Terms Of Audit Engagement Accounting Essay

Audited account program are prepared to find the dependability and relevancy of fiscal information in related to a company as a whole ( Leung et al. 2007 ) . The intent of the auditing program is to guarantee all fiscal information gathered is free from prejudice and materiality mistakes ( Thomas 2008 ) . Therefore, A this auditing program is to guarantee all possible audit hazards and jobs areA detected andA make certain the boards are given proper attending andA respond ( Pine 1998 ) .A In Melbourne Airport one-year study, we areA taking into considerationA five key hazard countries which are Aeronautical Revenue, Property Plant and Equipment, Staff Costs, Investment Property and Other Financial Liabilities. The reasonsA we choose these 5 key hazard country are comparative stuff in past 2010 fiscal year.A Therefore, hearer may non able to place all the hazards in an administration but hearer should be thoughtful sing to the entity and its concern activities before prosecuting in an audit reappraisal ( Leung et al. 2007 ) .

Footings ofA Audit EngagementA

We are confer withing for the first clip audit with Melbourne Airport which made us a new scrutinizing battle. Therefore, an engagement missive should be prepared for the portion of the scrutinizing plan.A Further, this engagement missive will be must be reviewed by the member ofA Melbourne Airport and communicate by both parties to guarantee all the elements of scrutinizing planning will carries in a proper manner as it relate to the entity, development of internal control, and searching of the materiality.A

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In this instance, A an engagement missive has been communicated by the hearer and member of Melbourne Airport. It is besides give authorization to auditor to reexamine the cardinal country in carry oning an audit program. Furthermore, the entire audit fees of $ 180,000 besides agreed by the member of Melbourne Airport in engagement missive. These fees are based onA sing theA clip, and material demand to puting up an audit plan.A

IntroductionA

Australia Pacific Airports Corporation Limited ( APAC ) is an unlisted company that ain two airdromes which are Melbourne Airport and Launceston Airport. We presently have chosen this company to make the audit program. Besides that, we will follow the ASA 200 Objective and General Principles Regulating an Audited account of Financial Report criterion to find whether our professional accommodation is good prepared ( AuASB 2007, ASA200, para 5 ) . Furthermore, we should cut down audit hazard to the sensible degree with the efficient and effectual mode which required by ASA 300 Planing an audit of a Financial Report ( AuASB 2006, ASA 300, parity, 5 & A ; 6 ) . Harmonizing to Gay and Simnett ( 2010 ) , there are four stairss to make audit program which are ; First, understanding the Melbourne Airport administration and their environment. Second, understanding the internal control of Melbourne Airport. Third, measuring the hazards of stuff misstatement, and in conclusion is developing responses to assessed hazard.

Audited account program

A. ) Understanding the entity and its environment

By mentioning to ASA 315.26, understanding the entity mean the hearer have to understands its nature, industry, regulative, aims and schemes in associating to their concern hazard ( AuASB 2011 ) . Therefore, there are important countries that an hearer has to recognize for the client ( Melbourne Airport ) which are ; place the industry status, regulative and its model and the external factors impacting the entity.A Therefore, it is really of import for the hearer to understand the Melbourne Airport conditions as any events and minutess that occurred possibly perchance impact the material misstatement or prejudice which could impact the year-ended fiscal statement to do more favorable to investor. Further, ASA 315.5 stated that the hearers need to obtain the information of the entity background and understand the hazard of materiality misstatement ( Leung et al. 2007 ) . Therefore, after the first measure of audit program which is understand the entity, hearer can obtain an indifferent judgement and apprehension of occurred dealing within the entity.A

Industrial ConditionA

Melbourne Airport isA aA Victoria’sA air power gateway besides known asA TullamarineA Airport, Melbourne. It is a chief airdrome and helping as international airdrome comparison of fourA airportsA in Melbourne ( Australia Pacific Airports Corporation 2010 ) .A For 40 old ages functioning since 1970 twelvemonth, Melbourne Airport is now Australia primary air power gateway. In add-on, Melbourne Airport is besides administrated by variously by corporate and the federal authorities. It is owned and operates by the APAM ( Australia Pacific Airport Melbourne Pty Limited ) which is owned by APAC. APAC is a in private held corporation owned by institutional investor like old-age pension financess ( Australia Pacific Airports Corporation 2010 ) .A Further, itA is besides operated by the Federal governmentA underA 50 old ages long term rental.

