ASSIGNMENT
You are the audit senior of ABC Company and are planning the audit of Thien An company for the year
‘ended 31 December 2017. The company produces printers and has been a client of your firm for two
years; your audit manager has already had a planning meeting with the finance director. He has
provided you with the following notes of his meeting and financial statement extracts.
‘Thien An's management were disappointed with the 2016 results and so in 2017 undertook a number of
strategies to improve the trading results, This included the introduction of a generous sales-related
bonus scheme for their sales men and a high profile advertising campaign. In addition, as market
conditions are difficult for their customers, they have extended the credit period given to them.
‘The finance director of Thien An has reviewed the inventory valuation policy and has included additional
‘overheads incurred this year as he considers them to be production related.
‘The finance director has calculated a few key ratios for Thien An; the gross profit margin has increased
from 44.4% to 52.2% and receivables days have increased from 61 days to 71 days. He is happy with the
2017 results and feels that they are a good reflection of the improved trading levels.
FINANCIAL STATEMENT EXTRACTS FOR YEAR ENDED 31 DECEMBER
Draft 2017 ‘Actual 2016
sm $m
Revenue 23.0 18.0
Cost of Sales (21.0) (10.0)
Gross Profit 120
Operating expenses (75)
Profit before interest and taxation 45 eH 40
Inventory 2 16
Receivables 4s 3.0
Cash 23
Trade payables 16 12
Thien An has factories across the country and its customer base includes retailers as well as individuals,
to whom direct sales are made through their website. Thien An’s website allows individuals to order
goods directly, and full payment is taken in advance. Currently, the website is not integrated into the
inventory system and inventory levels are not checked at the time when orders are placed.
Goods are despatched via local couriers; however, they do not always record customer signatures as
proof that the customer has received the goods. Over the past 12 months there have been customer
complaints about the delay between sales orders and receipt of goods. Thien An has investigated these
and found that, in each case, the sales order had heen entered into the sales system correctly but was
not forwarded to the dispatch department for fulfilling.Thien An’s retail customers undergo credit checks prior to being accepted and credit limits are set
accordingly by sales ledger clerks. These customers place their orders through one of the sales team,
who decides on sales discount levels.
Raw materials used in the manufacturing process are purchased from a wide range of suppliers. As a
result of staff changes in the purchase ledger department, supplier statement reconciliations are no
longer performed. Additionally, changes details in the purchase ledger master file can be undertaken by
purchase ledger clerks as well as supervisors.
In the past six months, Thien An has changed part of its manufacturing process and as a result some new
equipment has been purchased, however, there are considerable levels of plant and equipment which
are now surplus to requirement. Purchase requisitions for all new equipment have been authorized by
production supervisors and little has been done to reduce the surplus of old equipment.
Required:
1. Using the information above:
{a) Calculate additional ratios, for both years, which would assist the audit senior in
planning the audit; and
(b) From the view of the above information and the ratios calculated, describe audit risks
and explain the auditor's response to each risk in planning the audit of Thien An Co,
2. Describe the procedures that the auditor of Thien An Co. should perform in assessing whether
or not the company is a going concerns.
3. In respect of the internal control of Thien An Co.
{a) Identify and explain deficiencies
{b) Recommend a control to address each of these deficiencies; and
(0) Describe a test of control you would perform to assess if each of these controls is
operating effectively.
4, Thien An’s directors are considering establishing an internal audit department next year. The
finance director has asked about the differences between internal audit and external audit and
what impact, if any, establishing an internal audit department would have on future external
audits performed by ABC Co.
Required:
{a) Distinguish between internal audit and external audit
(b) Explain the potential impact on the work performed by ABC Co. during the interim and
final audits, if Thien An was to establish an internal audit department
5. Propose a materiality threshold for the audit of Thien An Co. and explain your decision,
6. Prepare a Management Letter to the directors of Thien An Co.BAI TAP LON
Ban la Kiém todn vin cao cp ca Cong ty Kiém toan ABC va dang lap ké hoach kiém toan Cong ty Thién
‘An cho nam tai chinh két thiic ngay 31/12/2017. Céng ty san xuat may in va la khach hang clia cOng ty
ban 2 nim lin. Chil nhigm kiém todn cia ban dai cé mot cud gp voi Gidm déc tai chinh va cung cap
cho ban céc ghi chii v8 cudc gap nay va tém tét bdo céo tai chinh.
Ban gidm déc cla Thién An rat that vong vé két qua kinh doanh nam 2016 va cé mot s6 chién luge dé cai
thién tinh hinh kinh doanh nam 2017. Céc chinh sch nay bao gdm viéc gidi thiu co ché thudng theo
doanh 6 ban hang cho di ng ban hang va chién dich quang céo Ién. Ngoai ra, vi diéu kién thi trubng
hd khiin di véi khach hang cla ho, ho da néi réng chinh séch ban hang tra cham cho khach hang.
Gidim déc t&i chinh cia Thién An da xem xét chinh sch dinh gid hang tn kho va da dua thém mot s6 chi
phi chung vao gid tri hang ton kho nm nay vi ong cho ring cdc chi phi nay lién quan dén qua trinh sin
xuat.
