Audit for the Rivets Ltd Company – Accounting Assignment Help

Assignment Task

Task
Question 1 Multiple choice questions
1) The parties relevant to an assurance engagement are:
a) users, responsible party, subject matter.
b) assurance practitioner, responsible party, criteria.
c) assurance practitioner, responsible party, users, subject matter.
d) assurance practitioner, users, responsible party.
2) A key difference between auditing balance sheet accounts and income statement accounts is that:
a) balance sheet accounts always have larger totals.
b) balance sheet accounts are always more significant accounts.
c) income statement accounts reflect only 12 months of transactions.
d) income statement accounts rely on audit techniques such as confirmations
3) Which of the following is not a type of control?
a) Manual controls
b) Automated controls
c) Substantive controls
d) IT-dependent manual controls
4) Tolerable error:
a) relates only to control testing.
b) is positively related to sample size.
c) is an amount prescribed by ASA 530.
d) is the maximum error an auditor is willing to accept within the population 

Question 2
Rivets Ltd has an internal audit department that primarily focuses on audits of the efficiency and effectiveness of its production departments. The other main role of the internal audit department is auditing compliance with various government regulations surrounding correct disposal of waste and storage of raw materials at its five factories. Rivets Ltd’s internal audit department is run by Rusty Rydell, a CPA and a member of the Institute of Internal Auditors. There are three other members of the department, all of whom have experience in performance auditing and, in addition, have completed industry-run training courses in waste management and handling dangerous goods. Rusty meets regularly with the chief production manager and sends monthly reports to the CEO and the board of directors. Your initial investigations suggest that Rusty is highly regarded within Rivets Ltd, and his reports are often discussed at board meetings. In most cases, the board authorises the actions recommended in Rusty’s reports with respect to major changes to production and logistics.

Required:
a) Comment on the extent of reliance the external auditor should place on the work of the internal audit department at Rivets Ltd.
b) Explain the likely impact of the internal audit department’s work on the audit plan. The internal audit department focuses on efficiency and effectiveness of production (i.e. performance auditing) and compliance with government regulations (compliance auditing). The head of the internal audit department is a CPA and the other members of the department have performance auditing and compliance relevant experience and qualifications. The internal audit department is highly regarded within the business, reports to the board of directors as well as the CEO, and the reports appear to be acted upon. All these factors suggest that the internal audit department is well run and effective. However, they also suggest that it does not concentrate on issues directly relevant to financial reporting and auditing. The external auditors are likely to review the internal audit department’s work, particularly where it is relevant to operational indicators which are reflected in the accounts. They are likely to review the internal auditor’s reports and their evaluations of internal control systems, particularly in production and inventory issues and general management issues. However, most of the internal audit department’s findings on waste regulations and efficiency matters will not be directly relevant to the external auditors’ audit of accounting transactions and balances.