Journal Educational Administration History -Myassignmenthelp.Com

Question: Discuss About The Journal Educational Administration History? Answer: Introduction Audit planning essentially refers to the planning by an auditor in regards to the systematic audit process that is carried out for the evaluation of the financial statements in order to ensure that the accounting statements reflect the true and fair view of the financial condition of the company. The audit of the accounting statements of a corporate entity is carried out in each financial year. A quality audit plan reflects the particular regulations and policies that should be strictly followed by an auditor for the successful execution of the auditing procedures. The major benefit that can be facilitated by the providence of an audit plan is that, by the following of the audit plan, an auditor can obtain enough evidence for the required examination and evaluation of the financial and non-financial proceedings of the company. The auditing procedure or plan effectively includes the testing of the various account balances for the identification of the material misstatements in the boo ks of accounts. Thus, the audit testing of accounts forms a crucial part of audit planning van (Buuren caes et al., 2014). Analytical Review The analytical review of the trial balance has been asked in the question can be effectively carried out by the horizontal trend analysis of the account balances of the financial statements of the company. The advantages that can be accrued from the analytical review of the trial balance is that the auditor can identify the material misstatements in the different account balances. The misstatements may have occurred either due to the fraud carried out by the concerned employee of the organization willingly or on the account of carelessness. The analytical review of the chosen accounts that have been carried out in this particular report has been effectively carried out by the horizontal trend analysis of the account balances. Preliminary judgment of materiality The preliminary judgment of materiality refers to the particular amount of materiality that is effectively carried out by the auditor in order to ascertain the maximum permissible amount that can be allowed in case the financial accounts are misstated. This particular amount of materiality that is fixed by the auditor, is the maximum amount by which the accounts if misstated, will not hamper the quality of the financial statements and they will continue representing the true and fair view of the liquidity position of the concerned company. It should be noted here that the materiality misstatements in the account balances might have occurred due to the double entry book-keeping system in accordance to which the trial balance has been prepared (Malaescu and Sutton 2014). The trial balance that is presented in the question has been utilized for the purpose of drawing the projected income statement balance sheet and significant ratios as follows: Particulars 2014 2015 Trend Analysis Cash at Bank 102,503 99,251 96.83 Accounts receivable 112,000 121,820 108.77 Inventory 175,000 189,000 108.00 Machinery 65,000 65,000 100.00 Accumulated Depreciation 24,375 43,964 180.37 Motor Vehicles 65,000 65,000 100.00 Accumulated Depreciation 20,150 26,000 129.03 Furniture 7,500 7,500 100.00 Accumulated Depreciation 2,250 2,925 130.00 Bank Loan 216,000 216,000 100.00 Sales 187,450 182,812 97.53 Cost of sales 63,595 49,024 77.09 Service fees (revenue) 58,000 44,063 75.97 Other income 25,000 900 3.60 Interest income 50 36 72.00 Bank charges 350 261 74.57 Depreciation 15,590 26,114 167.51 Interest expense 10,800 8,100 75.00 Printing 250 189 75.60 Miscellaneous - 1,800 not applicable Wages 53,000 42,134 79.50 Superannuation 4,770 4,002 83.91 Equity 142,083 162,495 114.37 Income statement of Fly Group 2015 2014 Trend Analysis Particulars Sales 182,812 187,450 98% Cost of sales 49,024 63,595 77% Gross profit 133,789 123,855 108% Service Fees (revenue) 44,063 58,000 76% Other income 900 25,000 4% Interest income 36 50 72% Operating Income 178,787 206,905 86% Less: Expenses Bank charges 261 350 75% Depreciation 26,114 15,590 168% Interest expense 8,100 10,800 75% Printing 189 250 76% Miscellaneous 1,800 - not applicable Wages 42,134 53,000 79% Superannuation 4,002 4,770 84% Net Profit 96,187 122,145 79% Ratios 2014 2015 Net profit margin 65% 53% Gross profit margin 66% 73% Inventory turnover ratio 1.07 0.96 Assets turnover ratio 0.39 0.39 Balance Sheet of Fly Group 2014 2015 Trend Analysis Current Assets Cash at Bank 102,503 99,251 97% Accounts Receivables 112,000 121,820 109% Inventory 175,000 189,000 108% Total Current Assets 389,503 410,071 105% Non-current Assets Machinery 65,000 65,000 100% Accumulated Depreciation 24,375 43,964 180% Value 40,625 21,036 52% Motor Vehicles 65,000 65,000 100% Accumulated Depreciation 20,150 26,000 129% Value 44,850 39,000 87% Furniture 7,500 7,500 100% Accumulated Depreciation 2,250 2,925 130% Value 5,250 4,575 87% Total Non-current Assets 90,725 64,611 71% Total Assets 480,228 474,682 99% Liabilities and Equity Bank Loan 216,000 216,000 100% Owner's Equity 142,083 162,495 114% Net profit 122,145 96,187 79% Total Liability and Equity 480,228 474,682 99% The accounts that have been selected have been listed down as follows: Account Receivable Inventory Cost of Sales Service Fees (revenue) Wages Other Income Accounts Receivable The accounts receivable has been selected for the purpose of audit testing in order to identify the materiality in the accounts Rationale for Selection The Accounts Receivable account has been selected due to the fact that this particular account has increased by 108.77%. This means that the auditor should look into such a rising trend as because materiality may have occurred in the selected account. This is also a crucial financial component because it is directly linked with the total sales revenue incurred by the firm. Assertion and Explanation The accounts receivable represents that part of the total sales that has been incurred on credit. This means that the revenue that the business has generated has not yet been received. The chances of the accounts receivable balance being understated or overstated is high as this particular balance does not impact the cash generated by the firm. Therefore, a particular employee carrying out fraudulent activities may understate or overstate this account for increasing or decreasing the profitability of the firm. The accounts receivable is treated as an asset in the balance sheet of a particular company. Recommended Audit Procedure The recommended audit procedure for the auditor is that the