Economic ConditionA

The impact of economic system factor to Melbourne Airport is considered in three different degrees which are at the national degrees, local and province. This is because it would be affected by its competitory positionA ( Australia Pacific Airports Corporation 2010 ) . Melbourne Airport besides defined as the activity of concern and other authorities operation within the country of Melbourne Airport. For illustration, conveyance operation in Melbourne airdrome are refering with freight forwarder, there are besides assorted authorities services such as imposts and constabularies runing within the airdrome and other activities located at airdrome such as retail mercantile establishments, auto rental operation in the airdrome precinct.A

Legislation and RegulationA

Melbourne Airport is a chartered federal airdrome and all leased federal airdrome are governed by Commonwealth Act and associating to airport rentals Division 2-8 of Airport Act 1996 ( Australia Pacific Airports Corporation 2010 ) . Therefore, Melbourne Airport regulations and processs are subjected to leased federal airdrome. There are besides certain ordinance whichA Melbourne airdrome isA linked furthers ordinance such asA environment ordinance which is subjected to pattern Airport Act 1996 and Airports Regulation 1997 ( Australia Pacific Airports Corporation 2010 ) . Besides that, it serves the intent of the airdrome operators are required to keep their duty of protecting environment which besides guarantee everyone who working at the airdrome have to be cognizant of their environment duties. From the consequence of Melbourne Airport Annual Report ( 2010 ) , it shows that the Boardss are satisfied with the consequences of environmental which conducted by internal and external specializer during twelvemonth ended June 2010. This shows that Melbourne Airport is conformity with the Acts and Regulations and operates in positives manner.A

Furthermore, Melbourne Airports is besides subjected to Airport ordinance 1997 such as limitation on the ownership and control of the substructure within airdrome. The intent is to keep services and duties for all activities operated. Others regulation such as Building Control Regulation 1996 must be approved by Airport Building Controller ( ABC ) which appointed by Commonwealth Law to administrate the edifice control government ( Australia Pacific Airports Corporation 2010 ) . Therefore, all activities from Melbourne Airport must beA soughtA for blessing from ABC for a planning and operational outlook.A

Accounting PoliciesA

Melbourne Airport is practising with the fiscal coverage model. Melbourne airport fiscal study is general purpose fiscal study in conformity with the corporation jurisprudence and applicable Accounting Standard. In add-on, they are besides practising traveling concern method. This is because the manager of Melbourne Airport believes that the parent entity and economic entity are traveling concerns based on the hereafter runing hard currency flows and finance installations ( Australia Pacific Airports Corporation 2010 ) .

B. ) Understanding internal controlA

Harmonizing to ASA 315.52, theA auditorsA need to gainA apprehension of an organisationA internal control construction ( AuASB 2011 ) .A It is because aA well-organised internal control system will do the hearer ‘s occupation easier in doing the audit program ( Leung et al. 2007 ) . An administration could take down their control hazard if they have a well-build internal control system. Based on ASA 315.55, there are five constituents in the internal control which are ;

Control Environment

TheA audit commission and Board of managers

Melbourne Airport consists of president, pull offing manager and main executive officer, managers and secretaries ( Australia Pacific Airports Corporation 2010 ) . Furthermore, this company does non hold any audit commission since the Board believes that harmonizing to the nature, degree, size and the experience of each member from your organizational. Besides that, audit commission have to incorporate non-executive manager. Therefore, the board is responsible for any activities of the audit commission.

