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ACC305 Auditing and Accounting Information Paper Editing Services
Auditing in financial terms refers to the systematic inspection and checking of accounts and financial reports of the business enterprise with a motive to present true and fair view of the financials. As per the important case law decision was given by the court, it was said “auditor is a watchdog, not a bloodhound”. This describes while making an audit approach an auditor must be vigilant in checking the accounts and the financials of the company but not with a pre-set motto that there is a fraud in an organization. It is the duty of an auditor that he should work without getting bias and should show the adequate integrity while providing reports and declarations on financials for the benefits of the stakeholders.
Case study 1
Audit planning issues that need to be addressed in the following issues
City Ltd is an organization which deals in property developer and works in developing big property projects. The issue which has risen in front of the Property development is that there has been a sudden downturn in the commercial property and the projects are lying with no buyers.
The main auditing issues in the Auditing planning in the real estate sector would be-
Ascertainment of value of the projects completed or under- construction- the main issue in the audit planning would be to evaluate the actual value of the projects which is under construction, since the property sector has seen a downturn, therefore the values of projects will go down and the correct evaluation of the project will become difficult.
Due to the downturn in the commercial sector, the comparison of the profitability of the organization as compared to the last years will be an issue in the audit planning.
The change in the salaries and wages of the labours that are in the construction business will be a problem in front of the audit planning & analysis.
Lack of security, of the vacant properties, clearly evident that losses will occur in the near future years, which automatically will affect the future predictions of the profit in the audit report and will adversely affect the stock market prices of the City Ltd (Millichamp & Taylor, 2012 ).
Web Ltd. is an organization which has recently bought new computer software which will itself do the entire management financial analysis and also do the quality management reporting.
The main auditing issues in the Auditing planning in the Organization that installs software for the financial analysis and quality management would be-
Need of engineers and expert would be required in the auditing of the financial aspects, therefore increase in the cost of the consultant and experts will be an issue which has to be explained in the audit report.
The cost related to the installation of the software and the expenditure associated with it such as salaries and cost of consultant required it in are the main issues in the audit planning.
If there is an internal error or internal manipulations in the coding of the software which the auditor is unable to detect will last in wrong or manipulated audit report. Therefore, audit planning will need to make in accordance with the software installed. This is one of the serious problems in the working through the software’s (Hay, 2014).
Beauty Pty Ltd. is an organization which manufactures cosmetics and other beauty & skin products. This organization has planned to establish an overseas sales outlet for the beauty products. In this project, the beauty products and skin products are sent from the Australia outlet to the overseas branch, in order to start the sales from the initial establishment and for customer retention. This method is one of the marketing strategies of the firm.
The main auditing issues in the Auditing planning in the organization would be-
Calculation of the cost of inventory-the inventory which is primarily for sale in the main head office but sent to the overseas branch is quite difficult to separate, as to which part of inventory belongs to which outlet.
Revenue earning of each branch-the revenue calculation will be also difficult in this type of scenario. As the stock which will be sold through the overseas branch is the inventory of the head office and not of the overseas branch, therefore calculation of revenue will become quite difficult in this scenario (McKinnon, 2010).
Case study 2
Test of control is one of the types of approach used by the auditor to conduct auditing by relying on the system of control used by the client in the financial statement of the organization. After the analysis made by the audit it is up to him to adopt the system of control set up by the client and if the audit feels that it is not suitable for the purpose of auditing then it can change the approach to perform in a better manner.
Substantive audit is the system through which auditor review and scrutinize all the aspects and the activities so that detection of any of the misstatement can be analyzed in an effective and efficient manner. There are two ways in which this can be performed that are analytical and tests of detail.
Auditor has to perform the auditing of the broom Ltd. that can be done by the way of test of control approach but if the auditors feel that the approach and the techniques used by the company is not accurate then it can simply switch on the substantive test which would definitely increase the cost of the company but would be more suitable in every aspect of accuracy (Dafedar, 2015).
Assessment of the audit approach can be ascertained by the following way-
In relation to the disclosure and existence of finance, leased assets auditor must prefer the test of control approach as disclosers does not require more scrutiny and company would provide all the disclosure that is required for proper auditing.
In relation to Measurement and completeness of depreciation, expense auditor must prefer the substantive approach as it would be more beneficial and the auditing can be done in an effective and efficient manner.
In relation to Rights and obligations in relation to vehicles, auditor must use the approach of substantive audit. It is more accurate and the correct approaches can be put to use in it. Company would have to comply with the auditors and has to pay all the expenses related to it to the auditor.
In relation to the valuation of vehicles, auditor is required to use the approach of substantive as there exists the high risk of inherent and control. So company would have to comply with it to the full potential. It is also necessary that all the cost that would be spent in this work shall be compensated by the company to the auditors (Sun et.al, 2015).