auditor should look into each credit sales of the organization. The credit transaction should be checked with the respective customers and the other stakeholders of business. Moreover, the accounts receivable balance in the subsidiary ledger should be matched with the general ledger in terms of each credit transaction (Earley 2015). Inventory The inventory has been selected for the purpose of audit testing in order to identify the materiality in the accounts Rationale for Selection The inventory account has been selected because this particular account displays an increase by 108%. Assertion and Explanation The inventory account that has been selected might be subjected to materiality. This is due to the fact that often the inventory of a particular organization is maintained by different techniques like the perpetual inventory system and the periodic inventory system. This increases the chances of misstatement in the inventory account. It should be noted here that the inventory account has a direct link with the liquidity position of the company. This means that the overstatement or the understatement of the inventory account will affect the financial position of the company. Recommended Audit Procedure The recommended audit procedure that should be applied by the auditor is that he should identify the particular process that is adopted by the corporate entity for treating the inventory of the organization. Moreover, the accounting records that have been maintained in regards to the purchase and sale of the inventory should be checked in order to filter out the instances of materiality in the books of accounts (Earley 2015). Cost of Sales The cost of sales account has been selected for the purpose of audit testing in order to identify the materiality in the accounts Rationale for Selection The cost of sales account has been selected because this particular account has decreased to 77.09%. Assertion and Explanation The cost of sales account refers to the different costs that are incurred by the firms and constitutes of the direct costs like the direct labor cost. The cost of sales account is directly related to the sales revenue that is, if the cost of sales has been understated or overstated the profitability of the firm will directly increase or decrease. Therefore, the cost of sales also signifies the fact that whether the profitability strategies that are incorporated by the firm are working out or not. Recommended Audit Procedure The recommended audit procedure that should be applied by the auditor is that he should check whether all the purchase or sales in regards to the cost of sales has been properly recorded and authorized. He should also monitor the results of the different inventory tests (Earley 2015). Service Fees (Revenue) The service fees (revenue) account has been selected for the purpose of audit testing in order to identify the materiality in the accounts. Rationale for Selection The service fees account has been selected due to the fact that the account has decreased to 75.97% Assertion and Explanation The service fees account has been selected due to the fact that the account displays an abnormal decrease in the account balance. It might be the case, that the account balance decreases due to a genuine reason. However, it is the primary duty of the auditor to look into the reason, as to why the service fees have decreased. Recommended Audit Procedure The recommended audit procedure that should be applied by the auditor is that he should look into the factors that led to the decrease in the service fees and determine whether there has been any genuine reason for such materiality (Graham 2015). The wages account has been selected for the purpose of audit testing in order to identify the materiality in the accounts The wages has been selected because this particular account has increased by 125.7%. The wages account shows an unprecedented rise in the current year. This might be due to the fact that there has been a huge recruitment drive for workers in the organization. However, it is the primary duty of the auditor to look into the fact as to why the wages account has increased. The wages account if subjected to materiality will directly be reflected in the profitability of the organization. Recommended Audit Procedure The recommended audit procedure that should be applied by the auditor is that he should check the total number of workers recruited or the workers who have been promoted and the particular wages offered to them. This will help the auditor to ascertain the fact whether there has been any materiality issue in the account (Graham 2015). Other Income The other income account has been selected for the purpose of audit testing in order to identify the materiality in the accounts Rationale for Selection The other income account has been selected because this particular account decreases to 3.60%. Assertion and Explanation The other income has been selected because this particular account displays an abnormal decrease in the account balance. The auditor should review this highly abnormal phenomenon. Recommended Audit Procedure The recommended audit procedure that should be applied by the auditor is that he should monitor and check all the components of the other income account and trace back the transactions to their point of generation (Graham 2015). References Earley, C.E., 2015. Data analytics in auditing: Opportunities and challenges. Business Horizons, 58(5), pp.493-500. Graham, L., 2015. Internal Control Audit and Compliance: Documentation and Testing Under the New COSO Framework. John Wiley Sons. Lambert, T.A., Jones, K.L., Brazel, J.F. and Showalter, D.S., 2017. Audit time pressure and earnings quality: An examination of accelerated filings. Accounting, Organizations and Society. Luippold, B.L., Kida, T., Piercey, M.D. and Smith, J.F., 2015. Managing audits to manage earnings: The impact of diversions on an auditors detection of earnings management. Accounting, Organizations and Society, 41, pp.39-54. Malaescu, I. and Sutton, S.G., 2014. The reliance of external auditors on internal audit's use of continuous audit. Journal of Information Systems, 29(1), pp.95-114. Mitra, S., Song, H. and Yang, J.S., 2015. The effect of Auditing Standard No. 5 on audit report lags. Accounting Horizons, 29(3), pp.507-527. Thompson, G. and Mockler, N., 2016. Principals of audit: Testing, data and implicated advocacy. Journal of Educational Administration and History, 48(1), pp.1-18. van Buuren, J., Koch, C., van Nieuw Amerongen, N. and Wright, A.M., 2014. The use of business risk audit perspectives by non-big 4 audit firms. Auditing: A Journal of Practice Theory, 33(3), pp.105-128.