Auditing Drea Tech Company (Case Study Sample)

Auditing Drea Tech Company
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Material misstatement
The auditor should ensure that the increased income of 33% is treated appropriately. It is supposed to show a True and Fair view of the company's affairs at the end of the accounting period (GAAS, 2013). Drea's internal auditors should understand that the sales relate to the items that have been shipped because they determine the right revenue amounts.
Valuation
The auditor should ensure that the profit and loss account is supposed to show the right picture of the company's business for the right trading period. It does not make sense to record the sales that have actually not been realized (GAAS, 2013). The auditor understands that the users of Drea's financial statements will be deceived by the increased sales revenues because they are a misstatement of the company's actual trading.
Completeness
The auditor should ensure the manner in which the accounts department executes the different recording procedures is one that is in line with the International Accounting standards. The different items of production should be reordered in the best way possible because this determines the quantity that is to be part of the sales revenues of the particular accounting period in question.
Revenue recognition
The overstatement that is shown in the income statement affects the true and fair view of the company's affairs as at the end of the accounting period (GAAS, 2013). The auditor should note that the personnel, research and development expenses are a very critical component of the company's affairs.
Accounts receivable
The auditor must make sure that the different stakeholders in the company understand the manner in which the revenue that is showing in the income statement has been arrived at. It is deceiving for an overstatement to be showing in the trading accounts for the business (GAAS, 2013). The right adjustments need to be carried out so the exact picture of the business dealings can be shown.
Allocation
The auditors of Drea are supposed to avoid any omission in ensuring that the different sums of money that appear on the entity's financial statements indicate the true picture of the company's affairs. It is necessary that the manner in which the different transactions appear on the different financial reporting should ensure that the company's stakeholders are not deceived in using the financial reporting for the wrong reasons.
Disclosure
Since the plant shows that it has been depreciating, it is necessary to show that the sales are being affected by such an effect (GAAS, 2013). The depreciation of the firm is necessary in showing that the profitability of the company will be affect in the same proportion given that this is the equip...