Impact of External Auditing on Financial Risks in Supermarket Industry

RESEARCH PROPOSAL

Table of Contents
INTRODUCTION...........................................................................................................................1
Literature review....................................................................................................................3
RESEARCH METHODOLOGY.....................................................................................................6
Appropriate plan and procedure to determines research specification ..................................8
ANALYSIS......................................................................................................................................1
Resources that require for conducting study..........................................................................1
Relationship between research resources and questions .......................................................1
Investigation with questionnaire.............................................................................................2
Collection of data...................................................................................................................2
CONCLUSION AND RECOMMENDATIONS............................................................................3
REFERENCES................................................................................................................................6

INTRODUCTION
Financial risk assesses that it is the risk that is being faced by firm as they are
not unable to meet its financial obligations. Such type of risk is one of the main concern
in all organizations. Therefore, it is essential for management of firm to identify its
different types of risk and thus undertake effective measures in regard to overcome
them and enhance the performance of firm in market (Wu, Hsu and Haslam, 2016).
External auditing helps in providing a fair and transparent view of the firm to users of
financial statements. Thus, it gives external stakeholders an assurance that potential
risks could threaten their firm. However, sometimes external stakeholders are unable to
detect such risks within the firm and inform investors regarding the financial risks faced
by firm so that they could make their mind for investing within firm. It is essential for
business to provide freedom to external auditors so that they could make fair and
reliable decision through reviewing the past financial performance of firm and then
provide the statements for external users so that they could use the same and thus
invest within business (Dolan, 2015). However, if auditors are not able to provide fair
views about the financial risks of firm then their value is being diminished.
There are different measures which have been adopted by the audit committees
in regard to make sure that high quality audits are being performed so that they could
easily detect the risks and overcome the issues in order to improve the financial
performance (Sarpong, 2014). Supermarket industry is required to adopt several
measures that results in overcoming the financial risk. Thus, business need to identify
and understand certain factors so that external auditors are required to evaluate the
different types of financial risk being identified and thus avoid them so that more number
of investors could be attracted towards firm (Hay, 2013). Therefore, external auditing is
considered as crucial element that helps in identifying the risks faced by firm. Through
evaluating the risk it helps external auditors to provide crucial information to stakeholder
and outside users in regard to identify the financial risks.
External auditor plays a significant role in regard to provide fair view of the
company's financial accounts to users so that they could identify the financial risks
attached with firm. Thus, it helps supermarket businesses to overcome such risk and
create high brand image in market and raise the sales and profitability of firm (Stewart,
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Kent and Routledge, 2015). It is essential for firm to undertake effective measures so
through forming audit committees and thus helps in detecting the risks within firm which
results in evaluating the outcomes and measure the performance of firm in market.
However, if auditors does not carry out their responsibilities in an ethical manner than it
impacts upon the expectations of stakeholders and therefore, quality audit needs to be
carried out so that performance of firm could be measured in an effective way Cohn,
Engelmann and Maréchal, 2015).
However, in regard to overcome the financial risk it is essential for supermarket
to adopt effective measures and thus identify the type of risk being faced by firm.
External auditors are required to identify the financial risk faced by organization and
therefore, it helps enterprise to carry out their operations so that strategic action could
be taken that results in attaining desired goals. For instance, if business is facing
serious problems regarding financial risk than it is essential for them to carry out
external audit and thus overcome the same by adopting effective measures that helps in
improving the performance of firm (Wu, Hsu and Haslam, 2016). Through recognizing
such risk which are unavoidable and therefore, it is essential for enterprise to carry out
effective environmental audit so that performance of firm could be evaluated in terms of
enhancing market share.
Aim and objectives
“Does external auditing of organizations in the supermarket industry have an impact of
the financial risks?”
 To determine the various types of financial risk generically occurs in the
supermarket industry. How does Tesco compare to the average?
 To explore and identify the correlation between non audit fees, length of tenure
and stakeholder expectations on the level of financial risk in the supermarket
industry in general and specifically Tesco.
 To evaluate if audit quality is impacted by financial risks of does financial risk
impact audit quality. To investigate the financial impact of external auditing on corporate performance.
Research question
 What are the main financial risk factors that affect the supermarket industry?
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 What impact does stakeholders expectations on audit quality?
 How audit quality is impacted by financial risk?
 How is corporate performance measured in the supermarket industry?
Literature review
Recent history of audit issues in supermarket industry
As per the view of Kamal, Brown and Sundin, (2015), in today's time supermarket
are facing various issues which creates problem to dealing with aims and objectives.
There are major grocery market facing problems to invest their money in new
operations and functions. In this aspect, retailer employ special teams which examines
old emails and trails to deal with disputes with quality, quantity and timing to delivery.
Tesco is the largest supermarket retailer which determines effective impact on the
business performances and outcomes (Kamal, Brown and Sundin, 2015). Tesco faces
high scandals in 2014 which create problem to deal with various situation. Their auditor,
PwC make high premier league of global financial services within the firm in auditing
and advising vast tranches in public and private sector of UK market. However, Davey
and Richards, (2013) stated that employees of the company regularly seconded make
their outcomes and performances with Ed Balls and Chuka Umunna. In order to
understand that what wrong thing goes in Tesco, it is essential to simply walk into
different stores to analysis their performances (Davey and Richards, 2013). It will make
profitability and positive outcomes within the enterprise. Manufacturers also frames with
prime position that appears to book early for achieve more profits and revenue.
On the other hand, Elson, O'Callaghan and Walker, (2015) said that technical is
the main sound which frames to ascertain the profitability at workplace. In this aspect,
audit is considering that is key part of the scaffolding of shareholders capitalism. It is the
primary way in which investors and business partners regulate true state that assist to
dealing with trust and audited accounts (Elson, O'Callaghan and Walker, 2015). In
addition to this, PwC has given three decades which frames for 10 directors on Tesco
board. For conducting effective analysis, PwS paid £10.4m by Tesco for its auditing
services within the market. It is very costly for lucrative relationship.
How has financial risk occurred in the industry
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