Auditing Plan for MYOB Group Limited for Accountability Journal

Question: Discuss about theAuditing Plan for MYOB Group Limited for Accountability Journal. Answer: Introduction Audit plan is a process of assessing the audit risk, and setting materiality levels. It a documentation of auditors explaining the clients financial systems and internal controls (Arens, 2007). An audit plan enables the auditor to understand the client business and the environment that it operates in. The audit plan is drafted after and agreeing on letter of engagement. The plan sets the audit objectives that have to be met at the end of the auditing process. The audit plan outlines the priorities that are cost effective, ensures sufficient evidence is generated from audit work, outlines direction and control of daily audit works, ensures sufficient attention is spent on critical areas of the audit work and ensures auditing is completed within specified time and cost budget (Christopher, Sarens, and Leung, 2009). Therefore, an audit plan is an important document in auditing process in order to provide true and fair opinion on the financial statements of an organization. The following write up is an auditing plan for MYOB Group Limited. The write up will also discuss the MYOB Company to gain the knowledge of the business and the environment that it operates in. Knowledge of the business MYOB is a public company listed in Australian Stock Exchange (ASX). MYOB is multinational informational technology company with headquarters in Glen Waverly, Victoria State in Australia. The Company was started in 1991 in Australia. The word MYOB is an abbreviation of Mind Your Own Business. The company specializes in providing accounting, tax, and other IT services to medium and small businesses. The MYOB Company is led by Tim Reed as the Chief Executive Officer and Richard Moore as the Chief Finance Officer. MYOB limited is a leading company in providing cloud based business solutions in management. The company provides their services to more than 1.2 million accountants, enterprises, and book keeping in New Zealand and Australia. The Company has 1400 employees. The company operations are divided in three segments; SME Solutions, Enterprise Solutions, and Practice Solutions. The SME solutions include provision of accounting software such as payroll, tax, accounting, and other business management solutions. The practice solutions provide practice software to over 40000 accountants. Practice software includes; practice management, company secretarial, insolvency, and accounting solutions. The company also provides enterprise software such as ERP and HRM software to over 7000 large and medium businesses. MYOB vision is to make businesses succeed by making every facet in business easier. The company mission is to create and deliver business management tools that lead the market in raising productivity of businesses in New Zealand and Australia. The Company strategy is to build a leading market platform that delivers seamless connection between SMEs, advisors, and the accounting ecosystem. Therefore, MYOB is a fast expanding business through first to the market cloud position. The company is highly affected by change in information technology system. Auditing objectives The objectives of the MYOB audit work to establish if the financial statements are; Free from Material Misstatement There is no fraud or error The auditing objective will enable the auditor expresses an assurance and reasoned opinion about the financial statements of MYOB. Audit Scope The audit scope of the audit is MYOB 2016 financial year. The fiscal year starts on 1st January to 31st December 2016. The audit will be done on the financial statements to establish if there is material misstatement. Materiality The benchmark for materiality will be profit from operations before tax. The bench has been chosen because of the nature of the industry that MYOB operates in. The company is also involved in aggressive strategy that is innovation to lead in cloud based business management tools. This means that the company profits are highly volatile from one year to another. The materiality level will be set on 5% of the profit from operations before tax. Any account that will have more than 5% misstatement will be declared materially significant and if an account or balances misappropriated or misstated are 5% less of profit from operations before tax will be declared materiality insignificant. This means that balances misappropriated or misstated behold 5% can have impact on the financial statement of the company and any balances below 5% of the profit from operations before income tax does not have an impact on the financial statements (Shah, 2012). The 5% materiality level has been chosen because the auditing works is for a profit company and can influence the decisions of stakeholders. Therefore, the MYOB audit will use 5% materiality level of profit from operating before tax to declare significant of a balances when making opinion on the Companys financial statements. Significant Accounts in MYOB Financial Statements The following are accounts that can go wrong in MYOB financial statement; Inventory account: The inventory account is in the risk of misstatement arising from underestimation or overestimation. The inventory account can be wrongly valuated or calculated when being recorded to the financial statements (Soh, and Martinov-Bennie, 2011). Cash account: This account is at a risk of misappropriation. Transactions by cash can easily be misappropriated from the company by individuals in handling the cash compared to credit or online transactions. Property, equipment, and plant account: This account is faced with several risks to misstatements. The account is affected by valuation as a result of depreciation. This means that the account can be valued using a subjective method that can lead to understatement of the account (Elder, Beasley, and Arens, 2011). Receivable account: This account is at a risk of understatement for allowable from doubtful account. This means that there is a problem in valuing the debtors accounts either by closing the account or allowing for write off (Legoria, Melendrez, and Reynolds, 2013). Expenses accounts: This account has a risk of being misappropriated. The entry of the financial data in this account can be easily be omitted or an error in entry that can result to the account being misappropriated. The expense account is also complex due to the large number of entry (Keune, and Johnstone, 2012). Auditing Budget The budget allocation for the audit is $400000 as indicated in the engagement letter. Conclusion The auditing plan above of MYOB Group Ltd will therefore be success following the analysis in the plan. The plan has discussed the MYOB Group Ltd that enables understanding of the business, the industry of operation, challenges, and products produced by the business. The plan also defines the objectives and the scope of the audit creating focus and direction of the audit work. Lastly, the audit report sets the materiality level and significant account in MYOB financial statements. Therefore, the audit plan will enable the management of the audit work in MYOB for 2016 financial year. References Arens, A.A., Best, P., Shailer, G., Fiedler, B., Elder, R.J. and Beasley, M., 2007. Auditing and assurance services in Australia: an integrated approach. Pearson Education Australia. Christopher, J., Sarens, G. and Leung, P., 2009. A critical analysis of the independence of the internal audit function: evidence from Australia. Accounting, Auditing Accountability Journal, 22(2), pp.200-220. Elder, R.J., Beasley, M.S. and Arens, A.A., 2011. Auditing and Assurance services. Pearson Higher Ed. Keune, M.B. and Johnstone, K.M., 2012. Materiality judgments and the resolution of detected misstatements: The role of managers, auditors, and audit committees. The Accounting Review, 87(5), pp.1641-1677. Legoria, J., Melendrez, K.D. and Reynolds, J.K., 2013. Qualitative audit materiality and earnings management. Review of Accounting Studies, 18(2), pp.414-442. Soh, D.S. and Martinov-Bennie, N., 2011. The internal audit function: Perceptions of internal audit roles, effectiveness and evaluation. Managerial Auditing Journal, 26(7), pp.605-622. Shah, M., 2012. Ten years of external quality audit in Australia: evaluating its effectiveness and success. Assessment Evaluation in Higher Education, 37(6), pp.761-772.