Auditing and Context

Auditing and Context

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
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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