Importance of Audit for Big Corporate House in Detection of Fraud - Case Study on Sainsbury's

Sainsbury report
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ABSTRACT
The report below is offer adequate knowledge about the importance of investigation that
is required to process and analyse better information that provide long term success and
development. For this research rationale is to know more about relative prospect as with this
profitable outcome is attained that is relative to systematic collection of various data through
which profitable outcome is achieved by business with productive manner. In this both primary
as well as secondary source of method is used that assist to attain better knowledge in relative
manner.
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CONTENTS
CHAPTER 1: INTRODUCTION....................................................................................................4
Overview of the study..................................................................................................................4
Rationale......................................................................................................................................5
Importance of study.....................................................................................................................5
Research Aim ..............................................................................................................................6
Research objective and questions................................................................................................6
Structure of report........................................................................................................................6
CHAPTER 2: LITERATURE REVIEW.........................................................................................8
The concept of audit within corporate firms................................................................................8
The factors determining success of Sainsbury's audit committee to enhance effectiveness of
financial statement. ................................................................................................................11
The challenges of audit which Sainsbury’s face while improving its financial performance...14
CHAPTER 3: RESEARCH METHODOLOGY...........................................................................16
CHAPTER 4: RESULT AND DISCUSSION ..............................................................................23
Analysis of research results ......................................................................................................23
Interpretation and discussion of collected data .........................................................................23
CHAPTER 5: CONCLUSION AND RECOMMENDATION.....................................................38
Conclusion ................................................................................................................................38
Recommendation ......................................................................................................................40
REFERENCES..............................................................................................................................42
Appendix 1: ...................................................................................................................................45
Research Proposal .....................................................................................................................45
APPENDICES...............................................................................................................................54
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CHAPTER 1: INTRODUCTION
Overview of the study
Sainsbury's is a UK retailer which operates its business in several countries throughout
the world. It offered range of product categories such as grocery items, clothing, homeware and
outdoors etc (Tuck and McKenzie, 2014). As it operates at international level this make it very
essential for the Sainsbury to ensure that each and every activity whether its is financial and non-
financial activities must be executed within the organisation by considering all the legal as well
as ethical principles.
Audit is defined as the evaluation inspection of several book of accounting by an
authorised person named as auditor along with certain physical check of inventory in to ensure
that all the department of an organisation are following the documented system of recording the
transactions. This is mainly performed to ascertain the accuracy within the financial statement
provided by the organisation so that transparency and accuracy in financial documentation can
be assured (Brazel, 2018). Audit is considered to be a crucial activity for an organisation which
support in getting an insight in the procedure, policies, culture as well as management which
further help in verifying the each and every practice that are executed within the organisation in
right and ethical manner. This bring transparency within the financial performance of the
company and help in maintaining the trust among the shareholders. Addition to this it also helps
in determining and preventing the fraud, testing internal control, assuring the operational
efficiency, mitigating the risk and monitoring the practices performed within the organisation.
The audit process help a lot in determining if any kind of fraud practice are going within the
organisation in secret. In order to perform the audit practice effectively there is a audit committee
which is formed in each organisation in order to keep the process free from any kind of biasness
which can affect the outcome of such process (Comer, 2017). This committee is responsible for
identifying the several kind of risk that are prevailing within the organisation or expected to
occur due to likelihood of certain action.
Therefore, the auditing practices within an organisation is very crucial to determine the
accuracy of operation along with any fraudulent practice or financial risk that may occur in the
organisation. This support an organisation in staying free form any kind of issue that may affect
their performance or brand image in marketplace. IN order to further study about the role of
audit within an organisation this research is conducted which is based on Sainsbury.
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Rationale
The main purpose behind conducting this study is to investigate about the necessity of
audit practice within an organisation and manner in which it is helpful in improving the
performance of an organisation with this function. This study helps the investigator in creating
awareness about the role of auditing within a larger organisation and also make them aware
about its contribution toward detecting fraud that may affect the performance of organisation or
its brand image in front of stakeholders. Despite of this, the researcher chosen this area of study
so that with the medium of information gather it can be presented the actions to be consider by
an organisation for performing using auditing as a tool for enhancing the profitability and overall
performance of organisation by keeping frauds away from business practices. Addition to this
study also conducted to enhance the understanding about the importance of audit within
organisational functioning and its influence over the performance of brand and creating its
positive brand image in front of stakeholders.
Importance of study
The current research is conducted to represent the role of auditing within an organisation
and in improving the overall performance. This study holds huge significant as it helps in making
several multinational organisations about the necessity of auditing. This is so because it helps in
an organisation to operates its functions efficiently and at the same time in ethical manner. As
auditing practice support in providing an idea about the credibility of financial statement which
represent the true picture of organisational performance in front of stakeholders. Additionally,
also support in improving the internal control of organisation (Davies, 2016). So, this study is
significant as it help an organisation in identifying the risk which may affect its performance by
providing relevant information regarding the fraudulent activities to top management so that
appropriate measures can be undertaken on timely manner.
