Audit and Assurance Report: Audit and Assurance in Business Context

This report delves into the core principles of audit and assurance, examining audit credibility, auditor independence, and the concept of objectivity. It explores the procedures auditors employ when encountering uncorrected material misstatements and identifies going concern indicators, including market competition, cash flow issues, and loss of key employees. The report outlines going concern procedures and discusses audit risk and its components, alongside audit strategies. It also differentiates between interim and final audits, detailing the procedures undertaken during an interim audit. The report emphasizes the importance of ethical considerations and professional judgment in the auditing process, providing a comprehensive overview of audit practices within a business context. It provides procedures for audit and assurance for financial statements.

Audit
And
Assurance
1

Table of Contents
INTRODUCTION................................................................................................................................3
QUESTION 1.......................................................................................................................................3
A. Audit credibility & steps which are related for accounting profession:................................3
B. The situations for independence auditor:...............................................................................4
C. Concept for objectivity:.........................................................................................................4
QUESTION 2.......................................................................................................................................6
(a) The procedure by auditor for uncorrected material misstatement.........................................6
(b) Going concern Indicators......................................................................................................6
(c) Going Concern procedure.....................................................................................................7
QUESTION 3.......................................................................................................................................9
(1) Audit risk and their components...........................................................................................9
(b) Identify audit risk and auditor response................................................................................9
C. The audit strategy which lay outs the audit scope, timetable, course, assists for designing
audit plans:................................................................................................................................10
D. Difference for interim audit & final audit:...........................................................................10
E. Procedures which carries during interim audit:....................................................................10
CONCLUSION..................................................................................................................................11
REFERENCES...................................................................................................................................12
2

INTRODUCTION
Audit is about systematic review & assessment for information. It is about view the
information for the company's financials statements which helps for improving quality for the
information for reduce chance for problems which are occurring for the indirect information. It is
the types for assurance services for the company. It helps company's for its financial statements. It
is the process for evaluating accounting entries for the financial statements for the company.
Assurance is the process for analysing the information. It helps company's for better performance
for its better analysis for statements for the businesses. Audit helps company for its financial
decision making which helps for higher profitability for the businesses. This report includes topics
which related for audit & assurance for the businesses (Maroun, 2019) .
QUESTION 1
A. Audit credibility & steps which are related for accounting profession:
Audit credibility is about the correspondence for the capability for external auditor,
throughout his, her auditing activities, for behave with honesty & objectivity. People's views for
integrity for audits are focuses for their interpretation for independence for auditor than for legit
independence.
Audit committee: Audit committee shall comprise for the specified number for
representatives for board directors for corporation whose primary responsibilities are for assists
auditors for stay independent for the management. i.e. committee should assist auditors for multiple
audit conflicts for overseeing these.
Size for audit form: The significant feature which are represents independence for auditor
are the scale for the audit businesses (Zhang, 2019). The integrity for the auditor is speciality which
are related for audit accuracy. Big audit companies which makes certain things for impartial quality
audit services for the bigger audit company's will makes certain for having impartial quality audit
services for the bigger audit company's which appears for providing stronger analysis facilities
which are reliable for financial services. The modern technologies which are more qualified staff
who will be capable for conducting large business audits which are relative for smaller audit
company's. Big audit companies which has small businesses offer which customise services since
their customers portfolios are smaller & they will have yield for the requirements for management.
Competitiveness degree for the audit service sector:
3

