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HI6025 Auditing Assurance and Compliance Assignment Help
For this report case study of BSF LTD. or Bio-Sustainable Feeds is utilised. It is an Australian Company that engaged into bio research activities and also listed in Australian Stock Exchange (ASX). There are various information provided related to the income and expenses made by the company over their research and development programs. There will be adequate discussion and analysis made over the Audit, assurance & compliance program with the help of the information rendered in the form of BSF Ltd. case study.
(1) Discuss the steps that you need to consider before accepting to do an audit and apply them to BSF Ltd.
Auditor is the authorised body that get selected by firms or companies for the purpose of conducting audit and compliance processes. For the purpose of appointing an auditor there are some steps that need to be followed such as proposal acceptance in context to conduct an audit. Auditor must consider all the aspects and information before selecting an organisation for audit purpose (Leung, et. al., 2015). Below are the points that need to be followed by an auditor in order to accept Audit engagement as there are different steps followed by the organisation in order to select organisation for the purpose of rendering audit and compliance services such as: -
Step 1: - Ability of executing audit program: -
It is observed that there is a requirement of getting consultation and specialist services in order to conduct an audit program. Auditor must attain the adequate capability in order to execute the audit program conducted for reviewing financial statements of BSF Ltd.
Step 2: - Analysis over Auditor independence: -
In order to analyse the impendence of the Auditor's the standards rendered by GAAS get utilised in effective manner. Standard of GAAS provide base for analysis in the form of defining field work along with all standards related to reporting's. Along with this there are some defined codes of conduct available where 101 get taken into consideration for the purpose of analysing auditors independence (Hardy & Laslett, 2015).
Step 3: - Evaluation of Auditor's Liability: -
During the selection of company for audit purpose there must be requirement of analysing capacity of auditor. It is important to analyse the capability of auditor whether he is capable to handle the audit program or not (Griffiths, 2016). For this purpose third general standard of GAAS is utilised along with two other important factors get utilised in order to determine auditor's capacity such as: -
Time of Appointment: -Auditor must get appointed well in advance so that he get ample time period for planning audit and reviewing documents.
Proper Schedule: -Auditor must prepare proper schedule and audit plan for the purpose of executing the audit program effectively and efficiently (Griffiths, 2016).
4. Execution of Engagement letter: -
Engagement letter is prepared in order to build contract between auditor and company. There are various terms and conditions motioned in it over which both companies need to render their consent. The terms among auditor and BSF ltd. mentioned in their engagement letter are: -
Need to provide detail of audited financial statements.
Audit's requirement and expectations
Accounting standards followed in Audit program
Auditors statement in context to declaration over non-inclusion of errors or irregularities.
Define accountants legal duties in order to identify illegal acts among financial statements (Griffiths, 2016)
Define management role for preparing financial statements and putting control over it
Proper description over fees or commission charged.
(2) If the inherent risk of the BSF Ltd. is estimated as 90% and the control risk and detection risk are estimated at, respectively, 5% and 80%, should your audit firm accept the role of doing an audit of BSF Ltd.?
Audit firm select company in order to render them adequate services related to audit and for this purpose they include different aspects or factors that make it more effective. Associated risk is one of the factors that get considered for the purpose of choosing organisation for auditing purpose.
Control risk: - It get defined as internal risk as it get raised with an effect of ineffective organisational management and inappropriate preparation of financial statements. Control risk get raised with the effect of organisational ineffective control along with their inappropriate financial statements that results into lacking over controlling internal activities of organisation. Inherent risk is raised due to the incorrect accounting and it get considered as the serious concern for auditor at the time of selecting company for audit. There is a 5% of control risk is estimated in BSF Ltd. that results into ineffective audit program as their financial statements attaining inappropriate and irregular recording as well as execution of information (Weirich, 2012).
Inherent risk: -It is an operational risk that get raised with the effect of the inappropriate preparation of financial statements or incomplete material information get recorded in their financial statements. When statements make inclusion of high level of estimations as well as complex transactions among their activities lead towards high rate of risk. It is identified that BSF Ltd. having 90% of inherent risk that get considered as serious concern because it is realised that there is huge misstatement is made among their financial statements.
Detection risk: - It is such risk that define the auditors ability and willingness in order to identify the inherent risk and control risk within the organisational financial statement. When the inherent risk and control risk get assessed effectively that results into getting low detection risk for the organisation. This factor is fully depend over the auditors capability in order to identify all factors and defaults related to the organisational financial statements. It is provided that detection risk is of 80% which describe that in the organisation followed ineffective and inadequate audit program along with lots of mistakes as well as ineffective control over organisational financial statements (Sinkovics, et. al., 2016).
