Audit, Assurance and Compliance: A Comprehensive Report

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Audit, Assurance and Compliance
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Contents
Executive summary:.........................................................................................................2
Introduction:..................................................................................................................... 3
Lo1................................................................................................................................... 4
Lo2................................................................................................................................... 6
Lo3................................................................................................................................... 9
Lo4................................................................................................................................. 12
Conclusion:.................................................................................................................... 14
References:....................................................................................................................15
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Executive summary:
In this summary reporting requirements of the auditing standards are discussed along
with the main and essential responsibility and obligations of the auditors towards their
client and third parties are also discussed in the summary. The role of the auditing
standards is highly relevant in eliminating the business risk is also discussed in this
summary. In this summary or report the effectiveness of the auditing procedures and
their compliance in order to balance the operations of the business is critically
discussed. Hence this report mainly focuses on the major roles, components, and
application of the accounting standard in order to reduce the risk and litigations in an
efficient manner by complying with the applicable accounting standards.
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Introduction:
Accounting standards are highly important which are to abide by the company so that
business can survive in a smooth manner. This report mainly focuses on the importance
and role of the accounting standards that are applicable to any business or the
organization. The purpose of this report is to critically analyze the legal case involving in
the litigation and to overcome these problems proper implementation of the audit
strategies are established within the company. The importance of the auditor in
responding to financial problems also discussed in this report. proper understanding of
the reporting requirements along with the auditor's responsibility to their clients and the
third party also consists of this report. How can the auditor and the applicable
accounting standard balance and maintain the operations of the business and their
reliability and integrity for the long term success in a sustainable manner is discussed in
this report?
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Lo1
The accounting standards refer to the basic information that should be integrated into a
financial report that should be applied to all the organization, entity, or company in order
to prepare financial reports (Briem, and Wald, 2018). All the entities such as disclosing
entity, unlisted organization, and small proprietary companies in Australia should follow
the reporting requirement which is advisable by the accounting standard boards. The
accounting reporting system consists of ya early and a half-yearly basis. All the
prepared financial statements must be reported to the top level management or to the
board in order to make effective and relevant decision-making process within the
organization so that the organization can achieve its desired objectives in an efficient
manner. Auditing standards are used by the companies so that they can prepare the
financial reports and the auditing and assurance standard board is responsible for
developing the auditing standards. Applicability of these auditing standards and their
respective guidelines sets the benchmarks or standards in order effective and proper
professional conduct by the members (Martínez‐Ferrero, et. al., 2015). Accounting and
auditing standards both go hand in hand and both the elements equally play a vital role
within the organization and contribute to multi-process. The auditor within the entity
focuses on whether the financial reporting framework applies to the preparation on the
financial report is acceptable or not. The auditor needs to analyze the importance of the
reporting framework so that effective communication channel can be implemented
among the management of the organization.
The important elements used in the reporting framework is about the auditing standards
that are must in order to audit the financial statements and also ensure that the
companies prepare their financial statements in accordance with the company law and
applicable accounting and auditing standards.
In the context of the recent case of the Barclays Bank vs Grant Thornton, the company
entered into the agreement with the bank for the loan requirement, thereafter Barclays
claim against the defendant auditors because of their suspected negligence or
carelessness in the production within the entity. The auditors also held responsible for
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their carelessness for providing non-statuary reports to the third parties. In this report,
the court held that auditors fail in finding out the fraud of two employees within the
company, and for this auditor held liable.
For such kind of instances, the company should follow the applicable auditing standards
to ensure the best practices performed by the auditors. For example by proper
implementation of the auditing standard no. 5 it provides the direction that applies when
the auditor is engaged to perform the audit management assessments for the effective
internal control and proper financial reporting. So it can be said that reporting
requirements of different types of auditing standards are highly important in respect of
every company or organization. Therefore in the above case, proper auditing standards
must be complied with in order to achieve the sustainable long term success of the
entity. So reporting requirement contributes to effective decision making and also
eliminates the chances of risk and future litigation. Hence every company should follow
the auditing standards so that malpractices and unwanted illegal practices can be
determined and reduced in the finest way. Auditing standards carried out the measures
that the auditor can undertake to take action in order to evaluate the risk of material
misstatement (Dewantara, 2016). Auditor also needs to gather various types of auditor
evidence that is should be in the compliance of the auditing standards. From the above
discussion, it can be said that reporting requirements of the auditing report played a
crucial role within the organization for smooth survival.
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Lo2
Auditors are liable for both civil and criminal offenses. Criminal law is the offense which
shows the relationship between the companies and the state. Whereas, civil law deals
with the disputes between the individual and the entity. The auditor is responsible for
paying damages to civil cases. Auditors having various types of responsibility towards
their clients and the third party. AThe auditor should produce the true and correct
information which is beneficial for their clients and the third party (Briem, and Wald,
2018). Concern about the legal responsibility of auditors continues to enhance on a
daily basis. Auditors are highly important individuals because in due course they are
responsible for increasing the reliability of the financial statements for all types of
external users. Lack of independent and competent auditor there will be chances of the
high fraud and material practices that can produce adverse impact over the
organization. Therefore professional conduct should be followed by the auditor in order
to reduce the unhealthy practices and fraud within the entity. So in order to effective
auditing process auditor must go for the business with due care such due care and
responsibilities are as follows:
 The auditor should possess mandatory and obligatory knowledge and skill.
 Auditors should be a person of integrity, dignity, and responsibility.
 An auditor can be held liable or responsible for carelessness in respect of their clients
and third parties.