Corporate administration

The company has several Numberss of managers ‘ meetings which are three audit and hazard direction meetings, seven board meetings and three safety, security, and environment meetings. Furthermore, the board and direction demand to understand its concern minutess and look into whether the fiscal study gives a true and just position as there is no audit commission in this company ( Gay & A ; Simnett 2010 )

Hazard Appraisal

Furthermore, Melbourne Airport has besides adapted Risk Management policyA ( Australia Pacific Airports Corporation 2010 ) . The board is invariably detecting the company operational and fiscal feature of the Melbourne Airport behavior. As there is no audit commission in this company, theA board isA constantlyA taking into their history advicesA on the restriction of the hazard of Melbourne Airport.A

Furthermore, the board must guarantee that all advices given by hearer and external advisor are investigated and appropriate action is taken so the company has a suited internal control environment in topographic point to pull off the hazards which are encountering.A In add-on, the board surveies ways of heightening bing hazard direction strategiesA ( Australia Pacific Airports Corporation 2010 ) . For illustration, theA board adapts segregation of responsibilities, providesA extremely professional employment and trainingA of suited and qualifies staff, A in concurrence with advices of the auditA commission and reexamine the range and work plan of internal audit.A

Information Systems

As to guarantee the company has operate in the efficient and effectual mode, there are some betterment in the operational systems and procedures such as put ining new lasting manner happening signage system, proclamations in new linguistic communication ( Mandarin ) and supplying security and operational showing staff ( Australia Pacific Airports Corporation 2010 ) .

Control Activities

As Melbourne airdrome does non hold Audit commission, the company will hold a high possibility of incurring a fraud or an mistake in their fiscal statements. Not merely that, the board may hold a struggle of involvement with the direction during the concern ( Australia Pacific Airports Corporation 2010 ) . This company demand to hold public presentation reappraisal in order to measure the member public presentation every bit good as the Board public presentation.

Monitoring Activities

As there is no audit commission, the Board is responsible for the function of audit commission. Therefore, the Board and the direction take the responsible and control for reexamining the effectivity of internal control. Besides that, they are besides necessitating to revaluate the relationship between we as external hearers and internal hearers which required for bettering the quality of internal control ( Australia Pacific Airports Corporation 2010 ) .

C. ) Measuring the hazards of stuff misstatement

Analytic processs can be defined as the ratings of fiscal information through the analysis of sensible relationship between both fiscal and non-financial informations ( Eilifen et al. 2010 ) . Based on ASA 520, Analytic processs can be used as a substantial audit process. It besides involves tendency analysis, runing statistics and ratio analysis for the comparing with external and internal information. This procedure can be used to assist auditor to place countries necessitating audit attending every bit good as to find the extent, timing and nature of audit processs.

Harmonizing to the APAC Annual Report ( 2010 ) , we have found five cardinal hazard countries which are ; aeronautical grosss, staff costs, belongings, works and equipment, investing belongings and other fiscal liabilities. Furthermore, each of these cardinal hazard countries can be assessed by utilizing the audit hazard theoretical account to find the hazard degree of material misstatement ( Gay and Simnett 2010 ) . Audit hazard contains three constituents that are control hazard, built-in hazard and sensing hazard.

Aeronautical Grosss

The first key hazard country is aeronautical grosss. Harmonizing to appendix 1, aeronautical grosss have increased by 7.60 per centum or $ 15,380,000. The built-in hazard of this history is high as there is a chance of material misstatement. The sum of aeronautical grosss in the one-year study is combined with the sum of security. But in the fiscal statement, the sum of aeronautical grosss and security are written individually. This shows that the control hazard for aeronautical grosss is high because there is a high possibility of fraud and mistake. Hence, the sensing hazard of aeronautical grosss will be low every bit good as audit hazard.

Staff costs

The 2nd key hazard country is staff costs. The addition sum of $ 2,813,000 or 11.15 per centum in the staff costs every bit at 30 June 2010 ( Appendix 1 ) . The control hazard for staff costs account is high because there is no note provided about staff costs. This shows that this company has a possibility of fraud and mistake in the fiscal statement. Furthermore, the built-in hazard of this history is besides high as there is a possibility failed in the company undertaking such as a staff adjustment undertaking and staff feedback on concern operation. For illustration, the company may non have a good respond from staffs sing their undertakings. Hence, the audit hazard and sensing hazard sing the staff costs will be low as the control hazard and built-in hazard are high.

Property, Plant and Equipment

Another key hazard country is belongings, works and equipment. This history has increased by 10.02 per centum or $ 108,592,000 as at the terminal of June 2010 ( Appendix 2 ) . This means the company has high built-in hazard as depreciation and capitalise is required for the fixed assets. Furthermore, the control hazard is besides high as the utile lives and residuary values of the assets will be reviewed for any accommodation required at the terminal of fiscal twelvemonth. Not merely that, the managers besides decided non to utilize the reappraisal theoretical account in the fiscal statement. This will makes the value of belongings, works and equipment lower. Besides that, the accounting policy may content mistake and fraud. Therefore, the audit hazard and sensing hazard for belongings, works and equipment will be low.

