This report discusses the importance of audit planning, conflict of interest in audit of competitors, ethical threats affecting the independence of Traver Watts, and more. It also explores the duties of auditors in the context of appointment and resignation.
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Auditing and Context
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Table of Contents INTRODUCTION...........................................................................................................................1 TASK 1............................................................................................................................................1 Conflict of interest in audit of competitors.................................................................................1 Ethical threats affect on independence of Traver Watts.............................................................1 TASK 2............................................................................................................................................2 (a) Inner audit division can assistance duties under the rule of good corporate governance......2 (b) Stage of assurance supply by an audit and a revaluation action............................................2 (c) Duty of auditors in context of appointment and resignation.................................................3 TASK 3 (Bakers Department Stores)..............................................................................................6 Discuss the importance of audit planning...................................................................................6 (b) Explain the benefits of documenting audit work...................................................................7 Audit risk and auditors response.................................................................................................8 CONCLUSION................................................................................................................................9 REFERENCES..............................................................................................................................10
INTRODUCTION Auditing is described as the on site verification activity in which consist of inspection or examinationfortheprocedureofqualitysystemandassureaboutthecomplianceof requirements. It is conducting by different types of business entities to present particular function, process and production procedure(Aldoseri, Hassan and Melegy, 2021). On the other side Context is a procedure in which analysis of environmental factors such as, legal, social, financial and regulatory etc. Context of the business mainly depends on the necessities of the interested parties. In this report consist of conflict of interest and independence of Traver Watts for audit and define each threat. Along with define internal audit division, rights of auditors and level of assurance in context of business entity. Moreover, importance of audit planning and benefits of audit documenting and define audit risk with auditor response. TASK 1 Conflict of interest in audit of competitors Conflict of interest is defined as a situation in which internal auditor is taking position of trust and conduct all the activities. Conflict occurs when appearance of impropriety will be determined on basis of confidence of internal auditor. In the context of Traver Watts is conducting audit of various organisation. The company conduct audit of main competitor of a retailer company so here is chances of conflict of interest when auditor leak information of other company with the competitor. Ethical threats affect on independence of Traver Watts There are defined different types of threat that impact on the independence of Traver Watts in regard of audit such as: ï·Self interest threat: It exists in the business when the auditors holds a direct or indirect financial interest in the business that based on the customer and take major fee that is outstanding. The Traver Watts working last five year and the auditor job accepted by the partner's son for auditing. ï·Self review threat: According to this threat the auditor is auditing in his own work which is completed by others in the same firm. Traver Watts appoint partner's son so auditor not provide unbiased opinion in regard of the financial statements(Köhler, Ratzinger-Sakel and Theis, 2020). 1
ï·Advocacy threat: This type of threat exists when the auditor is involved in the promoting of the client and carry out the objectivity that will be compromised. TASK 2 (a) Inner audit division can assistance duties under the rule of good corporate governance Boardofdirectorsareaccountableforbusinesseffectivegovernance.Corporate governance is known in collective manner that set up by authority of board that conduct by the business effectively and achieve their objectives. The internal audit division is properly work for proper good governance in which consist of different activities such as: ï·Cybersecurity ï·Geopolitical risk ï·Corporate culture ï·Sustainability ï·Select to manage risk (b) Stage of assurance supply by an audit and a revaluation action Level of assurance ï·Compilations: At this level rely data that provided by the management and have no confidence about the financial reports are free from the stock mismatch. The data based on the GAAP and puts all the financial information that develop in house for financial statement format. ï·Reviews: It is another level of assurance in which supply controlled authority that the authorities are free from stock mismatch and present with GAAP. There are applying unusual item and company's accounting policies and procedures((TRINCU-DRÄGUĆIN and ĆTEFÄNESCU, 2020). ï·Audits: It is providing a reasonable level of assurance where financial statements are totally free from material misstatement. Audited financial statements that is only type of report in which presents in regard of financial statements are truly and fairly presented. Review engagement: It is a kind of engagement in which provides a particular level of insurance in regard of financial statements. Through different level of assurance in audit analysis 2
