Additional question Your client, Macquarie Holdings, holds a large portfolio of investments in shares of other entities, approximately 80% of them being listed on the Australian Stock Exchange (ASX). Approximately 800 parcels of shares are held at any time.The following data on each share parcel is maintained on the share investment master file.Investment identification numberDate purchasedDate soldInvestee nameTotal number of shares purchasedNumber of shares soldNumber of shares currently heldInvestment cost for shares currently heldYear-end market value of shares heldProfit/loss on saleDividend income for the periodDividend income to dateThe above data is maintained on the IT system for a period of five years.Required:Identify the two (2) key assertions the auditor will need to address for ‘share investments’ account balance.Discuss how generalised audit software (GAS) other than exception reports, could assist in the audit of these investments for each of the assertions identified in (a) above. Provide an example of an exception report the auditor might create to gather evidence on the two assertions identified in (a) above.Outline one (1) practical programmed application control that you would expect to find in Macquarie Holding’s share investment master file. Your answer to parts (a) and (b) should be presented in the following format.AssertionUse of GAS to Assist in the Audit1. 2.
Question
Additional question Your client, Macquarie Holdings, holds a large portfolio of investments in shares of other entities, approximately 80% of them being listed on the Australian Stock Exchange (ASX). Approximately 800 parcels of shares are held at any time.The following data on each share parcel is maintained on the share investment master file.Investment identification numberDate purchasedDate soldInvestee nameTotal number of shares purchasedNumber of shares soldNumber of shares currently heldInvestment cost for shares currently heldYear-end market value of shares heldProfit/loss on saleDividend income for the periodDividend income to dateThe above data is maintained on the IT system for a period of five years.Required:Identify the two (2) key assertions the auditor will need to address for ‘share investments’ account balance.Discuss how generalised audit software (GAS) other than exception reports, could assist in the audit of these investments for each of the assertions identified in (a) above. Provide an example of an exception report the auditor might create to gather evidence on the two assertions identified in (a) above.Outline one (1) practical programmed application control that you would expect to find in Macquarie Holding’s share investment master file. Your answer to parts (a) and (b) should be presented in the following format.AssertionUse of GAS to Assist in the Audit1. 2.
Solution
(a) The two key assertions the auditor will need to address for ‘share investments’ account balance are:
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Existence: This assertion confirms that the investments recorded in the portfolio actually exist. The auditor needs to verify that the shares Macquarie Holdings claims to own are indeed owned by them and are listed on the ASX.
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Valuation: This assertion verifies that the investments are recorded at the correct value. The auditor needs to confirm that the year-end market value of shares held is accurate and reflects the fair value.
(b) Generalised Audit Software (GAS) can assist in the audit of these investments in the following ways:
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Existence: GAS can be used to cross-verify the investment identification number and the investee name with the ASX listings. It can also confirm the number of shares currently held by cross-checking with the purchase and sale data.
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Valuation: GAS can assist in verifying the year-end market value of shares held by comparing it with the market data from ASX. It can also calculate the expected profit/loss on sale and compare it with the recorded value.
(c) An example of an exception report the auditor might create to gather evidence on the two assertions could be a report that flags any discrepancies between the number of shares currently held as per the master file and the number of shares as per ASX listings (for Existence) and a report that flags any significant differences between the recorded year-end market value and the actual market value as per ASX (for Valuation).
(d) A practical programmed application control that you would expect to find in Macquarie Holding’s share investment master file could be a control that automatically updates the number of shares currently held based on the purchase and sale data and a control that automatically updates the year-end market value of shares held based on the market data from ASX.
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