# MAA303 Auditing Trimester 3, 2018 Assessment 2, Part B– Case study DUE DATE AND TIME: Week 8, 10/1/2019, before 11:59PM PERCENTAGE OF FINAL GRADE:20% WORD COUNT: XXXXXXXXXXwords (maximum) without...

there is included calculation

Answered Same DayJan 07, 2021Deakin University

## Answer To: MAA303 Auditing Trimester 3, 2018 Assessment 2, Part B– Case study DUE DATE AND TIME: Week 8,...

Ashish answered on Jan 09 2021
Running Head: Beautiful Products Limited (Case Study)
Beautiful Products Limited (Case Study)
Student Name:
Student ID Number:
January 9th, 2019
Materiality Concept
Materiality is the magnitude of omission
s or misstatements in the financial statements which can influence the decision of stakeholders. Materiality threshold limit are determined as per Nature and size of entity and at planning stage of audit. If the misstatements or adjustments are above threshold then it is called as material. Concept of Materiality is governed by Auditing standards (ISA 320 Materiality in Planning and Performing an Audit).
Auditors have great responsibility to plan audit and detect fraud to safeguard it from criticism. For which it has to follow professional skepticism that means applying a questioning mind to confirm the assertions obtained by management for sufficiency. Auditor should assume there is fraud in every field of financial statement.
Ratio Analysis
Purpose of financial ratio analysis is to know the financial well being of the company by making the ratios comparable to that of industry benchmark or peers. This gives a clear picture of the liquidity, activity and leverage, performance of the company which can be compared to the previous years to get an idea of the trend of company.
Ratio analysis can be used to make comparison in financial statements to understand the financial position, and cash flows of the entity. Ration Analysis is a tool, which can be used by external parties to analysis about financials i.e. liabilities, Asset backup, Income Opportunity etc..
However, there are a number of limitations of ratio analysis as follows:-
1. Ratio Analysis is based on historical data.
2. Ratio Analysis will not covered inflation factor. i.e if inflation will increase, money value will decrease which represent higher sale in value terms.
3. Ratio analysis will not consider operational changes i.e. A company may change its underlying operational structure to such an extent that a ratio calculated several years ago and compared to the same ratio today would yield a misleading...
SOLUTION.PDF