Competition describes the external influence which are impacting the independence for
auditors. The customers which quickly procure services for another auditor, several company's
which works for the highly competitive market which have trouble staying autonomous.
Tenure for audit company which meets the interests for the clients: The terms for audit
company which are relates for the period for time which needed for meet the particular client's audit
requirements. The long relationship for the corporation & accounting company are probable for
occur for the close identification for corporation for its customers needs, making it impossible for
the auditing company which takes autonomous actions.
Auditing size & non audit fees: IFAC's codes for ethics which suggests the company size
for determines for fee level could cast doubts about the integrity for the auditor. The fee for client
should not surpass the certain proportion for the overall audit company turnover, EFAA states
plainly. The auditors tended for has collusion for managers for covering illegal practices for
transparency scandals. The key feature for reservation are the money for the auditors which are
collected for clients for their non credit fees.
B. The situations for independence auditor:
1. There are lack for independence for this case audit manager for holding securities fo the
client company which may affects auditor's opinion.
2. This case are subjective for nature, the considerable aspects which are here is clients are
major source for income for auditor since total income are 700000 for which 100000 are
receivable for clients (Al-Dhamari and Chandren, 2018).
3. There are the lack for independence for audit for the case which auditor has taken loan form
for bank for which she is auditor.
4. There are for auditor opinion no matter for given case for auditor is asks for giving advice
which are the not audit engagement thereby there are no requirement for checking integrity
& independence for auditor.
C. Concept for objectivity:
External auditor: The primary goal of external auditors, also known as financial audits, is
to allow auditors to conduct their company's financial audits independently and independently, and
to make a judgement about whether: Financial Statements prepared by management are accurate
and equitable in all audit report, as well as whether such financial statements in compliance with an
appropriate financial reporting standards in all audit report. And, in order to achieve this goal,
4

external evaluations must strictly adhere to IFAC and other appropriate industry bodies' guidelines.
External auditors are often required to obey local professional bodies formed by legislatures.
Public accountant are external auditor who are performs reports, assessments & various
functions for his company's. External auditors are independent for entities which has financial
statements, management control mechanisms for these company's assess impartially. This auditing
opinion are the strongly respected for customers who requires the unbiased review for the
corporations financial statements.
Internal auditor: Internal auditing must be conducted independently, and those in charge
of the agency must be eligible. In certain countries, the appointment of a director of internal audit or
head of internal audit requires consent by a local government or agency to guarantee that the
district's output meets the required standards. As a component of risk assessment, several corporate
compliance teams became committee members of supervisors. This is not a legal requirement.
Internal auditor are those are qualified business professional who conducts unbiased & impartial
financial, company's assessments which includes corporate governance. This is their responsibility
for ensure the businesses compliance for legislation, regulations, obey appropriate protocols etc. the
accountable & unbiased information for the company should collects for the internal auditor for the
businesses (Steinbart and et.al, 2018).
Threats: There is the possibility for the self interest for auditor are personally interested for
the business for clients for the significant payments. In this context, there are for self interest threat
for auditor receive around 7% for his total income for Bakers co.
Safeguard for threats: There are threat for the independence for this case for the peter are the
employee for client for which wants for internal audit for the company. He acts for the internal
auditor for there are the no requirements for assess the independence level for case for internal
audit.
Threat: There are threat for independence for this case for the peter was the employee for
client, he wants for internal audit for the company. He acts for internal auditor there are no
requirements for assess for the independence level for case for internal audit.
Safeguard for threats: Company takes assurance for Peter for give unbiased opinion for
internal auditor which have the no personal issues for the company's personnel for any manner for
the businesses (Jizi and Nehme, 2018).
5

QUESTION 2
(a) The procedure by auditor for uncorrected material misstatement
A misstatement arise when some thing has not been handling properly in the books of material and
do not follow all the rules & regulations as per the requirement. For this auditor follow the
procedure such as:
5. Identify incorrect amount from the material books like an asset is not valued as per the
relevant of IFRS requirement.
6. The possibilities of error has to be taken and recognise the potential size of error that has
been checked on basis of large sampling of stock items (Maroun, 2019).
7. For further procedure classified all the errors and should be addressed with administration
of John co to defined about the material variance.
8. The error should be differentiated with stock to analysis of material separately.
9. At the end of the auditor procedure such other errors are recorded after audit should be
practical to analysis whether the problems are still considerable as a collective.
From the point of view of auditor it is essential that differentiate between such kinds of
misstatements in order to effectively communicate with John Co. and ask for the require corrections
in the material books. Such as, with the help of factual misstatement, there is no little room for
discussion with administration and simply treated incorrectly in financial statements. At the end
Auditor present conclusion based on robust audit evidence in order to defined about the
misstatement has been uncovered.
(b) Going concern Indicators
There are identified different going concern indicators of John & Jane company that a new
competitor Drums Concept Co (Drums) enter in the industry and keep low prices of their products
in order to cover larger market area and attract more customers. As a result It would impact on the
cash flow when clarinet arrange to loss share of market. It impacts on the John company to reduce
their cost and provide products on low profit to their customers top compete with new competitors
in the market. Thus, it will impact on the profitability as well as on cash flow of business (Zhang,
2019).
6