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the data of financial statements and reduce errors. It provides users to confidence in regard of their work and analysis the position effectively. (c) Duty of auditors in context of appointment and resignation Every organisation require to appoint an auditor to maintain its accounting books according to the provision of the companies act 2013. The audit reports of the business are produced by an auditor who have proper knowledge and information of audit activities. An auditor is an independent professional individual who is qualified to present an audit and accountable for analysing the validity and reliability of company's financial statements. The rights of the auditor for the appoint in regard their position is: Within 30 days: Each business must appoint its first auditor for auditing activities within 30 days of registration. It is right of the auditor to joint the company during the annual general meeting within 90 days. In case of emergency board of directors will appoint the auditor when conduct sixth yearly general meeting. Written consent: It is right of auditor to provide sufficient proof that present that he/she qualifies for particular position and serve their services effectively(Hammami, Moldovan and Peltier, 2020). Appointment notice: It is another right that get appoint notice from the organisation and form ADT-1 is necessary to be submitted that register within 15 days after the appointment of auditor. Rights of auditor in regard of resignation The section 518(1) is applied for auditor resignation is accompanied through by a statement as per the section 519 except here: ï·Send notice to authorization requisition for calling of main director duly to convince a general meeting of business with the reason of receiving like explanations of the reasons and matter connected with resignation. ï·Before general meeting requires to select term of office that would have expired and proposed to fill the vacancy after the resignation. ï·For the resignation of auditor require to change the completion of tenure and it occurs in some cases in which business entities is not satisfied with the services of auditor. ï·Before the resignation require to provide a chance for laying down reasons for ineffective activities. 3
ï·When the auditor is being resign before completion of term so for this require to take approvalfromboardofdirectorsbeforepassingaparticularresolutionbyan organisation. DRAFTAPPOINTMENTLETTER Date: To, M/s.___________ CharteredAccountant, Sub:DesignationasLegalAuditorsoftheOrganization DearSir, It is to inform you that with mention to your written permission and certification in case of the Shareholders of the Institution at the Yearly Broad Meeting held on ___, have appointed M/s. __ Chartered Accountant (Firm Registration No.____) as Statutory Auditors of the Organization for the Financial Year ___ and to hold the office of Enactment Auditors from the conclusion of this Annual General Meeting till conclusion of ____Annual General Meeting of the Company dependenttoconfirmationateveryAnnualGeneralMeetingandyourqualification& permissionataearningsasreciprocallyinagreementbyus. The documented true copy of the declaration passed at the Annual General Meeting of the Company in regard of your designation as Statutory Auditors of the Company is basined for yourreferenceandrecord. Thankingyou, 4
Yoursdependably, FORPRIVATELIMITED DIRECTOR Encl.:- Asabove DRAFTRESIGNATIONLETTER Date: To TheBoardofDirectors [organizationname] [Locationofanorganization] Sub:ResignationfromAuditorship DearSir, This is to communicate you that due to our pre-occupation in other delegate, we are not in a perspective to utilise our period of time to the concern of the Institution. Consequently, we are suggesting our resignation as Statutory Auditors of the institution with consequence from ____ It request you to nourishment this letter as our resignation from the Statutory Auditors of the 5
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Company. ThankingYou YoursFaithfully, For____________________ CharteredAccountants Signature___________ [Name of the Auditors] TASK 3 (Bakers Department Stores) Discuss the importance of audit planning Audit planning means developing a general strategy in which collect information in detailed manner for expected timing, nature and extent of audit. An effective audit presented audit has been done in proper and planned manner. Effective audit planning will assure about the appropriate attention to given to main areas of the audit and recognised on the basis of time. Bakers Department stores planning to develop a audit strategy for this develop audit plan. Here is defined the important audit plan such as: ï·It is considered as essential portion of audit procedure because it supports the auditor to decide particular areas in which require urgent attention for essential areas within the audit procedure(Olyukha and et.al, 2020). Moreover, it also calls for auditor to plans their audit in a way which supports them and concentrate on essential areas that become less relevant later on during the course of the audit. ï·This helps to auditor to know their client in proper manner and accordingly prepare auditing strategy to convenience them effectively. 6
