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[PDF] Auditing and Assurance Services

   

Added on  2021-04-24

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Running head: AUDITING AND ASSURANCE SERVICESAuditing and Assurance ServicesName of the StudentName of the UniversityAuthor’s Note
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1AUDITING AND ASSURANCE SERVICESIntroductionAuditing refers to the process of inspecting the financial statements of the companies inorder to make sure that they are free from any kind of material missstements. Thus, in thisprocess, it is required for the auditors to plan and perform the necessary audit procedures in orderto obtain reasonable and logical assurance about the fact that whether the financial statements arefree from material misstatements or not caused by any kind of error or fraud (William Jr, Gloverand Prawitt 2016). It needs to be mentioned that the auditors have many responsibilities in theauditing process and one of these major responsibilities of the auditors is the detection andreporting of fraud. All the responsibilities of the auditors related to the detection of fraud anderror can be seen in auditing standard ASA 315 and ASA 330. Auditors are required todetermine whether there is any deliberate action of the audit clients in the occurrence of fraudand errors. Apart from the responsibilities, the auditors are also required to maintain professionalskepticism while performing the audit operations. There are many instances all over the worldwhere the non-compliance of auditors responsibilities and professional skepticism has led to thecollapse of large business corporations (Leung et al. 2014). The collapse of ABC Learning inAustralia is considered as one of the major collapse due to the fault of the auditors. This essaytakes an honest attempt to analyze and evaluate different aspects of auditors’ responsibilitiesalong with professional skepticism in reference to the case of ABC Learning.Auditor’s ResponsibilitiesEarlier discussion shows that the auditors are responsible to obtain reasonable assurancethat the financial statements of the companies are free from material misstatements caused byerror and fraud. For this reason, the external auditors are responsible to consider the risk of
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2AUDITING AND ASSURANCE SERVICESmaterial misstatements caused by fraud. In this process, the auditors must consider the fact thatthere is possibility for the occurrence of material misstatements due to fraud in spite of havingthe experience about the integrity and honesty of the clients (smh.com.au 2018). In this particularprocess, it is the responsibility of the auditors to identify and assess the risks of materialmisstatements by understanding the business entity and its business environment further than thegeneral concepts; moreover, the audit engagement team is required to discuss about thesusceptibility of the audit clients to fraud (Salem 2012). In this process, the audit team is neededto obtain sufficient information for the identification of fraud risk at the time to perform the riskassessment procedures. In the process of doing so, the auditors are responsible for identifying themanagement’s process to assess and respond to the fraud risk. At the same time, it is also the responsibility of the auditors to enquire the managementteam and the internal auditors of the audit clients in order to know that whether they are aware ofany kind of fraudulent activity (Robu et al. 2012). In the presence of all of these audit activities,some inherent limitations of the audit process leads to the risk of the non-detection of some risksrelated to material misstatements even in the presence of planned audit procedures. It needs to bementioned that there is a high probability of fraud risk than the error risk in the companies due tothe presence of sophisticated and carefully organized schemes. As a part of the reporting offraud, it is the responsibility of the auditors to communicate the matters to the management ofthe companies in a timely manner in case they encounter any kind of fraud (Gold, Gronewoldand Pott 2012). The auditors are required to communicate the matters with the governance teamin case the suspected fraud activities are related to the management. The auditors are required totake legal advice from the legal authorities in case they encounter the involvement of thegovernance team with the fraud activities.
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