BAO3306 Auditing: Audit Planning Assignment

Overview

Assignment is worth 30% of the overall assessment for this subject.

• Due date: Week 10
• Length: 3000 words (maximum)
• Similarity index: 30% (maximum)
• Group size: Two students per group

Introduction

This assignment requires you to prepare a document to assist the Audit Manager in planning an audit. You must refer to the relevant chapters of the textbook for information relating to audit planning. Your submission must not exceed 3000 words in length. You must attach a signed and dated assessment declaration sheet to the front of your assignment.

You must ensure the clarity of your answer and the overall presentation of your assignment. Presentation includes grammar, spelling and compliance with the word limit. You must complete this assignment in a group of two.

Submission Instructions

Assignment must be submitted electronically via VU Collaborate. An originality report is available to students upon submission. Note: VU Collaborate may take up to 24 hours to produce a report. An originality report level exceeding 30% may indicate that the contents have more than 30% similarity with assignments submitted by other students or that the assignment has not been properly referenced. Assignments with an originality report level exceeding 30% will be penalised by four (4) marks. Students can re-submit assignments on VU Collaborate as many times as necessary but the final submission must be made by the due date.

Penalties

• Exceeding the 3000 words limit: FOUR (4) marks deduction.
• Exceeding the 30% similarity index limit: FOUR (4) marks deduction.
• Late submission: TWO (2) marks deduction per day.

Plagiarism

Plagiarism is defined as presenting someone else’s work, including the work of other students, as one’s own. Any ideas or materials taken from another source for either written or oral use must be fully acknowledged, unless the information is common knowledge. All students are strongly advised to read the VU Academic Integrity Policy available via the VU website.

Rationale

The subject aims to familiarise students with key tools used by auditors for collecting and evaluating evidence, in both manual and computerised accounting information systems, so as to enable them to express an opinion on the fair presentation of financial reports.

The subject also aims to provide students with an insight into the current environment in which auditors operate, including legal liability, ethical and other professional aspects such as the audit expectation gap. As such, the subject provides both a conceptual and practical approach to external, as well as internal and public sector auditing, enabling students to gain a complete picture of the audit process in light of contemporary audit issues.

In addition, the subject aims to enhance a number of generic skills through both the formal components of assessment and the student’s class participation. These include: research, problem solving, and analytical skills; written and presentation skills; and within/between group interaction skills.

This group assignment aims to provide students with an appreciation of the initial stage of the audit process known as audit planning. Specifically, it allows students to develop an understanding of the steps involved in developing an audit plan. Students are required to follow the structured approach specified in Leung, Coram, Cooper & Richardson, Auditing: A practical approach (current edition), John Wiley & Sons.

Learning Outcomes

On successful completion of this unit, students should be able to:

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1. Develop an appreciation of the reasons for the existence of a societal demand for audit and assurance services, and an understanding of the current environment in which auditors operate, including legal, ethical and professional aspects
2. Demonstrate an understanding of the key auditing principles, concepts and practices used by auditors to gather evidence and make judgments in order to form an audit opinion on the fair presentation of financial reports
3. Develop an insight into the audit of specific transactions and account balances
4. Be aware of the auditor’s responsibility in completing an audit
5. Obtain basic understanding of other types of assurance engagement

Background

The rationale for BAO3306 Auditing as per Unit of Study Outline is that on completion of this unit students should have a sound understanding of the underlying concepts of auditing and in particular of financial auditing. By adopting a logical, structured approach they should have the capacity to analyse the salient audit issues and apply relevant auditing theories and succinctly communicate their professional, ethical decision.

One of the unit outcomes requires students to be familiar with key tools used by auditors for collecting and evaluating evidence, in both manual and computerised accounting information systems, which will enable them to express an opinion on the fair presentation of financial reports.

To ensure the audit is carried out efficiently and in a timely manner, the auditor develops an audit plan for the conduct and scope of the audit. ASA 300 states that the auditor shall plan the audit so that the engagement will be performed in an effective manner.

