Case Studies on Auditing Theory and Practice in the Companies

Running Head: Auditing Theory and Practice 0
Auditing Theory and
Practice

Auditing Theory and Practice 1
Executive Summary
Auditing is that part of the process where books of figures are being checked weather being in
the accordance with the rules and standards set by the authorized people. The current report
depicts the three case studies based of different issues related to the practical working issues in
the companies. Case one elaborates the inherent risk in the organisation with the second option
of materiality in the firm. Case two explains the pros and cons of the External or Debtor
Confirmations in the organisation. The next available options with the auditors, if not satisfied
with the evidences available while examining the reports is also included. The last case study
also explains options available to the auditor if not complied with the laws and ethics by the
client or the company.

Auditing Theory and Practice 2
Contents
Introduction......................................................................................................................................2
Caste Study 1: Inherent Risks..........................................................................................................3
Materiality....................................................................................................................................4
Caste Study 2: External Confirmations...........................................................................................5
Strengths of External Confirmations...........................................................................................6
Weakness of External Confirmations..........................................................................................6
Is an only debtor confirmation the option for audit evidence?....................................................7
Caste Study 3: Ethical Issues faced by Meg Lithgow.....................................................................8
Audit Report Options...................................................................................................................9
Megs’ action................................................................................................................................9
Recommendation to Meg.......................................................................................................10
Conclusion.....................................................................................................................................11
Bibliography..................................................................................................................................12

Auditing Theory and Practice 3
Introduction
The accounting of the firm is just the basic part of dealing with the day to day
transactions of the company. The concept of auditing is to check weather the accounting is done
with compliance of the principles or not. The auditing of the enterprise improves the risk
associated, in daily routine operations (Knechel & Salterio, 2016). The risks are being there on
identified, given importance, studied, and related measures are taken. The auditing and
accounting are very apart from each other. The accounting is the process or the way of preparing
the books of accounts, maintain the records, but on contra the auditing is just the check to meet
the records with the code of ethics and fundamental principles (Hay, Stewart, & Botica
Redmayne, 2017).
This report will give the knowledge about the auditing and inherent risks associated with
the auditor, entity and industry as a whole. The concept of the materiality is shown in relation to
primary assessment and the factors affecting materiality for the organisation. External
Confirmation is another method of auditing in the firm or the organisation. Report includes the
strengths and weakness of External Confirmations, continuing with the other available options
other than External Confirmation in the auditing process of the organisation. The ethical issues
with other options and relevant options are also included in the report.
Caste Study 1: Inherent Risks
An audit risk in the enterprise is the one which is pointed out by the auditor in terms of
financial statements. Examples can be cited are: issuing the unqualified report, where the