Auditing Assignment Example | Topics and Well Written Essays - 2000 words

Auditing - Assignment Example The research delves on five of the major areas of heightened audit risk of Havelock Europa Plc (Havelock Europa, 2013). The basis for including the accounts as heightened risk involves two factors. The two factors are internal control and inherent risk (Messier, 2011). Certain financial report accounts have higher probabilities of errors or frauds. The current research centres on five such financial report accounts. The accounts are sales, receivables, payables, cash, and inventory. There is an audit risk that there is error or fraud in the  £ 100,778 thousand Revenue amount during 2012. There is a probability that sales completed during January of 2013 were included in the 2012 sales figure. This can be fraudulently done in order to present a falsely higher sales figure, improving the company’s financial report image (Lyn, 2011). Similarly, there is a probability that uncompleted sales transactions were included in the 2012 financial reports (Dauber, 2009). The uncompleted sales amount includes customer’s promise to purchase the company’s products and services that were never completed. Another possibility is that products returned by customers were not recorded as sales revenue reductions (sales returns). Similarly, discounts given to customers who pay early or pay in case are not reflected as deductions from the gross revenue amounts. Further, sales allowances given to customers to satisfy their complaints concerning poor product and service quality may not be deduction from the gross revenue amount. Further, another possibility is recording a Revenue transaction when there is actually no sales transaction started, processed, or completed (Dauber, 2009). Likewise, there is a possibility that the sales amounts were erroneous recorded or fraudulently recorded. In addition, the financial reports may erroneously or fraudulently not include some realized