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(PDF) Auditing and assurance

   

Added on  2021-02-19

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AUDITING ANDASSURANCE

TABLE OF CONTENTSREPORT CONVENTIONS.............................................................................................................1Executive Summary.....................................................................................................................1Problem Statements.....................................................................................................................1RESEARCH.....................................................................................................................................2Methodology................................................................................................................................2Findings........................................................................................................................................8APPLICATION...............................................................................................................................9Implications of findings...............................................................................................................9APPLICATION.............................................................................................................................12Conclusions and Recommendations .........................................................................................12REFERENCES..............................................................................................................................14

REPORT CONVENTIONSExecutive SummaryAudit refers to process for evaluating accounting entries in recorded in financialstatements of company. Assurance is process to analyse the methods used in assessingaccounting entries recorded in financial statements of companies. Auditing is undertaken forassessing whether company has followed all the applicable accounting standards and proceduresfor recording the events and transactions occurred during the financial year. Auditors ofcompany should use the relevant auditing standards while performing the audit of financialstatements of company (Al-Najjar, 2018). The independent auditor should perform theprocedures for assessing the reliability of transactions and events that are recorded by companyso that auditor can give unqualified opinion on financial statements of company. The research is carried out for analysing the financial statements of Soul Pattinson andanalysing the true and fair view given by statements of company. From the above research it isconcluded that auditing standards are very important while evaluating the financial evens ofcompany. The biases in the auditing practices can impact the reliability of business. Auditorshould not give unqualified opinion on the statements having material misstatements as they caninfluence the decision of the person interested in company (Bumgarner and Vasarhelyi, 2018).The valuation methods used by company for valuing its assets at reporting date should beaccurate and as per the accounting standards at fair value.Problem StatementsWashington H. Soul Pattinson (WHSP) is public company of Australia listed overAustralian Stock Exchange. It is investment house having investments in diverse portfolios.Making portfolio of industries is covered under its principal activities that include pharmacy,1

natural resources, building materials, agriculture, equity investment, corporate advisory andtelecommunications. True and fair view of the financial statements means that statements do nothave any misstatements and financial performance as well as position is fairly represented in itby company (Earley, 2015). True states that prepared statements are accurate and correct basedon facts. Statements are prepared as per applicable standards, reporting frameworks likeIFRS and does not have material misstatements that could mislead users. They could occurbecause of error or omission of transactions and balances in financial statements.Company is valuing its assets and liabilities on fair value method. For determining the fair valuesof assets and liabilities estimates and judgements have been made by company. Company iscategorizing its assets and liabilities using three of methods given as per accounting standards.2

RESEARCHMethodologyASA 315 – Identifying & assessing Risks of material misstatements through understandingEntity and its Environment.The standard is applicable to audit of financial reports of financial year as Corporations Act2001. Auditor has to assess and identify all the risks associated with material misstatementswhich may be because of fraud or omission in financial statements and assertion level byunderstanding entity and the environment, its internal control, by giving a base to design andimplement response to assessed risk of material misstatement. Auditor has studied all the regulations and external factors which were applicable to thecompany. Company is an investment company which is required to follow guidelines and rulesprovided by the investment regulatory authority (Gomes, Eugenio and Branco, 2015). Operatingand governance structures of business should be known to the auditor so identify the mistakesthat could occur in the organisation. If the auditor is not aware about the structure of businessthere are chances that faults or errors could not be found. It is important to have knowledge aboutthe regulation applicable to the investment company for properly identifying the areas of errorsor defaults (ASA 315. 2019). Risk based approach is followed for identifying the factors which can affect the businesslike its competitors, competent authorities and other factors. It helps the auditors toindependently obtain objective and relevant evidence related to the assertions related to processfor forming opinion related to process (Hay, 2015). They have to identify the evidence for testingthe organisation's compliance procedures related to legal requirements, process and regulations. ASA 320 – Materiality in Planning and Performing Audit3

It is the responsibility of auditor to apply materiality concepts to plan and perform audit offinancial assets. ASA 450 is used for explaining the application of materiality for evaluatingeffects of misstatements on audit. Disclosure are to be made by company related to thetransaction or events that are significant and material to business. Materiality of transactions isgiven by the amount and effect involved on the financial statements of the company. Non-disclosing the material event can influence the decisions of users of financial statements. It willquestion the true and fair approach of financial reporting. Company has disclosed the fair valuemethod used by it over different assets. It is important for company to disclose the valuationmethods so that they can identify which method is used for recognising the particular assets orliabilities (Hay, 2015). Experts use different method for analysing the data there is possibilitythat may face variance which can influence the decisions (ASA 320. 2019). Clearly disclosing itwill help to identify the causes of difference. The information stated was material as it is relatedto the assets and equity investments and company is investment company.ASA 330 Auditor's Responses to Assessed RisksStandard states that the auditor has the responsibility of addressing all the risks andmisstatement identified during an audit. A company cannot perform all the processes effectivelyand accurately. There will be misstatement and errors in the processes which are to be identifiedduring the audit and the responsibility of auditor is not restricted to identify but also to informthe company to rectify the mistakes. If the errors are not rectified than the auditor has theresponsibility to address the areas which have not met the compliance requirement. If thecontrols are reporting effectively the flaws and defects of organisations it should be reviewed byauditor (Moffitt, Rozario and Vasarhelyi, 2018). The misstatement in the report can highly affect4

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