Audit, Assurance, and Compliance: A Comprehensive Report

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Audit, Assurance, and Compliance
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Contents
Executive summary..........................................................................................................3
Introduction...................................................................................................................... 4
1....................................................................................................................................... 5
2....................................................................................................................................... 7
3....................................................................................................................................... 8
4..................................................................................................................................... 12
Conclusion..................................................................................................................... 14
References.....................................................................................................................15
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Executive summary
In this report of this summary in a short, it has been discussed the requirement of
auditing standards and also points out the main and inherent responsibilities and
obligations or liability of the person known as an auditor in the eye of their clients and
other members like thirds parties. The third parties are those who have not to directly
connect with the auditor or audit firm. In very firm the role and functions of the auditor
are important in the business affairs for the purpose of one thing is that to eliminate the
uncertainty and another business risk that may affect business. It also is discussed the
effective procedure of audit and their compliance in the business for maintaining a
proper balance. So it has been seen that this report is a brief summary of role and
application of the Accounting Standards (AS) for reducing the risk and litigation files by
following the AS, according to the rules and norms.
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Introduction
Every company needs to follow the accounting standards issued by issuing authority
issues in the interest of business smooth running in the market field. The whole report is
showing the role and the importance that is needed in the business for making a good
impact. The aim of making the report is to provide the importance of accounting
standards and analyze the help of this standard in order to overcome the situation of
litigation by the process following of proper implementation of accounting standards and
its strategies. In the report also made a discussion on the role of audit in responding the
situation s regarding the financially and also discussion make a brief comment on the
good and easy understanding of the purpose of auditing, that how auditor or audit firm
has responsibilities towards their clients and other parties. In this brief, how auditor
provides a framework for the proper maintaining of accounting standards in the
business for success over a long period of time.
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1
Accounting standards are the main and primary rules and norms stated in the
accounting standards which are issued by the authority in the favor of the company
whether it is listed on non-listed company or firm or any other type of organization in
Australian country. All the accounting standards are necessary and important in every
company while preparing their financial documents which is used the further process of
taking or using as a document for the purpose of borrowing. The financial accounting
reports of every company are based on the accounting standards and it is mandatory
for all the company to follow the norms of AS so that it is being issued for the general
public. Such documents are prepared by the auditor of the firm for the whole period i.e.
ends of the accounting year. All the statements regarding the company financial position
like balance sheet, profit and loss accounting, and other documents are transferred to
the company top management by the auditor because of the management can take
their action and decision regarding the business activities and also make budgets for
the further activities of business so that it help company to archived its desired
objectives or set of goals. The developing of accounting standards is in the hand of
audit and assurance standard board. both term accounting standard and auditing
standard are crucial component in the company while preparing report on financial
matter, because accounting standard is related to the accounts that how accounts are
prepared and audit standard provide a framework for starting the process of auditing of
the company .auditing of the organization are of two types i.e. statutory auditing and
regular auditing. Both are different from each other as statutory auditing is mandatory
for the firm, company in Australian once in the life of the company usually within 6
months from the date of establishment. Second, general auditing is that which start is at
the end of the financial or accounting year in order to present a financial statement for
the public and management of the organization. It is the duty of the auditor to analyze
the importance of auditing in business so that it provides or a make guideline for the
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staff including management for the flow of communication channel in an effective and
inefficiently way (William Jr, et. al., 2016).
In the light of the latest case the Barclays Bank v/s Grant Thornton, one party is a bank
and the second one is the company belongs to the same place. Both parties make an
agreement by their assigning of their permission. In this case the company i.e. Grant
Thornton makes an agreement by their mutual consent with the aim of requirement of
loan from the bank (Barclays Bank). The company makes a report of the company
financial statement afterward the Barclays bank sued against the auditors of the
company who make report including misconducting and error with known. In this case, it
is found that the auditor of the company also found them guilty of misconducting of audit
and hence it makes an auditor responsible regarding the error in the report. The
decision decided by the court that the auditor of the company failed in finding the fraud
made by the employee and hence for the entire, court made auditor liable for all these
things done within the company (Kothari, 2019).
In order to remove or eliminate such kind of thing from the organization, the company
must follow the norms of accounting and auditing standards as per requirement
because of this applicable in business it ensures the true and fair report regarding
organization financial documents. For instance accounting standard 5, as it provides the
guidelines for effective use of accounting standards in business and this will applies by
an auditor when he is engaged or conducting the audit for the better use and better
implication of AS. Hence it can be said that various types of auditing standard are
required in the business for conducting auditing process, so in the case of bank or
company which discussed above, it is concluded that company must comply all
accounting as well as auditing standards for the purpose of company and in the interest
of the auditor himself. The clean and clear report helps the management to take any
decisions regarding company welfare and it also helps in removing the chances of risk
and litigation. It is the duty and responsibility of an auditor to conduct audit true and fair
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and also finds any immaterial statement used in the accounts that misguide the
management or public (Kothari, 2019).
