Task 1

Type of Audit

Limited, regular, none at all? First things first.

Here is the background information on your task

The Board of Directors of a five-star hotel, our long-standing client, has again elected PwC as their auditor. We have received an intimation letter and a confirmation of the mandate offer. As every year, before accepting the offer, we conduct a risk analysis of the audit mandate.

The question is: what form should the audit take? We’ll get to that in a minute. But first, let’s continue with the process.

Using our central database, our lead auditors and you will perform a risk assessment for the business and its relationships with customers and determine a total score for the hotel. To ensure an efficient audit, we provide the client with a list of the documents we require, which always includes the balance sheet and the income statement. We also look into our previous documentation to point out risks. In this case: during previous annual audits, on several occasions, we’ve found inexplicable differences between the hotel’s supply stocks and their valuation. 

Here is your task

To determine what type of audit is required, first, you need to understand the legal options available. Research the requirements noted below and study the model in the background information.
 
Then, review the company’s balance sheet and income statement. 
 
When ready, draft an email in MS Word or PowerPoint format to Kevin and answer the following questions:
 
  • Does this client need to undergo an ordinary or a limited audit?
  • Or may the client legally dispense with an audit this year?
 
This experience is self-paced. However, Kevin is organising a team meeting in 1 hour and needs your valuable input. We recommend you spend no more than that completing this task.

Resources to help you with the task

Find a recap of Kevin’s case explanation below!

Resources for the task

Use the linked PDF’s for helpful guidance on completing your task

Business Analysis Framework (BAF)

Basics of the Swiss Audit Options Model

 

Balance Sheet

 

Income Statement

Helpful hint: In 2019, the hotel had 120 employees and 21 apprentices, and the previous year 119 and 21 respectively.

By the way: Because you must be curious about PwC’s audit database, check out this video to get a better understanding for how we do it in practice.