Once all the risk factors get analysed it is concluded that financial statement of BSF ltd. make inclusion of huge mistakes and misstatements. These mistakes and misstatements didn't get identified by their auditors that results into high risk (including inherent and detection risk) for the organisation. For them control risk is limited that can be analysed and improved easily. But as a whole audit firm evaluate all the risk factors and didn't give approval to acceptance in order to conduct audit over BSF Ltd. Because except control risk both risk are very high that clearly shows their financial statements didn't prepared accurately and also create problem for them (Sinkovics, et. al., 2016).
(3) List and discuss what should be included in an audit program for the BSF Ltd. Your program should include general coverage plus the specific items covered above.
Auditor need to adopt approach of strategic management in order to make the audit more effective and for this purpose he need to prepare effective audit plan and follow effective framework in order to conduct audit program in systematic manner. For this purpose two factors such as time and cost need to be decided well in advance as it helps in processing in effective manner (Hecimovic & Martinov?Bennie, 2011). There are some points that need to be included among audit program conducted by BSF Ltd. such as: -
Company analysis: -There is requirement of making effective analysis over organisation along with its activities as it helps in knowing the organisational type and its impact over auditing process. As per the effective analysis it is identified that BSF ltd. is an bio-research firm and they perform research activities in order to improve quality of fishes as well as provide them good quality and suitable food. Company is focused over different projects along with different objectives and investments (Hecimovic & Martinov?Bennie, 2011).
Due diligence of company: -Auditor need to cross check whether the company is listed under ASX or not. There is effective need of analysing and evaluating of appropriateness and completion related to their due diligence. BSF ltd is listed under ASX and fulfil their required regulations. Due diligence include preparing statements, distribution of dividend, etc (Blewett & O’Keeffe, 2011).
Financial statement details: -Auditing include detailed information related to the activities and works performed by all the employees. The documents that get cross checked are cash book, purchase book, sales book, journal, ledger and other books of accounts. BSF Ltd auditor effectively manage and collect their financial statements.
Work segmentation and planning: - Audit's planning process make inclusion of adequate work segmentation related to employees. Auditor significantly segment different works and projects in order to conduct audit over it (Blewett & O’Keeffe, 2011).
Time and budget determination over audit program: -In order to conduct audit there is effective requirement of determining time and budget so that audit program get completed well on time and within set budget.
Audit over patent and other intellectual property: -BSF ltd. hold patents for their researches and these get audited by auditor. Auditor need to audit all the legal contracts as well as incomes related to the property (Davis & Hay, 2012).
Audit over government grants: -BSF ltd. get grant from CSIRO for their research and auditor need to audit all the activities performed with the help of that amount as they invest the money as per the instructions or not.
(4) Discuss any concerns the auditor should have for the full set of journal entries of the R&D transactions from 2013 to 2016 (include the grant from CSIRO) and explain your decisions—especially how the CSIRO grant is treated. Remember to check how the R&D costs are allocated between expenses and patent/capital?
Auditor is legal identity that make investigation over the organisational financial position. BSF is performing their activities in order to develop new aqua-culture in order to protect the fishes and provide them quality food material which is essential for them. They perform activities in order to fill all the needs and requirements related to the fish feeds. It is also identified that company is regularly engaged into effective research and development program and make huge capital investment for their new research program (Olson, 2010).
The concern of auditor over the full set of Journal entries related to the R & D transactions held between 2013 to 2016 such as: -
1. All journal entries related to the R&D department need to be checked in effective manner.
2. There is need to put random testing over the expenditure made by them over the R&D department in context to the establishment of project shows under capital account. On the other hand loss of stock during the development process of patent need to be shown separately as credit to purchase account because all the loss of stock get reduced from purchase account systematically (Whittington & Delaney, 2011).
3. Top management systematically verify the entries posted by authorised personnel.
4. BSF need to make use of Narration and Folio number while posting journal entries in accounts. By doing this they shows that they follow effective guidelines rendered by IAASB (International Auditing and Assurance Board) (Pickett, 2011).
5. They need to pass the Journal entries for the grant amount received from the CSIRO (Commonwealth Scientific and Industrial Research Organisation) and it must create separate account.
6. While checking journal entries auditor need to cross check all the invoices in order to get better understanding over their records (Pickett, 2011).
7. Auditor need to cross check all the attributes mentioned in the journal entries related to the R&D activities.
8. Auditor has to map individual charts in order to represent relevancy among the amount recorded in capital account of R&D department.
9. Auditor need to cross check the amount of grant received as well as the utilisation of the amount as it is used in described manner or not.
10. There is need to check as while technical feeding of journal entries they followed the consolidated system or make use of semi-automated general system.