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1. For the purpose of the assignment, you assume the role of an auditor and your firm has recently been appointed as external auditor of an entity. As required by Auditing Standard ASA 300, you are assisting your Audit Manager in preparing an audit plan for the audit of the entity’s financial statements.
2. The audit fee is $42,000 and had been communicated to the client in the Engagement Letter.
3. You are required to download the 2024 annual report published by the following entity:
   • Select Harvests Limited (https://www.selectharvests.com.au)
4. Using information in the relevant chapters of the textbook, the company annual report and other relevant information, prepare a document for your Audit Manager to assist him in planning the audit. Note that quoting directly from the textbook does not meet the objective of the assignment.

Required

With reference to relevant chapters of the textbook prepare a document for your Audit Manager. Your document must include the following:

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1. Executive summary
2. Introduction
3. Key information:
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   1. Gain an understanding of the client
   2. Identify five (5) significant accounts most at risk of being materially misstated
   3. Set planning materiality level
   4. Identify what can go wrong (audit risk assessment) for each of the five (5) accounts selected in (b)
4. Conclusion
5. Appendix
6. References

Marking Criteria

Additional Information

For the purposes of the assignment, the following auditing standards are relevant:

• ASA 210 Agreeing the Terms of Audit Engagements
• ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information
• ASA 230 Audit Documentation
• ASA 250 Consideration of Laws and Regulations in an Audit of a Financial Report
• ASA 300 Planning an Audit of a Financial Report
• ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment
• ASA 320 Materiality in Planning and Performing an Audit
• ASA 330 The Auditor’s Responses to Assessed Risks
• ASA 520 Analytical Procedures

Hints and Tips

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1. You are required to plan the audit using only information that is publicly available. That is, you only use the information that is published by the entity either on its website or printed materials.
2. You must download and use the pro-forma document on VU Collaborate.
3. When identifying accounts most at risk of being materially misstated, you are advised to use analytical procedures; simple comparison to identifying those accounts.
4. When making preliminary judgements about materiality levels and identifying five significant accounts, you are required to consider the statement of profit or loss, statement of financial position and the notes.
5. To calculate materiality level for this audit assignment, you are advised to calculate 0.5% of total revenue as reported in the 2024 annual report.
6. In assessing what can go wrong, you are required to assess the audit risk for the five (5) significant accounts you have selected using the audit risk model. When deciding on the significant accounts, you need to consider the audit risk associated with those accounts.
7. Quoting directly from textbooks and reports will increase the similarity index. Quoting without proper referencing will also increase the similarity index. As this assignment requires you to use auditing theory to prepare a document for a real-life organisation, quoting from textbook does NOT meet the requirements. Students are advised to write their own document.
8. VU Collaborate has the facility to report on whether your assignment is copied from other sources. Penalty of four (4) marks may apply for poor presentation. Serious breaches will be reported to the disciplinary panel.
9. Submit your assignment early. A penalty of two (2) marks per day applies to late submission.
10. If you want to remove the previous version of the assignment on VU Collaborate, submit a blank assignment or a new version.

Sample Answer Excerpts and Writing Guidance

Sample Audit Plan Overview

An audit plan for Select Harvests Limited (SHV) for the financial year ended 30 June 2024 commences with a preliminary understanding of the entity and its almond-growing operations across Victoria, New South Wales and South Australia. The company operates within the agricultural sector where biological assets, inventory valuation and water entitlement accounting create significant estimation uncertainty. ASA 300 planning an audit of a financial report requires auditors to establish an overall audit strategy that sets the scope, timing and direction of the audit, which in this instance demands particular attention to the fair value measurement of almond orchards and the timing of revenue recognition across seasonal harvest cycles. Analytical procedures applied to the 2024 annual report indicate that biological assets, inventory, trade receivables, water entitlements and property, plant and equipment represent the five most significant accounts susceptible to material misstatement. Planning materiality is set at 0.5% of total revenue, a benchmark that aligns with industry guidance for agricultural entities where revenue volatility affects stakeholder decisions. The audit risk assessment for each selected account applies the audit risk model by separately evaluating inherent risk and control risk before determining detection risk and the nature, timing and extent of further audit procedures.

