ACC305 Auditing and Professional Practice Assignment

ACC305 Auditing and Professional Practice Assignment

ACC305 Auditing and Professional Practice Assignment

Introduction

In the financial effectiveness in every organization, there is required to have effective control over financial activities in the organisation. Auditors are the key people who define the level of effectiveness in the management of the finance in the organisation and its utilisation in an effective way. This report will explain various aspects related to the roles of auditors in the organisation that can lead to improved performance of the organization. Different case studies are explained with the scenario and solutions are provided for them.

ACC305 Auditing and Professional Practice Assignment

Case Study 1:

Required

For each situation, identify the main audit planning issues that need to be addressed in the planning documents.

(a) In this given case there is a property developer City Ltd. which is providing its services in real estate and running various projects which are in progress in Brisbane's central business district. The projects were in affected badly due to an effect on the commercial property sector in the city office centre that makes impact on the overall effectiveness of the organisational performance (Akresh, 2010). This situation is making impact on the overall sell of the properties in the market. This downturn has restricted the buyers to buy properties of these projects. This is situation of concern for the City Ltd and it should be effectively analysed all the related aspects influencing are participating in creating this situation. An auditor can be resulted as the effective and responsible person who can identify the factors which are making the situation worse and impacting on the business or real estate business. The following are the issues facing in the audit planning for the documentation.

1. First of all in the audit planning there is required to identify the nature of the real estate projects which are providing by the property developer and then define their type of business offering by the company.

2. Effective analysis of the site of property with the evaluation of the cost of the property and its comparison with the other projects offering by other developers.

3. There is analysed the market cost and rate of the projects and property that can be compared to actual cost of the organisation.

4. The government regulations and legislative requirements are analysed in the audit planning process which will define the effectiveness of the planning process.

5. The market positioning of the company will also be analysed and evaluated with the pricing method adopted by the company for its property (Akresh, 2010).

6. There is also effective planning process for the risk assessment programme which will define the level of risk associated with the property in effective manner and will help in managing and reducing the risk level in effective manner.

(b) Web Ltd is adopted new software which is providing effective management financial services and for improving quality management within organisation making impact on the overall effectiveness. Following will be required documentation in the audit planning process.

1. To collect the invoice from the vendor and acquire all the required documents included in the purchase and transfer of ownership.

2. Evaluation of the cost associated with this software and estimated maintenance cost which will be occurred and will make impact on the overall expenditure of the organisation (Anderson, et. al 2015).

3. All the required legal and legislative requirements must be considered which are applicable on the adoption of this software in the business. All the government requirements are required to be followed in the process.

4. There must be analysed quality standards set in the organisation and can help in evaluating the performance and results which are achieved with using this software.

5. Risk assessment is done in the process of risk management within the process of the using this software for quality management.

6. There is analysed opportunity cost of using this software in the process of quality management within organisation. in the planning process there is defined the cost included in the application of the software can lead to generate other profits in the organisation (Anderson, et. al 2015).

(c) Beauty Pty Ltd is a manufacturer of cosmetic and skincare products which is planning for expanding its business operations overseas as establishing a sales output and therefore there is required are various resources and in this process following are the requirement of documentation in the process of audit planning.

1. In the transfer of inventory has been transferred from Australia to the new branch of the business there is required for the audit planning appropriate invoices which make it clear the evaluation of the appropriate value of the inventory in case of shipping there must be prepared effective bills and inventories (Askary, et. al 2012).

2. This evaluation of the value of the inventory will lead to the effective assessment of risk which can help in estimating the amount of the insurance.

3. Estimated budget for the establishment of the new plan of the new branch of sales outlet and this budget will be a benchmark for rest of the process.

4. All the government policies, rules and regulations which are required to establish the new branch and export inventory for the store must be considered while auditing the plan as in it is important for starting a new business plan.

5. Maintenance cost of the new store which is monthly is required and in case of the lease of the place or store the documentation is required (Askary, et. al 2012).

Case Study 2:

Required

(a) What are the general issues related to deciding whether to use a test of controls approach or a substantive approach?

In the effective financial management, there are defined two type of approaches which are the test of control and substantive approach. We can understand them as follows.

Test of control approach- in this approach there is controlled all the activities by which there are identified all the possible errors and misrepresentations conducted by the staff in the organisation. Control is maintained from the initial stage of the organisation which can lead to control the overall efforts in the organisation (Bierstaker, et. al 2010).

Substantive test approach- In this approach of control auditors of the company analyses and identifies faults and misrepresentation in the financial statements of the company which is carried by the auditors of the company.

There are various aspects and factors which make influences the decision related to the selection of the approach to select the effective approach some of them are as follows.

1. In case of effective policies and procedures in the organisation and their implementation reduces chances of any kind of misrepresentation and fault in the internal activities of the company.

2. Employee effectiveness and their performance is the effective tool for selection of control approach.

3. Management level of the company which can be financial and other management can make the impact on the selection of the approach to control (Bierstaker, et. al 2010).

(b) How do the risk assessments above relate to the choice of audit approach?

In the process of effective financial management in the organization there emerge different kinds of risk in the organization that make the impact on the overall effectiveness of the organisation. This risk can be diversified into three types as follows.

Inherent risk- This is a type of risk which can be occurred in the overall process of the organisational activities. This risk emerges in the internal activities of the company making the impact on the overall effectiveness of the organisation (De Martinis, et. al 2011).