11. With the help of the data mining over journal entries auditor effectively identify relevancy of the transactions with the expenditure made by them over R&D department, or transactions related to the project or patent (Pickett, 2011).
12. Auditor has to mention in his report that all journal entries get utilised for preparing their financial statement along with this auditor need to identify whether management have control over the unauthorised record of entries among the books of account in order to maintain proper record of R&D department.
13. Auditor need to identify management indication related to other phases for the system of integrated audit. And if auditor get special indication then proper record should be maintain related to it in auditor report as it get utilised for the purpose of future prospective (Norman, 2011).
14. Auditor has to cross check references and date of transactions such as receivable of grant. There is effective requirement of putting emphasis over the procedure of recording journal entries for the purpose of future reference.
(5) In a triple-bottom line addendum (i.e. addition) to their GPFS, BSF Ltd. describe their research as being socially responsible and environmentally friendly. Are you willing to sign-off on that statement as being true and fair?
Triple bottom line is an accounting framework that get utilised for the purpose of defining accounting imperativeness in context to financial accounting. This is further utilised for the purpose of considering different elements such as people, plant and profit.
BSF make development of effective aqua-culture as it further get utilised for the purpose of fulfilling nutrient's needs of fish at global level. It put positive impact over the life tenure of fish (Norman, 2011).
BSF is agreed over selling their developed technology for the purpose of developing aqua-culture to the required ones in order to develop eco-friendly nature and render effective support to the company.
All the issues get eliminated with the effect of developed aqua-culture and its patent as it provide effective benefits in order to provide quality fish within the fish industry and helps in getting additional huge profits to the organisation (Norman, 2011).
BSF Ltd. an Australian based firm engaged into bio-research activities that render adequate support to economy in order to develop new patent. They are engaged into research program over sustainable aqua-culture feeds for the period of two decades. Their consistent efforts and innovative ideas helps in extracting adequate set of information that become very useful for the society as a whole along with this it is also beneficial for all other companies working under fish industry (Khlif & Achek, 2016).
In order to decide which company is need to be audited, firstly there is need to make proper evaluation and examination of the situation of their management or their organisational position in order to set path for managing their activities as well as employees also. Effectiveness and efficiency of organisational management put effective impact over the audit program. There are various factors that impact the audit program such as errors, irregularities, fraud, etc. along with this it also adversely influence the audit report and results mentioned in it. While auditing in BSF ltd. there is requirement to measure the effectiveness of their management along with any kind of irregularities or fraud available in the organisation (Khlif & Achek, 2016).
Yes I am ready to sign off this document with a note that document is true and fair on the basis of my understanding over the subjective matter.
(6) BSF Ltd. management asserted in a prospectus that the patent values were predicated on BSF Ltd. having exclusive control over the bacteria-based feeds technology. Are you willing to sign-off on that statement as being true and fair?
BSF Ltd. make assertion of bacteria based feeds technology in a prospectus to show case their controllership over technology. They have full controllership over technology because firstly it is invested by them and secondly they have patent related to it. After attaining patent the invented technology is become an intellectual property for them.
Intellectual property:It is such property that get invented with the help of huge research and after it completion company get set of exclusive right from a sovereign state for a particular time period in which they need to disclose their invention in front of global audience as well as restrict the others from making use of it without getting proper approval from them. These rights get considered as intellectual property rights. Legal business firm claim for patent in order to safeguard their invention and after this it get denoted as asset. After getting patent owner has full legal rights of selling or using that invention (Steel, 2015).
BSF limited is bioresearch company and they have their focus over improving quality of fishes and also provide them quality and suitable food with the use of different factors. With the help of research company invent bacteria-based feeds technology and also took patents for same. Due to this it become their assets and get included in their prospectus. After this discussion it is concluded that it is true that BSF ltd. having full right related to the bacteria-based feeds technology because they are attaining patent related to it.
During auditing it is necessary to consider and analyse the available risk factors or uncertainties. With this effect auditor need to be focused over these elements as errors can be committed during the preparation of financial statement. There are some factors that results into increase in uncertainty and risk such as negligence over implied laws and inefficient due diligence and auditor must consider these factors. Auditor analyse the level of due diligence of BSF ltd. well before approving it (Cooshna, 2012).
Above report make inclusion of the procedure and importance of auditing and compliance within company. It make inclusion of auditor's role and factors that become important for considering before auditor render acceptance to the proposal of auditing rendered by the company. Firm also evaluate the capability of the auditor in order to complete the audit program along with the resources required for the auditing program. There are various operational risks get identified in the report related to the BSF Ltd. that put impact over the hiring of auditing firm. Along with all these aspects few factors related to the patent and intellectual property right get well discussed in the report related to the BSF Ltd (Cooshna, 2012).
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