Assignment on Auditing PDF

Running head: Auditing 1
Auditing
Your Name
Name of institution
Independent Auditors Report
To
Company
Address

Running head: Auditing 2
Auditing
Part A
Auditing has been practiced in companies for a long period time. From what I have learnt
throughout my auditing course, the purpose of audit, nature, limitations, principles of ethics, auditors’
independence, role of regulators, phases of audit, understanding of an entity and its environment, the
audit risk model, appropriate tests and control in audit process, responsibility of an auditor in execution
of an audit are the main concepts that I have acquired from learning this course.
Learning this unit proved to be one of the core requirements that every individual in auditing
field should have a grasp. The concepts I have learned have helped me value audit practice and
appreciate its role in adding credibility to the financial statements.
Part B
Purpose. From my experience in audit, the purpose of financial statements auditing is to offer
assurance to the users of the financial statements, that the information has no material errors and is
prepared according to financial framework of reporting to enable them make useful economic decisions.
This gives me as an auditor a chance to express professional opinion about the fairness and truthfulness
of the financial statements. It enables the firm managers to be accountable for the operation or other
activities that take place in the business. Stakeholders require accountability from the management and
the best way to get this is through the financial statements audit which reflects on performance.
Financial statements audit help enhance the reliability of the financial information of firm to the
external users such as lenders and investors by adding credibility to the financial statements. When the
external auditors have given their opinion on the financial statements, the external users base their
decisions on the audited results, (auditors’ responsibility for fraud detection, 2018)
Nature. The nature of audit relies on the professional judgement of the auditor in a given audit
processes. The nature aims at documenting the audit and its extent. Audit processes are supposed to
meet certain profession levels of standards. The qualified standard and the client office rules and
policies cannot outlaw me as an auditor from incorporating the writings in the file that the I view as
significant to offer support to my work. Writing or documenting aids in the planning processes and
execution of the audit. It assists in backs reviews, aid in illustration of the applicable prerequisites and
offers supports to assessment of appropriateness of the available information in coming up with
conclusions, (Buuren, 2009).
As an auditor I have to document the audit so that during completion of the audit processes,
the documentation will illustrate how I came up with my opinion. Writing the audit activities enable
linkage between the goals and steps used in executing the audit. The written document should illustrate
the important risks and how they were mitigated, how the evidence collected during planning linked
with the decisions about audit activities, things that lead the auditor to draw conclusions, conformity
with the applicable standards and lastly the way audit programs gives a conclusion on the goals of the
audit. In coming up with the documentation as an auditor I ought to consider, greatness of the risk, the
level of professional judgment needed and the importance of the evidence.

Running head: Auditing 3
Limitations. I have learnt that in audit execution there are many problems that I can encounter
as an auditor. Some of the disadvantages are as follows. Impairment of auditors’ independence due to
conflict of interest that arises in the audit processes can cause material misrepresentation. Time
constraints for example when you have to work within certain time limits to enable the firm publish
reports on time to meet deadline which may lead to material misstatements. Fraud hazards which are
concealed by firms making it difficult for an auditor to detect them appropriately. Utilization of
professional judgement may lead to misjudgments hence material misstatement, (limitations of audit
n.d)
Principles of professional ethics. In my perspective, these are the guidelines and anticipations
that govern the way that a firm and the auditor should behave in the audit process. The professional
ethics requires the auditors to work with prudence, ensure confidentiality, be objective with their work
and ensure competency. It stipulates the minimum prerequisites of how the individuals are expected to
behave and conduct themselves in the audit process, (Duska, Duska & Ragats,2011).
Auditors independence. Auditors independence implies to the freedom of the auditor in
conducting his or her responsibilities and duties in the audit process free from intervention of the
parties who have reasonable interest in the firm, (Hopekin, 2009). This requires the auditor to exercise
integrity and objectivity in the work without interference. The auditor should not have any relationship
with the client to be able to make an accurate reasonable opinion about the financial statements which
is free from bias. The firm should also have a good set corporate governance to be able to avoid
influence to the auditors’ opinion, (Adelopo, 2010)
Regulators role. The work of audit regulators, from what I have learnt is to ensure that the firms
operate as expected in a good conduct to avoid false documentation and violations of vital issues such
as governance, the culture of firms and the tone set by firms. The regulators are also supposed to
maintain transparency and good governance by closely observing the firm’s culture, protect audit
practice independence in the firm, make sure the quality of audit is upfront compared to other income
generating activities, holding the partners who involve in audit frauds accountable of their activities. To
ensure consistency in reporting of the financial statements through use of GAAP (Generally accepted
accounting principles) rules, (Collings 2011).
Phases of audit. There are seven phases that audit process undergoes to be complete. Audit
planning. The auditors work hand in hand with the client to establish the scope of audit process, the
time needed to conduct the audit, the extent and resources that will be required during the process.
Gaining the understanding of the client. The auditor should obtain the necessary data to be
able to evaluate the potential effect of risks that will arise due to misstatement of the financial
statements.
Risk evaluation phase. Here the auditor conducts the assessment to determine what might have
gone wrong, the likeliness of things going wrong and the monetary worth of exposure to risks.
Testing controls. The auditor is required to test controls of the client to determine if the controls
are working efficiently and in the right way with which it was designed to.
Performance of the audit. The auditor in this stage ascertains if the assets and liabilities are
correct. The auditor will also check the accuracy of account balances, transactions and other disclosures.