Biological Asset Valuation Risks

Select Harvests carries almond orchards as biological assets measured at fair value less costs to sell under AASB 141, which introduces subjectivity through discounted cash flow models and assumptions around yield per hectare, almond prices and discount rates. The 2023 revision to ASA 315 introduced a spectrum of inherent risk that places significant emphasis on subjectivity, complexity and uncertainty as risk factors; biological asset valuation sits at the higher end of this spectrum because management must forecast long-term commodity prices and climatic conditions (AUASB, 2023). Auditors should address these risks through targeted procedures:
i. Inspect orchard records and confirm water allocation rights with state authorities to verify the existence and condition of biological assets;
ii. Benchmark yield assumptions against independent agricultural reports to corroborate management’s fair value estimates.
Industry data from the Australian Bureau of Agricultural and Resource Economics suggests almond prices fluctuated significantly during FY2024, reinforcing the need for professional scepticism when testing management’s price forecasts. Biological assets therefore warrant extensive substantive testing and potentially the engagement of an agricultural valuation specialist to obtain sufficient appropriate audit evidence (van Biljon & Wingard, 2020).

Materiality and Analytical Review

Setting planning materiality at 0.5% of total revenue follows the quantitative benchmark commonly applied to listed agricultural entities, though ASA 320 reminds auditors that materiality is a matter of professional judgement and not a mechanical calculation (Leung et al., 2024). Analytical procedures under ASA 520 provide the primary tool for identifying unusual fluctuations in revenue, cost of sales and operating expenses by comparing FY2024 results against FY2023 and industry averages for almond processors. Students preparing this assignment should note that revenue recognition for almonds often spans two fiscal periods because harvesting occurs in autumn while sales may extend into the following year, which creates a cut-off risk that analytical review can highlight through monthly sales trend analysis. The audit plan must therefore schedule substantive cut-off tests around 30 June and evaluate whether management has appropriately matched harvest costs against related revenue in accordance with AASB 15. Trade receivables also require attention because export sales to Asia and Europe may carry longer collection cycles and foreign exchange exposure that analytical procedures can flag through days-sales-outstanding ratios. A thorough analytical review at the planning stage directs limited audit resources toward the accounts with the greatest risk of material misstatement and supports the efficient allocation of the $42,000 audit budget.

References

AUASB. (2023). ASA 300 Planning an audit of a financial report. Australian Auditing and Assurance Standards Board. https://www.auasb.gov.au/media/gnkc2fzb/asa_300_12_21.pdf

AUASB. (2023). ASA 315 Identifying and assessing the risks of material misstatement. Australian Auditing and Assurance Standards Board. https://www.auasb.gov.au/media/1ppnfkvx/asa315_12-23-1.pdf

Leung, P., Coram, P., Cooper, B., & Richardson, P. (2024). Auditing: A practical approach (Current ed.). John Wiley & Sons. https://www.wileydirect.com.au/blog/buy/bao3306/

van Biljon, M., & Wingard, C. (2020). An agricultural sector assessment of biological asset valuation challenges with inputs considered from valuers. International Journal of Financial, Accounting, and Management, 2(3), 243–258. https://doi.org/10.35912/ijfam.v2i3.489

Compose a 3000-word audit planning document for Select Harvests Limited. This BAO3306 group assignment applies ASA 300, ASA 315 and ASA 320 to assess risks, set materiality and identify five significant accounts for the FY2024 external audit.

Write a 6- to 8-page audit planning report for Select Harvests Limited (SHV). This BAO3306 assessment requires students to evaluate audit risk, calculate planning materiality and develop an audit strategy using the 2024 annual report.

BAO3306 audit planning assignment for Select Harvests Limited. Group task worth 30%. Due week 10. Apply ASA standards to prepare an audit plan with risk assessment and materiality benchmarks.

 Next Assessment

Week 12: Substantive Testing and Audit Evidence Evaluation

Assessment type: Individual written report

Weight: 20% of total unit assessment

Length: 1500 words (maximum)

Description: Students select one of the five high-risk accounts identified in the Week 10 audit plan for Select Harvests Limited and design a detailed substantive testing program. The report must outline the nature, timing and extent of tests of details and analytical procedures required to obtain sufficient appropriate audit evidence for that account. Students must reference ASA 330, ASA 500 series standards and the Leung et al. textbook. The submission must include a completed audit working paper documenting the proposed tests, sample sizes and expected conclusions.