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Auditing and Context

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Added on  2022/12/28

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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
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INTRODUCTION
Auditing is described as the on site verification activity in which consist of inspection or
examination for the procedure of quality system and assure about the compliance of
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:
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.
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).
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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
Board of directors are accountable for business effective governance. 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:
Cybersecurity
Geopolitical risk
Corporate culture
Sustainability
Select to manage risk
(b) Stage of assurance supply by an audit and a revaluation action
Level of assurance
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.
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-DRĂGUŞIN
and ŞTEFĂNESCU, 2020).
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
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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:
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.
Before general meeting requires to select term of office that would have expired and
proposed to fill the vacancy after the resignation.
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.
Before the resignation require to provide a chance for laying down reasons for ineffective
activities.
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When the auditor is being resign before completion of term so for this require to take
approval from board of directors before passing a particular resolution by an
organisation.
DRAFT APPOINTMENT LETTER
Date:
To,
M/s. ___________
Chartered Accountant,
Sub: Designation as Legal Auditors of the Organization
Dear Sir,
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
dependent to confirmation at every Annual General Meeting and your qualification &
permission at a earnings as reciprocally in agreement by us.
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
your reference and record.
Thanking you,
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Yours dependably,
FOR PRIVATE LIMITED
DIRECTOR
Encl.:-
As above
DRAFT RESIGNATION LETTER
Date:
To
The Board of Directors
[organization name]
[Location of an organization]
Sub: Resignation from Auditor ship
Dear Sir,
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
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Company.
Thanking You
Yours Faithfully,
For ____________________
Chartered Accountants
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:
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.
This helps to auditor to know their client in proper manner and accordingly prepare
auditing strategy to convenience them effectively.
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It supports auditors to effectively organize and arrange the audit engagement after that
performed in good way.
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.
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:
Provide evidence to auditor on the basis of particular conclusion after that accomplish
overall objective of audit (Setiawan and et.al, 2020).
Analysis the engagement team for proper planning and present auditing procedure.
Present audit on evidence based and planned as per the ISAs and applicable legal and
regulatory necessities.
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:
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.
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.
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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.
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.
Client service: Focus on useful recommendations that can be based on client and
recognised appropriate problems.
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 risk Auditor response
It is susceptibility and
declaration in regard of class of
transaction and account balance
for the open of misstatement of
material and other controls. The
finance cost are opening by the
Bakers department stores that
borrowed for material
purchasing.
At this time auditor response that conduct operational
activities in subject of degree of regulation. For the
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
depth manner after that check out all the accounts of
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).
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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.
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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
auditor’s report’s communicative value: Experimental evidence from investment
professionals and non-professional investors. Accounting in Europe. 17(2). pp.105-128.
TRINCU-DRĂGUŞIN, C.P. and ŞTEFĂNESCU, A., 2020. The External Public Audit in the
Member States of the European Union: between Standard Typology and
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. and et.al, 2020. Audit: Legal Aspects in a Pandemic. Ius Humani. Law
Journal. 9(2). pp.365-388.
Al‐Shaer, H., 2020. Sustainability reporting quality and post‐audit financial reporting quality:
Empirical evidence from the UK. Business Strategy and the Environment. 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. and et.al, 2020. The effect of audit committee characteristics on earnings
management: the case of Indonesia. Afro-Asian Journal of Finance and
Accounting. 10(4). pp.447-463.
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