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Auditing and Risk Assurance - Doc

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Added on  2021-04-21

Auditing and Risk Assurance - Doc

   Added on 2021-04-21

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Running head: AUDITING AND RISK ASSURANCE
Auditing and Risk Assurance
Name of the Student
Name of the University
Authors Note
Course ID
Auditing and Risk Assurance - Doc_1
AUDITING AND RISK ASSURANCE1
Introduction:
The auditing standard ASA 240 is associated with the responsibilities of the auditor
associated to fraud in audit of a financial statement. Particularly, the scope of auditing
standard expands on ASA 315 and ASA 330 in respect to risk of misstatement because of
fraud. Misstatement in financial statement might arise either because of fraud or error (Aicpa
2017). The distinctive factor amid the fraud and error is whether there is underlying action
which lead to misstatement of the financial statement is deliberate or not deliberate.
According to the Australian auditing standard fraud is regarded as the wider concept. The
auditor is generally concerned with the fraud which causes material misstatement in the
financial statement. Even though auditor might suspect or in rare circumstances recognize
fraud the auditor does not make the lawful determination of whether the fraud has eventually
happened.
The primary accountability for preventing and detecting fraud relies on those that are
charged with the governance and management of organization (Li, Simunic and Ye 2017). It
is vital for the management to place a high stress on reducing the opportunities of reducing
fraud and deterring fraud that may persuade an invidious to commit fraud due to the
probability of detecting and punishing. The auditor enters much expanded ground to detect
the fraud.
Auditors Responsibility:
An auditor performing the work of audit in compliance with the ASA is accountable
for attaining sufficient reassurance that the financial statement that are taken as the whole is
free from material misstatement originating from fraud or error (Bozkurt 2014). Because of
the inherent disadvantages of audit there are risks that are unavoidable since some of the
Auditing and Risk Assurance - Doc_2
AUDITING AND RISK ASSURANCE2
material misstatement of financial statement should not be detected, even though the audit is
sufficiently planned and executed in compliance with Australian auditing standards.
The auditor is responsible for assessing the correctness of the accounting policies used
and appropriateness of the accounting estimations disclosures that are made by the directors.
The auditor is accountable for identifying and evaluating the risk of material misstatement
relating to the financial statement due to error and fraud and conduct an audit procedure that
are responsive to the risk.
The auditor is accountable for assessing the overall demonstration, construction and
content of the financial report along with the disclosure whether the financial statement
provides an underlying evidence of transactions that attains fair presentation (Shah 2017). At
the time of obtaining the reasonable assurance the auditor accountable for upholding
professional skepticism during the audit. The auditor is responsible for communicating with
the directors concerning the matters, prearranged scope and timing of audit with significant
findings from audit. This comprises of identifying the significant deficiencies in the internal
control which the auditor is required to identify during the audit.
Auditor failure in detecting and reporting fraud in ABC Learning:
In context of the current case study of ABC learning an evidence of overstatement of
revenues were noticed. In context of the revenues it is held that the auditor of ABC has failed
to derive sufficient and appropriate audit evidence for numerous fee revenue (Kassem and
Higson 2016). This ultimately resulted in significant amount of material overstatement of the
ABC revenue. Furthermore, the items originating from the provision of childcare services
were erroneously categorized since the revenues resulted in overstatement of the ABC
revenues.
Auditing and Risk Assurance - Doc_3
AUDITING AND RISK ASSURANCE3
The audit report of ABC learning suggests that there was incorrect treatment of the
development revenues. The ASIC notes that the revenues transaction was not considered as
revenue derived through the provision of childcare services (Ma’Ayan and Carmeli 2016).
On classifying the normal revenues as the transaction the users of the monetary reports
enabled them to consider developer’s fees as the recurring revenues that originated from the
provision of child care services. Therefore, any kind of attempt made to value the childcare
centres were useless. Evidences from the audit report suggest that the revenues were not
disclosed in a manner which clearly indicated that were recurring and resulting from the
provision of child care services. The critical assessment suggested that payment formed the
part of scheme that was artificially designed to inflate the profits (Fazli et al. 2014). The
auditor was unsuccessful in obtaining the adequate audit evidences in respect of the accurate
bookkeeping treatment for numerous fees which resulted in significant amount of material
misstatement of the ABC proceeds.
Among the other auditing issues surrounded the ABC learning was that the auditor
has failed to get the adequate evidences to enable a sensible knowledgeable auditor to
determine that ABC was a going concern.
Requirements of Professional skepticism:
At the time of getting reasonable assurance the auditor is required to maintain the
professional skepticism all through the audit. Fundamentally, ISA 200 necessitates the use of
professional skepticism as the medium of improving the ability of the auditor to recognize the
risk of material misstatement and respond to the risk recognized (Soh and Martinov-Bennie
2015). Professional skepticism is closely associated with the essential ethical deliberations of
the auditor fairness and liberation. Professional skepticism is associated with the
implementation of professional judgement by the auditor. If an audit is conducted without
Auditing and Risk Assurance - Doc_4

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