Auditing and Assurance Report Analysis

This assignment requires students to analyze an audit report provided, focusing on the application of proper auditing standards. The analysis should cover key areas like the detection and rectification of errors, impact assessment of identified issues, and the overall effectiveness of the audit in ensuring accurate financial reporting and company performance evaluation.

Auditing

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
A-1...............................................................................................................................................1
A-2...............................................................................................................................................1
A-3...............................................................................................................................................1
A-4 (a).........................................................................................................................................2
A-4 (b).........................................................................................................................................2
PART B............................................................................................................................................2
PART C............................................................................................................................................4
PART D...........................................................................................................................................5
Conclusion.......................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The practice of auditing commenced on that day when individual assumed to be
stewardship over another’s property. In organisation audit is done to do verification of result in
the state affairs of company (Arens, Elder, and Mark, 2012). The auditors are having
responsibility to meet with society expectation. In this assignment, different case study on
auditing has been explained with their solutions.
PART A
A-1
Corporate managers are responsible for marketing pharmaceutical products which
inevitable encounter the challenges of ethical issues. One of the reason is that ethics has special
relevance to pharmaceutical industry which is related with intrinsic nature of drug product. As
there are different types of hazardous wastage which could be managed by organisation. The
resources which are using by company should be used in limited manner and these all should be
included in decision which are taken by organisation.
A-2
An action which will take by auditor is that, first of all they will see that material error
turnover should not be more than specified rate. If it has been found that there is a greater
number of percentage of material error, then it is responsibility of manager to inform about
hedge transaction (William Glover, and Prawitt, 2016). Moreover, they have to monitor all
hedge transaction and identify that what errors are there where it increasing the errors. An
auditor has to report all transaction which are doing by company to treasure in order to reduce
the risk which is related with transaction. Through this they can also identify the weaknesses to
control those areas where monitoring is not done properly.
A-3
While conducting audit on Billing & Associate, it is responsibility of auditor to provide
sufficient evidence. But at the time of conducting audit, auditor did not perform their
responsibilities in appropriate manner because there is not a proper evidence. In regard to this,
client management asked to organisation to review engagement letter that audit has not been
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done properly due to lack of documentation. So, they are having right to ask for the sufficient
document otherwise penalty or fine will be imposed.
A-4 (a)
Different type of threats is there which has been faced by several companies. In first case,
auditor of Hail Pty Ltd finalised the financial statement which has been prepared by client.
However, client is admitting about that he is having limited knowledge in preparing the records.
In this auditor is having responsibility while finalising the account he is responsible to check it
again. Hence, there is independence threat to organisation (Yang, and Jia, 2013).
In second case, auditor of Travel Time Ltd is providing suggestion for improving their
quality of services. To gain consumer confidence, organisation need to set the price of goods and
services at reasonable price. Along with this they have to provide all necessary document to audit
to see that how much expenses are done by organisation (Furnham, and Gunter, 2015)).
In third case, in Civil Construction Ltd, auditor cannot do auditing because his wife is
having substantial shareholding in that company.
In forth case, there is a threat of independence because company is not paying fee to
auditor and due to this they are not issuing report also.
A-4 (b)
In first scenario, company will suffer from loss amount because auditor did not check the
final accounts which has been prepared by client. As client had clearly stated that he is not
having sufficient knowledge about all this. So, ultimately it become burden on organisation to
give penalty or fine which is imposed by government.
Besides this in fourth case, mutual consent can be done by organisation with auditor
because it depends upon the company profit whether it will increase or not in upcoming year
(Wang, Li, and Li, 2012).
PART B
A). Material misstatement could come form various sources, covering external factors,like
conditions under firm's industry and environment, and firm particular factors. Under this case,
CPPL is the small chain of convenience stores which renders products grocery products. In this
era, most of the supermarket chain capturing the market drastically with the help of rendering
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products at a cheaper rate. Henceforth, they are stimulating anti- competitive trade in order to