A big client has discontinued exchange with John and start work with their competitor
Drums. Thus, it might lead to to substantial loss in forecasted sales and generating income in large
manner in order to maintain cash flow in proper manner until client is substituted.
Most of the suppliers do not continue their business activities with John and start business
with Drums. Along with owing to their expertise and skills of company which is not possible for
business to replace them. The organisation develop new technologies and provide training to their
staff members to accomplish their set financial goals & objectives (Schmidt, Wood and Grabski,
2016).
The overdraft of clarinet has been increased next year when the corporation secure their
substitute credit. Thus, it will likely to grow trade when bank does not extend overdraft.
For the next 12 months, the cash flow of John's presents a bad position and do not able to
maintain capital outflows. So it would more raise overdraft and start running out of money.
New competitors: A market with a high risk of potential entrants is less appealing because the
conditions are favourable. As a result, new entrants can quickly join the market, compete with
established companies, and gain market share. Since there are more players in the market, profit
growth is limited.
Cash flow issue: Whenever a company fails to pay its bills because they become overdue, it has a
cash flow challenge. It's important to note that having a cash balance issue is not like having a cash
outflow.
Loss of key employees: The loss of a key employee will have a detrimental effect on health and
profitability, as well as trigger a financial hit to the business as a whole. Relocation, loss of an
individual to that other organisation, or the abrupt removal of an employee will all result in a loss.
(c) Going Concern procedure
The audit processes that an auditor may follow when determining whether a corporation is
still viable.
 When confronted with such a necessity, applicants must be vigilant not to generate a list of
standardised audit protocols, but rather to define and demonstrate the variables from the
situation that could call the individual's willingness to proceed as a going concern.
 Applicants should be prepared to think about the processes the auditor might use to
determine if the reporting entity basis of valuation is acceptable in the conditions after these
considerations have been established.
7

 Create a cash book in which mention cash balance to present the performance of business.
Along with analysis the cash inflow and outflow to analysis the assumptions and determine
the results to acknowledge the business entity for cash flow (Al-Dhamari and Chandren,
2018).
 Present proper research of cash flow to present the organisation's net cash flow as well as
outflow.
 Communicate with director of finance department in order to cover more new clients to
replace one absent.
 Research about the post year incomes and analysis of trade volumes in order to increase
intensified drum competitiveness as well as cash flow.
 Determine all the activities that related with bank in context of overdraft and agreement
have been broken.
 Analysis all activities in regard of loan in order to analysis the risk of bank of overdraft
renewal.
 To analysis the organisations lawyer for more disagreement and suggested about the
clarinet's risk of requiring to pay to customers that plans in regard of income loss.
 Analysis of management accounts at the end of year to review in compliance of cash flow
forecasted.
(d) John & Jane directors decided to make public disclosures that impact on the particular business
activities to rely of audit report will rely on how satisfactory they are. When information is not
sufficient so audit report would be modified as per the matter specific concentrated as per the
requirement.
The audit judgement is not revised because of substantial ambiguity and relate with
management disclosure statement. When board of directors disclose information but these are not
sufficient so require to apply changes in audit activities due to identify errors in business. This
would be identified that adverse judgement manly depend on the materiality of the matter (Steinbart
and et.al, 2018).
8

