Using the information provided about Noyers Ltd and appropriate research regarding the industry…

Using the information provided about Noyers Ltd and appropriate research regarding the

industry and other economic factors:

a. Assess the key business risks of Noyers Ltd from the information available to you (at

least six (6) need to be identified);

b. Explain the implications of each risk identified on the financial statements;

c. Identify the related financial statement accounts at risk.

d. Identify the related management assertion (refer to ASA 315) most at risk for each

financial statement account identified as being at risk.

e. Justify your identification of the management assertion at risk.

Use the spreadsheet template tab Task 1 in order to complete this task.

Task 2

Materiality assessment requires an auditor to make judgements about the size of

misstatements that would be considered ‘material’ to the users of the financial statements.

The auditor will design procedures in order to identify and correct errors or irregularities that

would have a material effect on the financial report and affect the decision making of the

users of the financial report. Materiality is used in determining audit procedures, sample

selections, and evaluating differences from client records to audit results. It is the maximum

amount of misstatement, individually or in aggregate, that can be accepted in the financial


In selecting the base figure to be used to calculate materiality, an auditor should consider the

key drivers of the business. They should ask, ‘What are the end users (i.e. shareholders, banks

etc.) of the accounts going to be looking at?’ For example, will shareholders be interested in

profit figures that can be used to pay dividends and increase share price?

S & A Partners’ audit methodology dictates that one planning materiality (PM) amount is to

be used for the financial report as a whole (that is, rather than separate PMs for the income

statement and the balance sheet). The basis selected is the one determined to be the key

driver of the business.

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