In relation to the depreciation auditing for the company, auditor is required to follow the procedure of auditing as prescribed IAS 16 that is available in the guidelines of the IFRS. With the procedure mentioned in this standard, there are very fewer chances that auditor would make any default in its working. This standard would help to perform accounting in an effective and affected manner that would increase the probability of the auditor to avoid any of the mistakes that may occur if the standard is not followed in an appropriate manner. It helps in carry out the treatment in relation to the depreciation charged in the financial statements of the company. In this standard of accounting plant, machinery, as well as the equipment of the company assets, are treated by following all the procedures as prescribed in it. Apart from that, the planned approach of the risk assessment states that it must use the test of control approach as that would be more beneficial for the company in an effective manner (Tillema & ter, 2010).
Case study 3
Auditing and the communication of accounting information.
Auditing- Auditing basically means authentication, inspection and examination of the official documents in order to ensure the compliances of the working of the organization. In the audit of financial reporting, the main aspects of the accounting such as financial statement (that primarily includes the balance sheet, income statement, cash flow statement, statement of stock holder’s equity) are closely examined and the information regarding the financial aspects of the organization is carried out.
Communication of accounting information
There are numerous people who are associated with the accounting conduct of the business, and the information of accounting is of vital to them. The main person who requires the accounting information is Stakeholders, government, Directors and key managerial personnel.
Communication of the accounting reports includes the analysis of the current aspect of the financial position of the organization and the effect of the past and future activities over the financial position (Cowlishaw, 2014,).
Integrity of the Accounting Report
The communication process of the accounting reports includes integrity and authentication of the financial reports, the proper presentation of the financial report and a clear conclusion for the clear understanding of the audit reports. The information which is provided and communicated to an outside must be authentic and true. Basically, the true and fair view of the auditors and directors of the organizations must be depicted. This is a vital concept in the entire communication of the financial reporting.
Proper way of communication
Communication must conduct in such a way that it maintains the confidentiality and integrity of the accounting reports of the organization. These depict the actual financial position of the organization, therefore, a leak out of this information can make the auditors and the organization in serious trouble.
Communication is very important in the organization to improve the working and the operations of the organization. The auditing of the company is better achieved if the proper communication system is followed by the organization. The managers need to be the best and effective in decision making as it has become the important things of the time to grab the market position. The communication system of the organization is also needed to be strong to achieve the goals and the objectives effectively and to achieve the organizational audit and measure the success in the organization (DeFond & Zhang, 2014).
At last, it could be said that communication of the accounting information and reporting are the most important factors for the auditors and other associated stakeholders of an Organization. The importance of the organization can be understood with the decision making of the organization and the effective results of those decisions. The communication is the important part of the organization in every way which provides the various benefits to the company. The better the communication system the better will be the working of the organization and the auditing of the company can be effectively done.
The audit also gets the improved with the communication as it provides the proper information about the financial transactions and the operations of the organization.
End result of the accounting
The accounting communication is not enough rather it must be supported by the conclusion. It must depict if the organization is able to achieve its goals and objectives or not. The end result must guide regarding the ways through which the organization can explore itself in future as well as the opportunities which are available for the organization in the coming years. And it must also answer, regarding the future perspective of the Organization (DeFond & Zhang, 2014).
In the above report, it can be concluded that the organization needs the proper auditing in the organization to improve the working of the organization. The different methods of the auditing are explained in this report. The methods described to provide the company with the different and various methods of the auditing. The report describes the risks associated with the auditing and the relationship with the communication and auditing. The effective communication in the company provides the auditing successful as the communication provides the easiness in maintaining the financial accounts and the books and become easy for the organization to check them.
Cowlishaw, G. 2014, "Auditing ethics committees", The Australian Journal of Anthropology, vol. 25, no. 3, pp. 377-379.
Dafedar Abdus Salam Bakhyiyar Ahmed 2015, "Environmental Auditing", International Journal of Innovations in Engineering and Technology, vol. 5, no. 4.
DeFond, M. & Zhang, J. 2014, "A review of archival auditing research", Journal of Accounting and Economics, vol. 58, no. 2-3, pp. 275-326.
Hay, D. 2014, "Auditing, International Auditing and the International Journal of Auditing: Editorial", International Journal of Auditing, vol. 18, no. 1, pp. 1-1.
McKinnon, A.C. 2010, "Product?level carbon auditing of supply chains: Environmental imperative or wasteful distraction?", International Journal of Physical Distribution & Logistics Management, vol. 40, no. 1/2, pp. 42-60.
Millichamp, A.H. & Taylor, J.R. 2012, Auditing, 10thedn, Cengage Learning, Andover.
Sun, T., Alles, M. & Vasarhelyi, M.A. 2015, "Adopting continuous auditing", Managerial Auditing Journal, vol. 30, no. 2, pp. 176-204
Tillema, S. &terBogt, H.J. 2010, "Performance auditing", Critical Perspectives on Accounting, vol. 21, no. 8, pp. 754-769