ï·It supports auditors to effectively organize and arrange the audit engagement after that performed in good way. ï·They can also helps auditors in proper management and audit engagement where they capable to allocate their time and various resources effectively. It is something that is outstanding going to supports them in planning different activities that bearing in mind for time constraint that they have and major auditing assertion require to cover during this time period. ï·Audit planning is most essential to ensure that auditors are able to design their audit teams bearing in mind and supposed to be conducted audit scope. For effective design team manage their abilities and resources are collected for audit. (b) Explain the benefits of documenting audit work Audit documentation refers to the records of process in which auditor presented and conduct activities on evidence based that they obtained and conclusion makes on basis of evidence. It is very essential for auditor mainly in quality control of the audit. There are mentioning benefits of audit documentation such as: ï·Provide evidence to auditor on the basis of particular conclusion after that accomplish overall objective of audit(Setiawan and et.al, 2020). ï·Analysis the engagement team for proper planning and present auditing procedure. ï·Present audit on evidence based and planned as per the ISAs and applicable legal and regulatory necessities. ï·Retained a record of matters of continuing particular future audits and engage team to be accountable for its work. Audit planning process: For effective audit planning require to take appropriate steps such as: ï·Research the audit area: It is a first step in which understand business procedure and different function for auditing. Along with review internal procedure and seek help from subject matter experts. ï·Maintain open communication by the planning procedure: In next step certain amount of trepidation consist in any audit. Working with audit prior and audit supports ease concerns in which audited have communicating in preferable manner. 7
ï·Administration: For effective audit research require to keep qualified staff who have knowledge of work and effectively apply audit strategy. A time table for completion of the job should be agreed with client. ï·Audit team briefing: After that develop a team and conduct meetings to sets out planned audit approach and identified effective risk areas and clarifies each member role in the assignment. ï·Client service: Focus on useful recommendations that can be based on client and recognised appropriate problems. ï·Client communication: Information required by the audit team for proper communication and identify all the changes that occur in the assignment(Broberg Tagesson and Uman, 2020). Audit risk and auditors response Audit riskAuditor response Itissusceptibilityand declaration in regard of class of transaction and accountbalance for the open of misstatement of material and other controls. The finance cost are opening by the Bakersdepartmentstoresthat borrowedformaterial purchasing. Atthistimeauditorresponsethatconductoperational activitiesinsubjectofdegreeofregulation.Forthe refurbishment require to take approval from the management team and prepare a budget in which mention all the expenses and results of activities. Auditor can analysis all the details in depthmannerafterthatcheckoutalltheaccountsof refurbishment. New accounting ledger system open at the starting of financial year and centralised the system in head office. The auditor must have collect all detailed information to confirm that all opening balances have been recorded in right manner and record as per the new financial year. They should document and test new ledger system to recognise problems with the procedure of accounting information(Palav and Jagtap, 2020). 8
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CONCLUSION As per the above report it has been concluded that auditing is important procedure for any business. There are analysing different threats that occur in the business when properly do not follow the guidelines and identify different audit risk. On the basis of this risk auditor provide effectively response. 9
REFERENCES Books and Journals Aldoseri, M., Hassan, N. and Melegy, M., 2021. Audit committee quality and audit report lag: the role of mandatory adoption of IFRS in Saudi companies.Accounting.7(1). pp.167- 178. Köhler, A., Ratzinger-Sakel, N. and Theis, J., 2020. The effects of key audit matters on the auditorâsreportâscommunicativevalue:Experimentalevidencefrominvestment professionals and non-professional investors.Accounting in Europe.17(2). pp.105-128. TRINCU-DRÄGUĆIN, C.P. and ĆTEFÄNESCU, A., 2020. The External Public Audit in the MemberStatesoftheEuropeanUnion:betweenStandardTypologyand Diversity.Audit Financiar.18(159). Hammami, A., Moldovan, R. and Peltier, E., 2020. Salary perception and career prospects in audit firms.Managerial Auditing Journal. Olyukha,V.andet.al,2020.Audit:LegalAspectsinaPandemic.IusHumani.Law Journal.9(2). pp.365-388. AlâShaer, H., 2020. Sustainability reporting quality and postâaudit financial reporting quality: EmpiricalevidencefromtheUK.BusinessStrategyandtheEnvironment.29(6). pp.2355-2373. Broberg, P., Tagesson, T. and Uman, T., 2020. Antecedents of psychological well-being among Swedish audit firm employees.International journal of environmental research and public health.17(10). p.3346. Palav, M. R. and Jagtap, S. D., 2020. Research In Marketing Audit A Systematic Literature Review.PARIDNYA-The MIBM Research Journal.7(1). pp.1-25. Setiawan,D.andet.al,2020.Theeffectofauditcommitteecharacteristicsonearnings management:thecaseofIndonesia.Afro-AsianJournalofFinanceand Accounting.10(4). pp.447-463. 10