INTI INTERNATIONAL UNIVERSITY

BACHELOR OF ACCOUNTANCY
ACC4247: Auditing & Assurance 1
SESSION: August 2016
Group Assignment (20%) : This assignment consists of ONE (1) question @ 20%.

QUESTION

Refer to the appendix 1 for the case study details and answer the following questions.

Required:

(1) Given only the information presented in the scenario, identify the specific factors the
auditor would evaluate in formulating an opinion on the required public reporting of
internal control.
(2) Identify areas of inherent risk and control risk, with a focus on the control environment
factors.
(3) Develop an audit program that could be used for auditing the marketable securities for the
current year.

Please take note of the following:

1. Top, bottom, left and right margin 1
2. Font Arial, size 12 and line spacing 1.5
3. All answers must be electronically prepared. Word count: 1,000 words to 1,500 words.
4. Three to four persons in a group.
5. Plagiarism is a serious offense. An assignment that shows evidence of plagiarism will
result in a grade of zero for the assignment.
6. References to any sources must be cited accordingly.
7. Please attach the marking form with the assignment cover.
8. Due date:
i. Mid check point is on Week 10
ii. Full submission is on Week 12
 ACC4247 AUDITING AND ASSURANCE 1
Group Assignment
Group Name:
Group Members:
No. Name ID No.
1
2
3
4
5
 No. Evaluation Criteria for Report Mark [%]
1 Ability to identify key factors and discussion for Question1

/20
2 Ability to identify and discuss critically on issues in Question 2

/20

3 Ability to discuss in depth regarding the issues in Question3

/30
4 Originality and flow of the assignment

/20
5 Citations/referencing & bibliography, and overall care in producing
the report

/10
TOTAL
/100

Examiners Signature:
Appendix 1

Your CPA firm is the external auditor of Tip Top Manufacturing. The principal activity of the
company is providing components for the automobile industry. The company is publicly traded
on the Bursa Malaysia. Over the last 3 years Tip Top had been earning minimal returns. Mira,
the CEO is intent on turning the company around. She has analysed the situation and decided that
the best opportunities for superior returns lie in investments in high-risk marketable securities.

When questioned on this strategy during a board meeting, she cited finance literature that, she
asserted, shows greater returns are consistent only with greater risk. However, the risk can be
minimized by appropriately diversifying the investment portfolio. Given Miras knowledge of the
subject and quick grasp of the companys situation, the board gave her complete control over all
aspects of management. She personally manages the investment portfolio. Moreover, the board
was so impressed with her analysis that she was given an incentive pay contract with an annual
bonus based on a percentage of profits in excess of the previous years profits. In addition, she
received share options.

The company has an internal audit department that reports directly to the CEO (Mira). Although
there is an audit committee, it exists more in form than substance and meets with the director of
internal audit only occasionally. The internal audit program for the year is determined by the
director of internal audit in conjunction with Mira and is strongly influenced by two factors: (1)
Miras perception of areas needing review and (2) areas of potential cost savings.

Mira has let it be known that all units of the company must justify their existence, and if the internal
audit department expected future budget increases it must generate recommended cost savings in
excess of the current internal audit budget.

During the preliminary planning for the audit, you note the following:
1. The investment account has grown from approximately 7% of total assets to approximately
30% of total assets.
2. The investment portfolio includes some long term investments in company shares; however,
many of the shares held in the portfolio are high risk shares (with hopes of greater returns)
3. The remainder of the investment portfolio consists of a wide variety of financial instruments,
including junk bonds, collateralized mortgages, and other similar instruments.
4. Broker fees have increased dramatically. There is also a new line item for investment
consulting fees. It appears that most of these fees are owed to a company that might be
somehow related to Mira.
5. Most of the securities are held by the brokerage firm, but a few are held by the investment
consulting company, and a few others are held directly by the company.
6. The company has shown a 25% increase in reported net income during the past year.
7. The companys share value has appreciated more than 20% during the past year.