eliminate small traders like- CPPL (Knechel, and Salterio, 2016).
A). Business risk B). How this might lead to risk of material
misstatement
Anti-competitive risks: CPPL's rivals offering
products at lower rate. Which represents an
anti-competitive risks.
In an integrated audit, auditor will check
whether this affect the company brutely or not.
If yes then, this may lead to material
misstatement.
Product obsolescence risks: CPPL company
started to expend products in order to provide
products timely. But, this did not work
between CPPL's customers and stock
obsolescence is high.
This risk arise due to material misstatement
because of obsolescence of the product.
Supplier payment risks: Under this, supplier
of CPPL reduce payment terms from 30 to 14
days which would probably creates problems
for the firm for payment to them.
If the supplier reduce their credit line then in
that case, this would lead to risks of material
statement.
Predatory pricing risks: Under this,
predatory pricing method is used by the CPPL
rivals for fixing low price in order to eliminate
the competition.
The predatory pricing risk creates risks of
material misstatement.
Lease risk: The CPPL company uses the
premises in which the lesser demanding to
50% more in rent.
This risk would lead to material misstatement.
(a) Deficiency Explanation (b) Control (c) Test of control
Due to inefficient
planning of stock,
Inefficient planning of
stock would create a
TUPL needs to make
an effective planning
The auditor would
check whether
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company is
performing their
operations
ineffectively.
inventory risk for the
firm.
so that the company
could optimum utilise
the resources.
management of the
company has made
effective planning.
Inappropriate use of
resources.
Business risk arises by
the firm in order to
have an effective
planning.
The company needs to
implement their
resources effectively.
The auditor of the
company needs to
make their resources
effectively so that
these deficiencies can
be removed.
PART C
(a)Deficiencies Explanation (b) Control
Timely delivery of
couriers to customers
There is a delay in
courier a these are
creating due to
receipt of goods.
Customers are doing
regular complain to
organisation in
delivering courier in
time period.
This deficiency can be
control by using
proper transportation
services. Along with
this they can also
deliver these goods
through online which
save their time and
cost.
Sales order It is due to delay
between sales orders
and receipt of goods.
The department is not
dispatching
information to further
for making order of
good. So, this is
Proper
communication
should be there and
whenever customers
are making order, then
it should properly
communicate to sales
department.
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creating problem for
customers also in
timely delivery of
goods.
Sales leger clerk Sales managers and
directors are not over
looking to the books
of account on regular
basis. Along with this
there is also no higher
authority who
command on them.
This can be control by
regular monitoring on
the books and sales
which are made by
customers.
(c) Test of control
Auditor has to see that whatever deficiency which has been found by them has properly
controlled or not by using different tools and techniques. Along with this they have to cross
check the information which has been provided by departments. Further, if they identified that
there is not proper use of techniques or methods, then it is their responsibility to report to higher
authority about these problems.
PART D
Event Description Impact on materiality Explanation
1 Finance manager
resigned and no quick
Decrease Finance manger takes
all the responsibilities
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replacement found of the companies
finance and in his
absence it will be
difficult to take
decision regarding the
finance. Even when a
fresh candidate will be
employed he will take
time to understand the
working of given
institution hence this
will decrease the
materiality of referred
enterprise.
2 HR manger resigned Decrease Finance manger takes
all the responsibilities
of the companies
finance and in his
absence it will be
difficult to take
decision regarding the
finance. Even when a
fresh candidate will be
employed he will take
time to understand the
working of given
institution hence this
will decrease the
materiality of referred
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enterprise.
3 An error was detected. Increase Under this, the
management of the
cited company
detected.
4 Initially, the purchase
document was not
found. But later on,
this has been rectified.
No impact The purchase
document initially not
recoded. But later on,
this is been removed
by the company.
Conclusion
From the above mentioned report, the proper auditing standard have been
followed so that the company can adhere the proper auditing standard. Auditing helps in
evaluating the performance of the company and also it is assured that weather the financial
statements of the company are maintain properly or not.
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REFERENCES
Books and Journals:
Arens, A.A., Elder, R.J. and Mark, B., 2012. Auditing and assurance services: an integrated
approach. Boston: Prentice Hall.
William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and assurance services: A systematic
approach. McGraw-Hill Education.
Yang, K. and Jia, X., 2013. An efficient and secure dynamic auditing protocol for data storage in
cloud computing. IEEE transactions on parallel and distributed systems. 24(9).
pp.1717-1726.
Wang, B., Li, B. and Li, H., 2012, June. Oruta: Privacy-preserving public auditing for shared
data in the cloud. In Cloud Computing (CLOUD), 2012 IEEE 5th International
Conference on (pp. 295-302). IEEE.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Furnham, A. and Gunter, B., 2015. Corporate Assessment (Routledge Revivals): Auditing a
Company's Personality. Routledge.
Online
WHAT IS AUDITING?. 2017.[Online] Available through:
<http://asq.org/learn-about-quality/auditing/> .[Accessed on 21st September 2017].
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