Auditing is an important activity
associated with the financial accounting department of the business
organisations. The organisations have to audit their financial statements by
the auditors to proof the integrity and reliability of the financial statements
to the stakeholders. Different stakeholders have different interest from the
business organisations such as the investors try to calculate their income from
the business organizations by using the information of the financial
statements. The government tries to calculate the tax from the financial
statements of the company (Zadek, Evans & Pruzan, 2013). The financial
statements also provide some relevant information about the financial
performance of the business organisations. The main focus of the following
study is to provide some relevant information about the conduction of auditing
program in the business organisations. The study also provides some relevant information
about the responsibilities of the auditors and the process of discharging the
responsibilities in the business organisations.
i) In the first situation the
outstanding interest expenses of the client is confirmed by the bank but not
present in the financial statements. Therefore, the auditor has to present the
interest expenses of the clients in the financial statements according to the
AUS 502, paragraph 13.
ii) In the second situation the fair
value of the land is recorded in the Director’s minute of the Messr contemn
& Co. The auditor can use the Valuation management assertion as per the AUS
502, paragraph 13, to evaluate the accuracy of the fair value recorded in
the minute by comparing it with the
market value (Brusca
et al. 2016).
iii) In the third situation the
auditor can use the measurement management assertion to examine the details of
the lease agreement by which the senior management get the permission to drive
four motor vehicles of the firm. These expenses have to include in the
financial statements by the auditor to disclose the actual expenditure of the
company.
iv) In the fourth situation the
auditors can use the disclosure management assertion as per the AUS 502, paragraph 13 to disclose the damage of $300000 water damage
in the financial statements.
v) In the fifth situation the
auditor can use the Existence management assertion as per the AUS 502,
paragraph 13 to do the balance date adjustments for the clients in the
financial statements.
vi) The auditors can use occurrence
management assertion as per the AUS 502, paragraph 13 to include the occurrence
of international purchase transactions in the financial statements of the
company.
vii) The auditors can use the
completeness management assertion as per the AUS 502, paragraph 13 to include
the expenses of issuing visa card to the managers to entertain the employees on
the behalf of the company because the inclusion of such expenses in the
financial statements completes the auditing job of the auditor (Zeff, Radcliffe, & Gunz, 2014).
The annual closing stock of
inventory of the company plays a vital role to reveal the status of the asset
of the company in the balance sheet. The auditor have to follow some
appropriate standards to count the annual stick of the company. Therefore, the
auditors can assist in the counting of the closing stock because the company
can increase the value of asset by high valuation of the stock acquired by the
company. The auditors also do some market research to know the actual value of
such stock in the market.
It is true that the auditor can
examine all the financial evidences to provide a clear opinion about the
financial statements of the company but this is not possible for the auditor to
achieve all the financial evidences of the company associated with the revenue
and expenditure of the company. Sometime it is not possible for the auditor to
generate the financial evidences to proof the truth of the revenue and
expenditure of the company. Again, the auditor cannot meet the relevant people
of the company to know the information about the revenue and expenditure of the company. In this situation the auditors can their
experience to provide an appropriate opinion for the financial statements (Hayne & Salterio, 2014).
Tracing and vouching both are the
processes by which the auditors test the truth of the transactions of the
business organisations but the procedure of testing is not same in such
processes of testing. In the tracing process the auditor first select the
transaction documents and then identify the source of journal and ledger
associated with such transactions. On the other hand, in the vouching process
the auditor try to select the accounting journals and ledgers associated with
the transactions and then identify the source of the documents that prove the
truth of the transactions.
There is a huge difference between
the receipts of the documents for the third parties and the receipts of
documents from the clients. The scope of the receipt of documents from the
third party is narrow because the auditor only gets the informations about the
transactions. On the other hand, the receipt from the client not only provides
information about the transactions but also provide some brief knowledge about
the journal and ledgers associated with such transactions. However, the
truthness of the receipt of documents from the third parties is higher than the
clients because the thirds parties have no interest on the financial
performance of the company.