Investing Property

The following key hazard country is investing belongings which has increased by 1.43 precent or $ 12,489,000 as at 30 June 2010 ( Appendix 2 ) . This history has increased because the company squad which is Melbourne Airport Property Team has performed good with the capital value growing up to 1.5 precent and income up to 3 precent. Therefore, the built-in hazard for this history is high and the control hazard is besides high as the willing parties can interchange their belongingss in an arm ‘s length dealing based on the location of the belongings. The high control hazard and high inherent hazard are result in low audit hazard every bit good as low sensing hazard.

Other Financial Liabilitiess

The last key hazard country is other fiscal liabilities. The lessening in other current fiscal liabilities by 13,398,000 or 98.99 precent as at the 30 June 2010 which shows that the company has high built-in hazard as there is a high possibility hazard of material misstatement ( Appendix 2 ) . The control hazard of this history is besides high as there is a possibility that the amalgamate entity can non pay the involvement rate barters. As there is a important decrease in fixed involvement rate, the value of other current fiscal liabilities is besides fall. As a consequence, the audit hazard and sensing hazard sing other current fiscal liabilities will be low.

D. ) Developing responses to assessed hazards

Aeronautical grosss

The control hazard of aeronautical grosss of Melbourne Airport is high. Therefore, the lower assessed degree of control hazard attack will be applied to this history.

History

Audit Strategy

Audit process

Key Assertion

Aeronautical grosss

Lower assessed degree of control hazard attack

Trace a sample of minutess from gross diary and cheque for the appropriate mandate.

Happening

Review the gross history whether all grounds of control of accounting is recorded decently.

Completeness

Check a sample of minutess whether has been recorded in the right grouping.

Categorization

Staff costs

As the control hazard of staff costs is high, the prevailing substantial trial will used for this history.

History

Audit Strategy

Audit Procedure

Key Assertion

Staff Costss

Predominant substantial attack

Verify whether the staff costs history is recorded right.

Accuracy

Check the period of the staff costs account accurately.

Cut-off

Ensure all staff costs are decently recorded in the right grouping.

Categorization

Property, works and equipment

As the control hazard of belongings, works and equipment is high, the prevailing substantial attack will be used for this history.

History

Audit Strategy

Audit Procedure

Key Assertion

Property, works and equipment

Predominant substantial attack

Check each sample of the belongings, works and equipment whether they exist.

Being

Review whether all capitalised costs are recorded right.

Completeness

Check whether analytical processs are applied to the depreciation rate of Melbourne Airport ‘s fiscal statement right.

Evaluation and allotment

Investing belongings

The control hazard of Melbourne Airport for investing belongings is high. Hence, the prevailing substantial attack will be used as audit scheme for this history.

History

Audit Strategy

Audit Procedure

Key Assertion

Investing Property

Predominant substantial attack

Check whether the loans and progresss exist.

Being

Review the general processs whether all the belongings investings are right recorded in the Melbourne Airport ‘s fiscal statement.

Completeness

Trace the investing belongings sum whether decently valued in conformity with the accounting criterions.

Evaluation and Allotment

Other fiscal liabilities

Melbourne Airport has high control hazard for other fiscal liabilities account. So, the prevailing substantial attack will be used for this history.

History

Audit Strategy

Audit Procedure

Key Assertion

Other fiscal liabilities

Predominant substantial attack

Trace and look into whether the minutess exist in both the balance sheet and income statements.

Being

Review the general processs to look into whether there are similar legal and duties.

Rights and Duties

Trace and recalculate the history balance whether are recorded in proper sums.

Evaluation and Allotment

Decision

As a consequence, we have reviewed your administration by understanding the internal control and the environment of your administration. We use both audit schemes and materiality to finding the audit program. From the audit program, it can see clearly that your organizational control is non effectual as it has a high control hazard. Therefore, we use prevailing substantial attack for all possible hazards except for aeronautical grosss.

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