Essay instructions on auditing assignment

Hi
Here is my assignment instructions. the case and question. It is an auditing assignment. If you could get it done in 3 days, it would be much appreciated. Thank you very much for helping.


THE AUDIT OF GOURMETCHEF LTD
PART 1: PLANNING, KNOWLEDGE OF THE BUSINESS AND EVALUATING STRATEGIC BUSINESS RISK

Your firm has acted as the auditor of GourmetChef for a number of years, and presently you are planning the 31 December 20X1 audit for the company. GourmetChef manufactures, supplies and retails quality food ingredients for use in the home kitchen or small restaurants. Recently, the company extended their food product range and services to include 'pre-packaged' meals suitable for dinner parties, which customers order from a set menu. In addition, the company has also opened a number of small cafes where customers can purchase the company's product range.

The company currently has 30 outlets of varying sizes. It has been a market leader in the gourmet food and beverage industry for the last 2 years as a consequence of focusing on marketing and promotion and also the acquisition of a number of smaller competitors. The management team at GourmetChef is experienced, and all their managers have been with the company for over 5 years, with the exception of the new finance director who joined the company last month.

The company installed a new computer system in February 20X1. A professional computer company installed the system and the old and new systems ran parallel for 3 months. The new system allows each outlet to process its own stock-take results, accounts payable invoices and payments. Management has experienced no major problems with the new system to date.

GourmetChef has an internal audit group (IAG) which may be able to assist you in this year's audit. The client has provided you with draft financial information for the year ended 31 December 20X1. No taxation figures are included, as the client has engaged the tax department of your firm to provide the tax figures.

PART 1: UNDERSTANDING THE INTERNAL CONTROL STRUCTURE AND ASSESSING CONTROL RISK

You audit partner has requested you to investigate the possibility of using the work of the internal audit group (IAG). The IAG was established five years ago and now comprises the following staff:

a) The manager Margaret Shaw, a Chartered Accountant with 10 years audit experience, including 5 years in internal audit. She reports to the Audit Committee.

b) The supervisor, Samuel Chan, currently completing his Bachelor of Business degree. He reports to the financial controller. Samuel has 6 years working experience, including 2 years in internal audit.

c) Two assistant internal auditors: Andrew Wells, who is halfway through a part-time Bachelor of Business degree, and Bruce Joness, a recent university graduate. Andrew joined the division 6 months ago, having worked in a small chartered accountancy firm for the previous 2 years. Bruce has 12 months experience, having commenced employment with GourmetChef upon his completion of a full-time university degree.

The IAG functions as follows:
• Annual work-plans are prepared in conjunction with the audit committee. These work-plans set out the objectives and scope of the tasks to be carried out.

• Each task is performed and appropriate work-paper files are then prepared and reviewed. At the end of each internal audit task, a summary report of findings is presented to the audit committee.

• The audit committee reviews the summary report, prepares written comments on the findings and implements changes where it is considered necessary.

• The summary report is also presented to the Board.

The audit committee and the IAG have a good working relationship and it usually accepts the recommendations of the IAG. The audit committee also requires a follow-up report annually on implementation of recommendations. You have obtained an extract from the IAG's 20X1 work-plan relating to trade creditors. This extract is reproduced below.
IAG Work plan for the year ended 31 December 20X1, Trade Creditors Objectives:

1. To examine the payment terms requested by creditors, and determine whether all discounts offered are being taken.

2. To examine existing relationships with creditors and ensure supply arrangements are consistent with the company's objective of providing high-quality goods at a competitive price.

3. To ensure supplier lists are reviewed annually to ensure all supply agreements have been adhered to. If not, ensure procedures have been followed to negotiate new supply agreements.

4. To examine the payments made to creditors and determine whether longer payment terms could be taken without adversely affecting the customer-supplier relationship.

5. To examine payments made to creditors throughout the year, and determine whether the procedures laid down in the accounting manual have been properly followed.

6. To examine all material year-end creditors' balances, and determine whether these are complete.

QUESTION 1:
a) Using appropriate auditing standards, explain the overall objectives and scope of the work of both internal and external auditors.


b) Assume that you could independently set the objectives and scope of the IAG's work. Would it be possible for you to rely on their testing? Why or why not?


c) Assuming that you plan to test the internal controls surrounding creditors, which of the objectives set out in the IAG Trade Creditors Work-plan are relevant to you as the external auditor? Why?

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