Sainsbury is a multinational organisation which operates at several different geographical
location and for due to this it has to perform range of financial transactions where it become
quite difficult to have a insight over each and every transactions. Hence audit committee help a
lot in keeping insight over the operations performed in organisation to ensure that each and every
action are performed in ethical manner and there not remain any space for unethical or fraud
practices. This this study will support Sainsbury in determining the ways in which it must adopt
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and manage with the auditing practices to maintain efficiency in operations by detecting fraud
and hence put emphases toward improving performance(Zhang and et. al., 2016).
Research Aim
“To understand the importance of audit for big corporate house in detection of fraud” –
Case Study on Sainsbury's
Research objective and questions
Research Objective
 To study the concept of audit within corporate firms.
 To identify the factors determining success of Sainsbury's audit committee to enhance
effectiveness of financial statement.
 To investigate the challenges of audit which Sainsbury’s face while improving its
financial performance.
Research Question
 What is the concept of audit within corporate firms?
 What are the factors determining success of Sainsbury's audit committee to enhance
effectiveness of financial statement?
 What are the challenges of audit which Sainsbury’s face while improving its financial
performance?
Structure of report
The structure of a study support in presenting the blue print of the set of activities that are
involved within a report along with the pattern of execution it follows. This support in presenting
giving an overview about the sections present within the report so that reader get an idea about
the sections involve within the report and what is discussed under each section that help in
developing better understanding. In context of current study for determining the importance of
audit for big corporate houses, the chapters structure is followed in order to represent the data in
more systematic manner. the chapters involve within this study are mentioned below:
CHAPTER 1: INTRODUCTION – In current report Introduction is the first chapter of
this investigation that present the overview and background of the research area to provide an
idea about what is the main concept or direction of study. additionally, it also represents the
reason behind conducting study along with the aim, objectives and research questions that set the
criteria for gathering information.
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CHAPTER 2: LITERATURE REVIEW – The second chapter of this investigation is
literature review in which the data from the existing available information is gathered from
several different sources that is previously investigated by another person. This support on
determining the nature of study area by gathering view point of several scholars and then
evaluate it critically to extract best information that cover all the major aspect and help in
creating further direction for primary study.
CHAPTER 3: RESEARCH METHODOLOGY – In this section of report the
investigator will present a detailed information regarding the set of tools, techniques, approaches
and methods that they will use in order to conduct this study in term of gathering, analysing and
interpreting the information to reach at final conclusion. This section is very crucial as it help the
investigator in providing a view regarding the reliability and validity of the investigation because
the method used provide an idea regarding the effectiveness of study.
CHAPTER 4: RESULT AND DISCUSSION – This section involves the process of
analysing the data gather with the help of primary and secondary investigation and interpreted in
order to present adequate findings and discuss them in relation with the research question. This
step is very crucial as it help in determining that whether the aim of study get achieved or not
and help in drawing the conclusion of study`.
CHAPTER 5: CONCLUSION AND RECOMMENDATION – This is the last chapter
of investigation which represent the actual conclusion that has been extracted out of the analysis
performed for the primary and secondary y data gathered. Addition to this it also involve certain
recommendations on the basis of finding over the issues which is being focused within an
investigation.
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CHAPTER 2: LITERATURE REVIEW
Literature review is defined as the process of reviewing number of secondary sources in
order to gather the information regarding a particular area of study from the perspective of
different view point of scholars (Flick, 2015). This support in developing an understanding
regarding the nature of study so that appropriate points can be explained which can be used to
proceed further. In other words it can be said that literature Review is the review of scholarly
sources that gives an overview of specific topic. It includes the process of systematic review of
different articles, journals, books and other sources related to the different themes of study area.
It administers foundation of knowledge on the topic.
The concept of audit within corporate firms
According to information presented by Bansal. G., 2017, audit is consider as an
independent as well as systematic examination of book of accounting, statutory records, voucher
and documentation of a company. The auditing is mainly performed within an organisation in
order to get an idea about how far the financial statement represent the fair view as well as true
picture of organisation’s performance. This support in ensuring that the book of accounting are
properly maintained as per the accounting standards and principles, so that fair picture of
company can be represented which maintain trustworthiness and transparency among its
stakeholders. Financial audit is consider to be most effective as it support in highlighting the area
of success or concern within the business and support the management team to determine the
greater pathway for achieving the success. The auditing is mainly performed by a authorised
person who is specialised in the area of auditing and usually known as auditor. In this process of
auditing the auditor mainly obtain the evidences and formulate he opinion as per his judgement
which is then communicated with the help of report presented by them (Halbouni, Obeid and
Garbou, 2016). The auditor mainly work for providing the third party assurance on every subject
matter and by presenting true picture of a company also support them in taking up better
decision. It support in several areas such as,
 Risk of misstatement: Sometimes statements in book of accounting may be missed or
placed wrongly which may result intro wrong representation of information. But auditor
help in assessing this issue from the financial report. This mistake is mainly happen as the
company itself is not able to create a reliable financial report as it is not easy to allocate
the resources to understand which of its segment is more profitable. But the auditor help
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