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2
In any country any company, an auditor is also being the liable person as same the
other person because of an auditor is the person who attested a seal of proof that the
report that he produced is true. There may be two chance of being offenses made by
the auditor, one is criminal and other is civil. Both are different as criminal offenses are
those offenses that harm the country as a whole while the civil offense is those who just
only harm a particular society. In second one offense (civil offenses), an auditor has a
responsibility to pay their damages and it is found that auditor has a responsibility both
towards clients and third parties (Knechel, and Salterio, 2016).
Define the legal liability of auditor towards clients and third parties?
The auditor is the main person because of the auditing responsibility is on the shoulder
of the auditor. So ultimately the all information presented in the financial reports is
reliable for all users whether internal or external. Code of conducts in relation to
professional legal states that auditor should always take care of the business in which
he starts work.
 It implies generally the following points:
 It must acquire all the skills and knowledge.
 It should have a duty to fulfill such skills with full care (Furnham, and Gunter, 2015).
 He should believe in the presented document but not necessary.
Legal liability towards third parties of auditors is:
 Known who the users of such documents are.
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 Limited person of those who sees beyond.
List of auditor responsibilities towards clients and thirds parties:
 He should produce an accurate and true and transparent report to the management well
as the public.
 Not be biased toward any company or clients.
 Always follow norms of auditing while conducting auditing process.
 Used all records and ask documents only within a working hour of business.
Ethical responsibilities:
Auditor has a right to show or express their opinion only those subjects which have he
possess completed knowledge. There some ethical responsibilities of an auditor which
serve as follows:
 Make sure compliance and established an inertial control procedure by testing the
record and reports of the organization.
 Start the process of verifying all the company assets and liabilities.
 Completed all the paperwork regarding the audit by documentation or testing.
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3
The audit is a wide term as it contains all the information of the company documents
which are prepared by the auditor by collecting all the material evidence and then after
evaluating which evidence is help in provides true and fair and transparent information.
For every organization, whether it is private or public organization audit is important as it
provides the guarantee of the company activity true because everyone believes the
audit report. In simple word, the audit can be defined as a document’s which provide the
guarantee of the business activities that are going on a good track. The process of an
audit begins after the accounting process ends. For conducting audit process, it makes
sure that all the needed documents, accounts and ledger and other related information
are in hand with the auditor for the purpose of presenting audit report and that
verification process started by investors (Christensen, et. al., 2016).
The process of audit planning within the organization takes an important place in the
area of auditing. It provides a method or way to an audit which must be followed by an
auditor in order to conduct audit while following accounting and audit standards and
norms when such procedure begins.
Those steps or stairs that assist auditor at the time of conducting the process of auditing
or climbing auditing process are followings:
Full and complete knowledge:
The very first step in the audit process is that before starting the process; an auditor
should possess all the information of their clients business and also obtained
information from third parties source. It is necessary because it assists an auditor to
bring true and transparent information of the business of their client report.
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Develop audit strategies:
For an auditor, it is compulsory that he should develop a sense of mind in developing
strategies so that the auditor conducts their work without facing any issue in their work
and the audit report present corrective information.
Prepared report:
For conduction audit process, an auditor needs all the documents related to the
company and necessary for making an audit of the company. So for this, the auditor
should arrange the entire material or documents required as per the rules and norms of
the Australian company.
As the audit conduct as per norms of accounting and auditing standards, it creates an
advantage to the audit. The advantages generated are as bellows:
1. Assist in removing unfair trade practice within the business.
2. Assists in finding and evaluating the issue created within an organization due to audit.
3. Auditors take advantage of minimizing low cost regarding the audit,
4. Create a healthy atmosphere.
5. Helps the company to work their business according to the rules so that no issues of the
problem arise regarding the audit.
Evaluating business risk:
The risk evaluating is the chain of finding all the risk connected with the company
projects (private or public). The reason behind evaluating business risk is to identifying
and then makes comparisons between the company two potential things i.e. potential
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loss and potential benefits. Risk has no shape and size so it is clear for the people who
analyze the business risk that the project should be made flexible so that it has the
capacity of accepting changes in minor areas. As this is done then such risk not makes
a negative impact on the overall company performance during the period. It can be seen
that every business, two risks are inherited (internal and external risk) (Chou, 2015).
Both internal and external risks are different from each other as the internal risk
associated within the company while the external risk is related outside the company.
Internal risk can be control by implementing or minimized as it depends upon the
business nature while the external risk is out of control because of dependence on
outside factors which are not easy for the business to control like political factors and
others (Bamber, and McMeeking, 2016).
Internal control:
Before proceeds to start the audit process, an auditor should access the internal audit
system of the company before he was there. He should see all the facts and material
part related to the company that might be useful for an auditor in the future. In the
following case, an auditor should use their power of accessing internal control of the
company reading the audit. The auditor uses the internal control system of audit as
followings:
 Demand to present the required documents or any other material facts.
 Call anyone from the management reading the audit process.
 Overviewing the system of auditing in an earlier time (Krishnan, et. al., 2016).
 Go any time (business working hour) for checking any theft of documents.
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