Auditing Risks and Financial Performance
Added on 2020-06-03
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AUDITING -INHERENT RISKS
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................1Question 1...............................................................................................................................1Question 2...............................................................................................................................3CONCLUSION................................................................................................................................5REFERENCES................................................................................................................................6
INTRODUCTIONPresent report is based on case study of SIMEC group. Current assignment will discusskey inherent risk factors that can impact on SIMEC group auditing. It will first define theobjective of auditing and then will describe inherent risk related with the same. Furthermore,assignment will explain impact of risk on evidence mix for planning of audit of SIMEC. MAIN BODYQuestion 1Inherent risk are issues factors that determine possibilities of occurring errors inorganization. Inherent risk is misstatement in financial statement that can spoil entire brandimage of company. The main objective of audit is to conduct risk analysis and find out issue inbusiness (Alles, Kogan and Vasarhelyi, 2018). By this way, authorities can make effectivestrategies and can improve the business performance. Agenda of conducting audit in theorganization is to measure effectiveness of assessment, identifying deficiency and verifyingongoing documents. If the firm is facing huge financial issues then it may make misstate in itsfinancial information in order to show the good profit. If this misstatement in financial recordswas found by the auditor then it affects brand image of company to a great extent (Chan andVasarhelyi, 2018). Auditor conducts audit in order to obtain reasonable assurance so that it canbe measured that whether financial testaments have been prepared with accuracy.One of the major risk factors that is associated with audit in SIMEC is impairment ofgoodwill. It can affect the overall brand image because audit helps auditor in analysing assetsand liabilities of firm. By this way, it can be determined that whether firm is able to generateincome in the future or not (Collins, 2017). It helps in measuring the availability of resources.Another inherent risk is related with accuracy in account balance of SIMEC financialstatements. There are many assets of the business. Some equipment which are considered asassets have accumulated depreciation due to which overall value of assets will get down. It isconsidered as control risk (Ridley-Duff and Bull, 2015). It is the type of risk which is relatedwith material mismanagement. Main reason of arisen this issue is due to in efficiency incontrolling over operational aspects of the business. Another inherent risk factor is result of previous audits. If in the previous audit there wasmisstatements discovered then there is high chances that same mistake occur in current reports as1
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