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Updated: 9/22/2020
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  • Audit Team Meeting
  • (1) As a byproduct of the sharp increase in sales, the company could have neglected to accurately record production costs
  • (2) Agreed. The huge number of sales could increase the company’s inherent risk
  • Audit Team Meeting
  • (3) We cannot rely on previous year’s data as a reference. We need to double check the production cost allocation process
  • (4) But re-going through the cost allocation process is complex. Corroborating evidence is being significantly delayed as most banks and law firms have reduced their hours due to COVID
  • Audit Team Meeting
  • (5) We could assign an auditor who knows cost allocation process well to you or ask for an additional expert.
  • (6) Sure, but we have to use work of an expert who is qualified and independent.
  • Auditors have a reasonable suspicion that the sharp increase on sales due to the COVID-19 could increase the company's inherent risk.
  • Use Work of an Expert
  • (7) Could you help me to assess the cost allocation process of Melbourne Masks? I don't think I possess required skills and knowledge.
  • To reduce inherent risk, auditors need to re-go through the complex calculations in the company.
  • Client Meeting
  • (10) The sharp increase of mask sales due to COVID-19 has greatly increased our organisational cost structure.
  • An auditor may engage an expert to help in audit when she does not have required skills and knowledge to assess item.
  • Client Meeting
  • When the auditor decides to use the work of an expert, the report produced by the expert forms part of the evidence used by an auditor when forming an auditor opinion。
  • (8) Sure, I'm happy to help.
  • An auditor reaches a conclusion on inherent risk and control risk in the company.
  • (9) Based on our investigation, the inherent risk in your company is relatively high.
  • Based on the analysis of inherent risk, control risk and detection risk, an auditor can set materiality higher or lower.
  • (11) We have to set the materiality of your company lower than before.
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