The main responsibility of the auditor is to prepare or plan the audit process with the
motive of ensuring that the financial statements are free from encumbrance and
material misstatement. The professional responsibility of the auditor is complying with
the standards by his fellow practitioner, an in independent auditor must be a practicing
charted accountant. The auditor must perform their activities by following applicable
accounting and auditing standards and thus he mainly focuses on detecting the
misstatements consequential from the illegal acts. Auditors should also follow the
ethical code of conduct while performing the audit and audit-related services.
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AThe auditor should do not make fraud in respect of their clients and the third parties
auditor should work by protecting and safeguarding the interest of their clients and third
parties. When the clients or third parties asked for the work from the auditors, then the
auditor should present them a true and fair scenario instead of making false
representation.
Auditors should implement the following activities in order to conduct best practices:
1. Auditors need to obtain such relevant information and documents from their clients and
third parties so that an effective process of the audit can be conducted or prepared.
2. Auditors need to determine the best method and procedures for carrying out the audit-
related activities.
3. Auditors should properly investigate all the assets of the organization so that proper
measurement and evaluation can be carried out and the asset valuation can be
generated or attained accurately.
4. And the third parties are also obliged to produce relevant and important documents and
evidence that are highly important for carrying out the auditing services.
Hence from the above discussion, it can be concluded that auditors having the
responsibility in respect of their clients and the third parties. While considering the
ethical responsibility of the auditor in regards to their client. The auditor should be the
person of integrity, humanity, honesty, and dignity. He should be honest and
straightforward in all his professional conduct and activities. The auditor should not bias
and partial while dealing with his different clients, which means auditors should treat all
clients in an equal manner and in a professional capacity. The auditor must secure and
make confidential information about their clients and third parties while dealing with the
third party and clients. He should not disclose the confidential information of his clients
to other clients and parties. Using confidential information it results in a professional
relationship and in the favor of the third parties (Martínez‐Ferrero, et. al 2015).
The professional auditor should also consider that the auditor should comply with the
applicable rules, standards, laws, and regulations in order to avoid the actions or
activities that may harm the reputation of the activities and work performed by the
auditors.
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Therefore auditor should abide by the applicable laws and standards so that he can
protect and safeguard the interest of the third party and clients by taking reasonable
responsibilities.
So by the above discussion responsibilities of the auditors in respect of the clients and
third parties are discussed.
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Lo3
The term audit is referred to as the important part of the business of the company which
marks a seal of proof that the company business activities are going as per the norms of
the audit. Audit planning procedure starts after the all accounts of the company made
and available for presenting in front of the auditor for producing such documents after
verification by the auditor in the front of investors (Griffiths, 2016).
Audit planning procedure provides the guidelines to the auditor which should follow
such audit norms when conducting the procedure of audit. It is an important area in the
field of auditing. The audit planning process includes three steps that help the auditor at
the time of conducting the auditing process. Such three steps are below:
 Complete understanding and full knowledge as per requirement about the
business of the client: First of the for the start of process of audit, it should be must
compulsory for the person who audit of the company that he should behave a complete
knowledge about the business of their client in order to make fair and transparent
report.
 Development of strategies related to audit: Another step in audit planning is that
auditor develops some strategies or make a plan for the purpose of conducting an audit
process.
 Preparation of audit programed: Now the auditor make arrangement for start the
process of audit which should be required the entire material document for making the
audit clear and true report. For auditing processes important documents like company
balance sheet profit loss account and other relevant accounts are required for the
purpose of conducting an audit as per norms of audit in Australia (Furnham, and
Gunter, 2015).
Some of the benefits are generated from the audit plan which discusses below:
 Help the auditor to maintain the cost related to the audit at an optimum level.
 Help in eliminating misunderstanding.
 helps in identifying the problems in business.
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 Assist the business to run its business work smoothly
 Assist the company to run its business activities as per norms so in future no issue
creates regarding an audit.
"Evaluating of business risk is the process of identifying the risk of loss associated with
project or venture, afterward the analyst compares the potential loss with the potential
benefit of the company entire project.T he risks in the business come in any shape and
size, this means the plans should be made that it can accept all the risk of business and
have a capability to sort them quickly. So that it does not harm the business
performance and others. In every business, there are two types of risk associated viz.
internal and external risk.
The internal risk is associated or related within the company that directly harm the
business while the external risk is those risk which not an easy to control like political
change, technical change or any other factors in the market.
 The internal risk may be controllable.
 Risk regarding internal audit assessed especially for the large companies whose
business work is trading.
 External risk begins by categorizing the company potential risks. In such a case, some
of the internal risks are nominal while some are an ordinal risk. Nominal risk is more
preferable for the company in order to easily understandable and easy to compare.
 External risk assessment depends on data which are heavy for in controlling. Therefore
it cannot be easy to adjust according to the needs of the company plans (Knechel, and
Salterio, 2016).
Audit risk means the risk associated with the audit that the auditor presents an
inappropriate audit opinion or result when the company financial statement like profit
loss account balance sheet and other documents are changes or material misstated.
The management of the company is responsible in order to make proper internal control
over the business activities. Assessment of the internal control is a part of the auditing
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requirement and it helps the nosiness in order to evaluate and identify the risk factors
that are associated with the company (Martínez‐Ferrero, et. al 2015).
In order to assess the company internal control system of audit, the auditor must look at
the material matter which might affect the company and its report. Following are the
points in which he makes the process of assessing:
First, the auditor should assess all documents which are an essential part of producing
their report. Then he should collect all the important part or evaluate all the material fact
which directly affects the report. After that, he should use the norms for staring the
process of auditing as per the rules of auditing and then make its report clear, true,
transparent and free from mistake or errors (Chou, 2015).
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