HI6006 Competitive Strategy Editing Service
Delivery in day(s): 4
Auditing is one of the most prominent processes that is done by every firm in order to know the financial position of the company. A true and fair picture of the financial statements that is known through the auditing process is helpful for the company in decision making process so that the company can achieve its goals and objectives in the easier and smooth way. Auditing is usually done in periodical intervals. The efficiency and experience of the auditor is an important factor in the success of the auditing. For the auditing purpose, the external auditor has to collect the required evidences like accounts statements and other information, for conducting the auditing process. The most critical aspect of audit risk, in which the auditor gives the incorrect opinion about the financial accounting are to be avoided with utmost care. This essay analysis the nature of the evidence collected and how the audit evidences are collected by the auditor in order to ensure the non occurrence of the audit risk and to eliminate the key issues that may occur during the audit process (Datar, S. M., Feltham, G. A., & Hughes, J. S, 1991).
The assessment of the potential risk is a vital factor in the auditing process. The audit risk involved during the auditing period has to be well understood and analyzed. Audit risk is termed as the risk occurs when the auditor gives an inappropriate opinion about the financial statements. This will result in an improper auditing process, where there the financial statements are materially misstated. Hence it is essential for the auditor to do a thorough check on the financial statements and its fairness with a proper audit plan. This will ensure the potential risk involved in the auditing process leading to completion of the auditing process in an effective way. In the situations where the audit risks are high, then there is a requirement of more evidence related to the accounting statements. For this purpose, more staffs with more experience levels are to be appointed in order to carry out a thorough auditing in a successful manner eliminating the risks involved in it. All these aspects take to the root of the necessity of a formulating a good audit plan well before the initiation of the auditing Carcello, J. V., & Neal, T. L, 2000).
The first and the foremost duty of auditor is to formulate an effective audit strategy in which the purpose and objectives of the auditing is described and this is later executed along with the amendment with updated objectives required if any. The auditor has to see nature of evidence, time required to collect the evidence, plan and forecast the changes that may occur during the auditing due to unexpected conditions in the company. This may make the auditor to collect information system that is entirely different from the already collected ones, resulting in more time involvement in completion of the audit process (Habib, A., & Bhuiyan, M. B. U, 2011).
In order to conduct a proper audit, the auditor has to follow the below mentioned methodology, which are:
Understanding and Analysis of business: The first and the foremost step in the auditing process is to know the exact position of the business in the company. This helps the auditor to set the specific audit objectives and thereby carry out the auditing process accordingly.
Determine Audit risk: The inherent risks that are to be well known by the auditor is the suspected mistakes in the account balance and in the transactions. The misstatements in the accounts can be material which may be an individual error of error or omission occurred when compared and calculated with other statements. These factors prove it prominent for a proper audit plan by the auditor. The assessment of the audit and inherent risks helps to know the nature, quality and quantity of the evidence required to be collected for the purpose of auditing.
Analysis audit process: The audit process has to be analyzed in an effective way in order to know if there are any errors or omissions that are to be considered in the auditing process. A proper analysis on the documents, verification of assets etc are needed in this stage.
Communicating results and follow-ups: Once the auditing is done, the audit reports are communicated to all the departments, where the concerned officials will go through the audit report. This helps them to know the performance level of the company by knowing the financial position of the company. If there is any internal audit control weakness, they are addressed to the audit committee and the required rectification is done thereafter. This is usually conducted on a periodical basis, say quarterly or half yearly.
The true and fair picture of the financial statements can be derived, which is the ultimate objectives of the auditing. The auditor has to plan in such a way that he is equipped with the time, evidence and staffs that can be altered or considerable changes in these factors can be brought in, with the changes in the internal system that might occur in the auditing. The evidences collected might be required to change as a result of this factor. However, a good audit plan will help the auditor to find the resources and make it easy to collect the necessary audit evidences (Krishnan, J., & Yang, J. S, 2009).
The main objective of the auditor is to execute the auditing in a successful manner so that he will be able to provide correct information about the trueness and fairness of the financial statements. Another purpose is it improves the confidence of the management, who uses the financial statements for decision making process. With the help of the true opinion of the auditor about the financial statements, the confidence level of the users of these statements will be increased. This will help the management in implementing the firm’s business strategy in accordance with the true financial condition of the firm. The assets and liabilities of the firm can be utilized in an efficient manner so that the firm can perform well with increased business profits and efficiency (Bartov, E., Gul, F. A., & Tsui, J. S, 2000).
While going through the auditing of the various day to day transactions of the company, the auditor has to look in to the same so that it meets the required audit objectives. The auditor has to ensure that the transactions that are recorded do exist. It is also required to ensure that the transaction recorded is complete and there are no omissions. Another objective of the auditor is to validate the accuracy of the transactions and amount stated are correct. A proper classification of the transaction has to be ensured along with correct dates entered for each transactions. The auditor also has to know if the recorded transactions are properly entered in the journals (Solomon, I, 1987).
This objective is used by the auditor to evaluate the amounts and the information entered in the financial statements, that is, in the balance sheet are accurate and they really exist. It is also verified whether the complete information is given in the balance sheet and they are properly classified. Another objective is to know whether the dates of balance sheet entries are correct. It is also vital to know that the assets included at the realizable value.
Interview Questions and Documents:
Balance-Related Audit Objectives:
Information systems audit and assurance goes through the various aspects which are vital for conducting the auditing by the auditor. The auditor has to see whether the evidences collected will meet the objective of the audit plan. It is also vital for framing a perfect audit plan before the starting the auditing process. This plan considers the unexpected changes that may occur in between the auditing process, which may sometimes lead to the complete change of the evidences collected leading to collection of new evidences. The various the audit objectives is also portrayed in this essay. The audit evidences plays a significant role in the formulation of the audit strategy. This is because of the fact that a proper audit evidence will reduce the audit risk. With the collection of appropriate evidences, it is also possible for the auditor to draw a true picture of the financial statements of the firm. He will be able to ensure the delivery of a correct opinion about the firm’s financial position. This factor will not only help the company to undergo proper decision making process for the purpose of achieving the goals and objectives of the company efficiently. It is recommended that, it is essential for the auditor to plan a good audit strategy and audit plan in the light of the audit evidences received. This will ensure a successful auditing process within the stipulated time with reduced audit risk and true picture about the financial position of the particular firm (Bell, T. B., Landsman, W. R., & Shackelford, D. A, 2001).
Carcello, J. V., & Neal, T. L. (2000). Audit committee composition and auditor reporting. The Accounting Review, 75(4), 453-467.
Krishnan, J., & Yang, J. S. (2009). Recent trends in audit report and earnings announcement lags. Accounting Horizons, 23(3), 265-288.
Bell, T. B., Landsman, W. R., & Shackelford, D. A. (2001). Auditors' perceived business risk and audit fees: analysis and evidence. Journal of Accounting Research, 39(1), 35-43.
Bartov, E., Gul, F. A., & Tsui, J. S. (2000). Discretionary-accruals models and audit qualifications. Journal of Accounting and Economics, 30(3), 421-452.
Solomon, I. (1987). Multi-auditor judgment/decision making research. Journal of Accounting Literature, 6(1987), 1-25.
Datar, S. M., Feltham, G. A., & Hughes, J. S. (1991). The role of audits and audit quality Management in valuing new issues. Journal of accounting and Economics,14(1), 3-49.
Habib, A., & Bhuiyan, M. B. U. (2011). Audit firm industry specialization and the audit report lag. Journal of international accounting, auditing and taxation,20(1), 32-44.