The main objectives of the auditing
program are to prove the truth of the transactions of the company to the
stakeholder (Wang, 2017). The business organisations also
try to maintain the integrity and reliability of the stakeholders on the
financial statements of the company. Business organisations also try to attract
mare investors in the company by preparing a audited financial statements in
the organisation. Organisations have to follow some steps to conduct the
auditing program in the company in an efficient manner. The organisations have
to prepare and present all the documents associated with the transactions of
the company to the auditor. The organisations also prepare the financial
statements for the auditors therefore, the auditor can easily concile the
information furnished in the financial statements with the documents of
transactions of the company. Organisations also provide a proper freedom to the
auditors to take the interview of the important person and analysis the
documents of transactions of the company for the investigation purpose.
It is difficult for the auditors to
conduct the auditing program in the recurring engagement because the status of
the business is changing continuously in every year. For this reason, the
auditors has to investigate the financial transactions of the company of the
previous years also to track the changes in the company. On the other hand, It
is easy for the auditors to conduct the auditing program in the initial
engagement because all the relevant documents of transactions are fresh and
there is no need to track the changes of the company by the investigating the
previous year's transactions documents.
The chartered accountant has no
rights to take the responsibility of the installation of the computer system in
the company. The chartered accountant can provide the suggestion of the
computer consultan but for this purpose the auditors can not avoid to review
the consultant’s work. It is against the ethics of the auditing job. The
auditor has to support the consultant at he the time of the installation of the
computer and provide suggestions about the all relevant software that can be
applied to the production expenses of the company. In this situation the chartered accountant
violate the ethical rules of the auditing by taking the responsibility of the
installation of the computer system.
The following criteria have to
fulfill by the auditors while preparing the working papers:
A) The auditor has to provide all
relevant information about the transactions of the company such as date, time, and
persons involved in the transactions, details of the company etc.
B) The auditors have to provide all
relevant evidences associated with the transactions of the company while
preparing the working paper.
C) The auditors have to reveal all
relevant journal and ledgers associated with the transactions of the company.
D) The auditor has to sign the
working paper and provide the date in which the paper is prepared.
It is a serious breach of contract
by the auditor because the auditor has to take the permit from the company to
review the financial statements of the company. The auditing ethics also did
net permit the auditors to review the financial statement of the company
without permission. The auditor can do some insider trading with the
information of the company. Therefore, it is highly prohibited to the auditors
about the use of the financial statements of a company without permission.
There are different kinds of risk
associated with the auditor’s job. Therefore, the auditors have to maintain the
all evidences of transactions of the company to avoid the loss of such
documents from the auditing process because the client can ask the evidences
based on which the auditor prepare the financial report. As the income of the
investors and tax of the government depend on the audited financial statement
of the company. Therefore, the auditor has to prepare the financial statements
with an unbiased mentality. If the auditors try to conceal the actual financial
status of the company therefore, the auditor can face some serious legal
problem in the professional life (Hoang, Salterio & Sylph, 2017).
Hire an auditor without contacting
the old employer of the auditor is not a violation of a legal obligations but Morris
has to inform her old employer about the joining in a new firm therefore,
Morris broke the ethical rules of audit.
Morris has to submit the resignation letter to the old employer to join
a new firm.
While the auditors can not generate
appropriate evidence to justify a transactions of the company in this situation
the auditors can ask some help from the third parties such suppliers,
distributors, buyers for some appropriate evidences of such transactions. The
third parties also provide some opinions about the transaction process of the
company. Such relevant information from the third parties helps the auditors to
prepare a proper audited financial statement for the company (Power & Gendron, 2015).
As a chartered accountant set up an
insurance company is not illegal or not against the ethical rules of auditing but
Bill set up the insurance company as a complement of the audit and tax services
which is illegal according to the auditing law. Therefore, the government can
cancel licence of chartered accountancy for the breach of contract.
The above study tries to reveal all
the relevant information about the responsibilities of the auditors. The study
recommends some suggestions for the auditors for conducting the auditing
program in the business organisations in an efficient manner. The relevant
standards and laws associated with the audit also be mentioned in the study.
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