records. Under this circumstance, the partner decided to ask you to conduct further substantive tests prior to year-end audit.
Answer following questions using Costa Group Holdings Ltd annual report 2020 https://investors.costagroup.com.au/Investor-Centre/?page=annual-report
1. Comments on strengths (minimum 2 items) and weaknesses (minimum 2 items) of the client’s internal controls. Refer to ASAs 260, 315 or other references.
2. Examine the techniques of testing controls that should be applied by the auditing firm. Given an example for each technique identified.
3. Determine relevant substantive testing for THREE (3) accounts selected from balance sheet accounts of the chosen company, such as cash, trade receivables, inventory, property, plant and equipment (PPE), intangible assets, goodwill, investment, loan, payables, provisions, leases, long-term liabilities, equity, revaluation surplus, deferred tax assets, deferred tax liabilities. You should identify the objectives, substantive tests of transactions and account balances for each account identified. Refer to relevant ASAs or other resources.