Gitim déc t&i chinh aa tinh mot 6 chi s6 chinh cho Thién An; Igi nhun bién gop tang ti” 44.4% [én 55.2%
va s6 ngay thu ng tng tir 61 Ién 71 ngay. Ong rat phén khdi voi két qua nm 2017 va cam thiy cdc chi s6
nay phan énh su tng trutng cita doanh thu.
TRICH BAO CAO TAI CHINH CHO NAM TAI CHINH KET THUC NGAY 31/12/2017
Dy-thdo 2017 Thyc té 2016
sm $m
Doanh thu 23.0 18.0
Gié vin (21.0) (20.0)
Loi nhudn ep 12.0 80
Chi phi ban hang va quan ly doanh nghigp (75) (4.0)
Lgi nhudn truéc I5i vay va thué as 40
Hang tn kho 24 16
Khoan phai thu 4s 3.0
Tien 23
Khon phai tra nha cung cép 16 12
Thién An c6 mGt sé nha may r&i rac 8 khdp dat nude va khdch hang ctia ho ¢6 ca khach hang c4 nhan va
khdch hang ban buén. Khéch hang ban lé thung mua hang qua website. Website cla Thién An cho
phép khdch hang ban lé dat hang truc tiép va tra tin truée. Hign tai, website chu tich hop voi hé
théng hing tn kho va mifc d6 tn kho khéng duoc kiém tra khi c6 don dat hang.
Hang héa duge van chuyén béi cac don vi van chuyén dia phyong. Tuy nhién, Kkhéng phai lic nao ho
ciing lay chit ky khach hang dé ching minh khach hang da nhan hang. Trong vong 12 thang qua, cé mot
s6 phan nan tir khac khach vé viée cham tré chuyén hang. Thién An 43 diéu tra va phat hién ra, trong
mot s6 truéng hep, don dat hang dugc dura vao hé théng ban hang chinh xdc nhung khéng duoc
chuyén sang phong van chuyén kip théViéc kiém tra tin dung di véi khach hang ban budn cia Thién An truéc khi chap nhan cho ho mua chiu
cing nhu han mtic tin dung la do Nhan vién ban hang thy hién. Cac khdch hang nay dét hang cho nhan
vien ban hang, la nhiing nguei quyét dinh mete glém gid
Neuyén vat liéu sir dung trong qué trinh sn xudt dure mua tir nhi8u nha cung cap. Do c6 sy thay di
rnhan su’tai Phong vat tu, khéng c6 sy d6i chiéu s6 ligu véi nha cung cp. Ngoai ra, su thay di hd so”
trong file Mua hang c6 thé do Nhan vién mua hang va Sép cla ho thyc hién
Trong 6 thang qua, Thién An da thay déi mot phn quy trinh sén xudt va mua méi mot s6 thiét bj. Tuy
nhi8n, c6 mét 6 lung ldn thiét bi thira so v6i nhu cu. Viéc mua hang cho tat cd cdc thiét bj méi due
phé duyét bai Quin déc phan xuéng va khOng cé hanh dng gi dé giam s6 luging cdc thiét bi cil bi thiva.
Yeu cu:
1. Sir dung céc théng tin trén
(a) Tinh thém céc chi sé tai chinh cho cd 2 nim, dé hé tro Kiém ton vién cao cap lap kat
hoach kiém toan; va
(b) Tir cdc th6ng tin trén va cae chi s6 tai chinh da tinh, mé ta ri
kiém todn vién sé lam gi d6i véi mai loai ri ro trong qué
Thién An,
2. M6 ta cdc thi tuc Kiém todn vign sé tién hanh dé danh gid xem Thién An c6 nghi ngo’vé tinh
Hoat déng lién tuc khéng.
3. éi véi hé théng kiém soat néi b6 cita Thién An:
(a) Xac dinh va giai thich céc diém yéu
(b) Bua ra khuyén nghi dé tang cuding kiém sodt déi voi mdi diém yéu phat hién; va
(c)_ M6 ta thir nghiém kiém soat sé thuc hign dé danh gid xem cdc hoat dong kiém soat co
duoc thytc hién higu qua khong.
4. Ban gidm d6c Thién An dang xem xét thanh lap Phong Kiém todn ndi b6 trong nam téi. Glam dBc
tai chinh c6 hai y kién tur van vé sy khac nhau gitta n6i kiém va ngoai kiém, va anh huge néu co
cia Phong Kiém tod ndi b6 len céc cubc kiém todn doc lap tuang lai clia ABC.
Yéu cau:
(a) Phan biét n@i kiém va ngoai kigm
{b) Gidi thich céc nh huéng tiém tang dén cdng vige cla ABC tai cudc kiém toan gitta ky va
cudi nam, néu Thién An thanh lap Phong Kiém toa n6i bo.
5. Bura ra mifc trong yéu cho cudc kiém todn tai Thién An va gidi thich quyét dinh cia ban.
6. Soan thur quan ly giri Ban gidm dBc Thién An
ro kiém toan va giai thich
inh lap ké hoach kiém todn