Details

The assignment is based on the 2012 financial statements of EarthWear Clothiers. Company related information is posted under the assignment folder. Review the 2011 annual report to gain a good understanding of the company. You should also review the 2012 financial statements and other financial information.

Assume the role of the organization’s external auditor Willis and Adams and prepare an Audit Plan for 2012 containing:

Understanding the Business (15 marks)

1. a) Overview of the company and industry. Include key corporate goals or strategies, markets the company operates in, main products and sources of revenue, and the company’s revenue and earnings levels. (5 marks)
2. b) Financial Statement presentation: Review the Management Discussion and Analysis section, the annual report, any additional company information, the financial statements and notes to the financial statements. Comment on any significant changes in operating results, changes in operations or activities (such as acquisitions or divestitures), and accounting policies. (10 marks)

Analytical Procedures (10 marks)

1. c) Compute or identify the important ratios and other calculations that would be done in the planning stage of the audit. Discuss your findings or concerns you may have and how they will impact your audit. Materiality (5 marks) d) Using the guidelines in the CICA Handbook, calculate a preliminary estimate of overall materiality including quantitative and qualitative factors to consider. Provide a brief explanation supporting your estimate.

Audit Risks/Considerations (20 marks)

1. e) Based on your work above, determine the overall audit approach and identify and explain 5 important risk factors/ risk areas of the company. (10 marks) f) Select one risk area and develop a preliminary audit plan including at least 5 audit procedures and the related financial statement assertions. (10 marks)