Control risk- This risk is the internal risk within the organisation in which there is the risk of the failure of the internal control to identify and prevent internal errors in the organisation that can make the impact on the overall effectiveness of the organisation. This type of risk is controlled by the organisation.

Detection risk- This is the external risk the organisation which is separate from the overall internal control within an organisation. This risk is related to the auditors and their efficiency. This is the risk in which there is chance of failure to detect the error in the auditor’s procedure to identify any fault and misrepresentation.

All the above risks is related and make impact on the selection of the control approach which can make impact on the selection of the approach of control by the auditor. In case of high inherent and control risk there must be adopted test of control approach and in case of high detection risk there should be adopted a substantive approach of control (De Martinis, et. al 2011).

(c) If you adopted the approach set out in the planning summary, what audit procedures would you use for the accuracy and completeness of depreciation expense?

In the process to ensure the accuracy of the depreciation expenses in the organisation that can make impact on the overall effectiveness of the organisation. There should be adopted test of control approach in which there will be control of the auditor from the initial stage that can reduce chances of any kind of default and misinterpretation in the depreciation expenses which can make impact on the overall performance of the organisation. There are various aspects related to the effective evaluation of the valuation and allocation of fixed assets in the organisation. There are also defined various transactions related to the impairment of the assets making impact on the depreciation related to the assets of the company that can make impact on the overall profitability of the business and organisation (Lees, 2012).

There can also adopted approach of sustainable control in which there are various aspects by which there can be controlled potential defaults and mispresentations in the financial statements of the company that can make impact on the overall effectiveness of the financial management of the company and this is done by the auditors of the company which make impact on the overall effectiveness of the depreciation expense and their impact on the fixed assets of the company (Lees, 2012).

Case Study 3:

Required

Explain to Jim the connection between auditing and the communication of accounting information.

In the process of audit there is required various information and data that can provide a base to take decisions about the effectiveness of financial management in the organisation that can generate effective results in the organisation. Following are the requirements of the connection between auditing and the communication of accounting information in the organisation (Mock, et. al 2011).

1. There is the effective requirement of the auditing in which there require financial information and transaction which are done in the organisation to achieve effective performance in the organisation. This is due to the demand for financial audit in the organisation.

2. There is requirement communication of accounting information for the execution of the interaction between the internal and external auditors of the company. This is required to maintain the transparency within organisation about the financial transaction in the organisation to achieve effective results.

3. Communication of the accounting information in the organisation is required to maintain the effective relationship between the client and auditor by developing trust between them for presenting effective decisions that can make the impact on the overall effectiveness of the organisation (Rao, et. al 2011).

4. The efficiency and effectiveness of the performance of the auditor depend on the effective communication of financial information that can make the impact on the overall results of the audit in organisation.

5. There can be taken advantage of specialisation in the audit process of organisation that can define financial effectiveness by handling all the activities in the company. There is effective control over the activities and it can be easy to identify any kind of default and misinterpretation in the organisation.

6. There can be taken advantage of past records and their impact on the overall performance of the organisation that can help in achieving effective results of audit in the organisation.

All the above points are making it clear that there exist the effective connection between auditing and communication of financial information that can make the impact on the overall effectiveness of financial positioning. Ineffective communication of financial information leads to ineffective and inefficient results in the organisation (Rao, et. al 2011).

Conclusion

This report is explaining various aspects related to the auditing process which can make impact on the overall performance of the company. There are various aspects which make the impact on the selecting and taking strategic decision related to control approach which controls different types of risks which can be the inherent risk, control risk and detective risk that can make impact on the overall effectiveness of the organisation. There are also defined the importance of the communication of the financial information in the process of auditing which can ensure the effectiveness of the auditing process of the company.

References

Akresh, A.D. 2010, "A Risk Model to Opine on Internal Control", Accounting Horizons, vol. 24, no. 1, pp. 65-78.

Anderson, U.L., Christ, M.H. & Janvrin, D.J. 2015, "Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on The Institute of Internal Auditors' Proposed Enhancements to the International Professional Practices Framework (IPPF): Participating Committee Members", Current Issues in Auditing, vol. 9, no. 1, pp. C23-C33.

Askary, S., Goodwin, D. & Lanis, R. 2012, "Improvements in Audit Risks Related to Information Technology Frauds", International Journal of Enterprise Information Systems (IJEIS), vol. 8, no. 2, pp. 52-63.

Bierstaker, J., Abbott, L. & Parker, S. 2010, "Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on IIA's Exposure Draft of 2010 International Standards for the Professional Practice of Internal Auditing", Current Issues in Auditing, vol. 4, no. 2, pp. C1.

De Martinis, M., Fukukawa, H. & Mock, T.J. 2011, "Exploring the role of country and client type on the auditor's client risk assessments and audit planning decisions", Managerial Auditing Journal, vol. 26, no. 7, pp. 543-565.

Lees, F. 2012, Lees' Loss Prevention in the Process Industries: Hazard Identification, Assessment and Control, 4th;4; edn, Butterworth Heinemann, US.

Mock, T.J., Srivastava, R. & Gao, L. 2011, "The Dempster-Shafer Theory: An introduction and Fraud Risk Assessment Illustration", Australian Accounting Review, vol. 21, no. 3, pp. 282-291.

Rao, H. & MacDonald, J. 2011, "A study on audit pricing and market assessment of risk", Academy of Accounting and Financial Studies Journal, vol. 15, no. 1 SI, pp. 123.