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Management Case

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RQ 5.7

Regarding to the management assertions about the entity's financial position and performance embodied in the financial report, there are 3 assertions.

Firstly, the assertions about transactions and events happened during the auditing period. This assertion has following characteristics, namely occurrence, completeness, accuracy, cut-off and classification.

Secondly, the assertions about account balance in the end of auditing. The second assertion contains existence, rights and obligations, completeness valuation and allocation.

Last, the assertions about presentation and disclosure, which occurrence and rights and obligations, completeness, classification and understandability, accuracy and valuation.

RQ 5.8

Audit trail is the process of transforming original accounting records and related information about real transactions to the final financial report.

According to ISA.500.A14-A25, usually the procedures involve inspection, observation, external confirmation, re-calculation, re-performance, analytical procedures and enquiry.

RQ 5.14

As Grant & Roger (2010) states, if we can get corroborating information which is from an independent entity; in this case, namely the independent party other than client personnel and management, there would be an enhancement of the assurance which auditors gaining from the internal source.

Furthermore, evidence from outside is considered more reliable compared to that obtained only within an entity. The corroborating evidence can be seen a reliable evidence to test the internal evidence even if internal control is not effective.

DP 5.32


According to ASA 200.13, audit risk refers to the risk which auditors conclude a wrong opinion based on the financial report which is materially misstated. The audit risk can be seen as a function of material misstatement risks and the detection risk. (ASA 200. A32)

Generally speaking, the audit risk can model can be classified as three parts:

1. Inherent risk, which refers to the susceptibility of an assertion related to transactions or account balance that can be significant before taking related taking related controls into account (ASA 200.13.N)

2. Control risk, which describes the risk that a misstatement which is material would not be detected on a timely basis in the entity's internal control (ASA 200.13.N)

3. Detection risk, which refers to the chances that substantive risk-reducing procedure will not find material misstatement (ASA 200.13).


For item (a), the fact that the company's reporting manual were not



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