QUESTION 3
(1) Audit risk and their components
Audit risk is risk that identified by the auditors and issued incorrect audit opinion to the
audited financial statements. Such as, auditors issued unconditional thoughts to the audited
financial reports for material misstatement. These risks are categorised into different kinds such as:
 Inherent risk: Before discussing any additional control, inherent risk translates to the
inability of a claim towards a class of operation, checking account, or revelation of an
accounting fraud, either collectively and if combined with other factual errors.
 Control risk: Control risk is the risk that a critical factual error in an announcement about
the need for a form of financing, account balances, or notification will not be discouraged,
established, and clarified on a routine fashion by the audited entity, particularly
appropriately or when integrated with other factual errors.
 Detection risk: The probability that the processes used by the examiner to diminish audit
effects of a disaster will fail to discover a misstatement that persists and could be content,
either internally or when combined with other misstatements, is known as detection danger.
The reliability of the system is mediated by scanning and non-sampling.
(b) Identify audit risk and auditor response
Audit risk: A new accounting ledger system has been launched by the company at the
starting of financial year but also use old system for parallel of two months. There is identifying
risk of opening balances being misstated and loss information when they have not been transferred
from the old system perfectly. Moreover, the new accounting ledger system will need for
documentation and control over this will require to be tested.
Auditor response: The auditor should tackle elaborate testing to confirm that all opening
balances have been correctly recorded in the accounting ledger system. For this document of all
new system so for this analysis any management reports to run comparing the old as well as new
system during parallel run to recognise any problem with the procedure of accounting information.
Audit risk: Peter has incurred expenses about $4.5 million on the development of a new
brand of Fizzy drink. The expenses on research & development conduct under IAS 38 intangible
assets. For this require to research costs for the expenditure and development cost for the
capitalisation of intangible assets. When Peter has not classified all the expenses properly of
9

research & development so identify the risk of intangible assets that could be overstated and
expenditure understated (Jizi and Nehme, 2018).
Auditor response: Collect a breakdown of the expenses and analysis testing that related
with cost activities and research for development stage. Along with communicate about the
accounting treatment with the finance director and assure about it is as per the IAS 38.
C. The audit strategy which lay outs the audit scope, timetable, course, assists for designing audit
plans:
 The key characteristics for commitment which determines its scope must defines.
 The monitoring priorities for the commitment for schedule the date for the schedule for the
date for audit , the scope for the correspondence needs should determines.
 The approach should takes for account the considerations which are important for the Peter
Cola Co's audit teams activities for professionals opinion.
 The outcomes for the preliminary audit plan activities for the information acquires about
Peter Cola Co's other obligations are appropriate should considers where are appropriate.
 In audit plan the types, time, scopes for resources requires for execute audit should
identifies.
D. Difference for interim audit & final audit:
Interim audit: The intermediate audit is the portion of the audit that occurs until the close of
the fiscal year. The auditor requires the intermediate audit to complete operations that would be
impossible to finish by the end of the year due to time constraints. An interim audit is not required;
however, the size and scope of the enterprise, as well as the efficacy of corporate governance,
should be considered when determining to either conduct one.
Final audit: The final audit occurs after the fiscal year ends, and it begins with the
examiner obtaining and voicing a view on the income accounts under audit throughout the year. It's
worth noting that the substantive evaluation takes into consideration the findings of both the
preliminary and final audits.
E. Procedures which carries during interim audit:
 Review the Peter Cola Co accounting framework documents.
10

 Conversions for managers for the recent development, various improvements for the Peter
Cola Co company during the current years for refresh the auditor's comprehension for the
company's.
 Risk appraisal which would the effects for the Peter Cola Co's audit.
 Perform audits for the sales, acquisitions, inventory periods, credit management for Mila's
main transaction times.
 Enforce substantial benefits activity significant processes for the material transactions for
the businesses (Barr-Pulliam, Brown-Liburd and Sanderson, 2020).
CONCLUSION
From the above report it has been concluded that audit is about views the financial
performance for the company. Audit is about systematic review & assessment for information. It is
about view the information for the company's financials statements which helps for improving
quality for the information for reduce chance for problems which are occurring for the businesses.
It helps company's for better performance which helps for higher profitability for the businesses.
11

REFERENCES
Books and journals:
Al-Dhamari, R. A. A. and Chandren, S., 2018. Audit partners gender, auditor quality and clients
value relevance. Global Business Review. 19(4). pp.952-967.
Barr-Pulliam, D., Brown-Liburd, H. L. and Sanderson, K. A., 2020. The effects of the internal
control opinion and use of audit data analytics on perceptions of audit quality, assurance,
and auditor negligence. Assurance, and Auditor Negligence (February 7, 2020).
Denisov, I. V., Khachaturyan, M. V. and Umnova, M. G., 2018. Corporate social responsibility in
Russian companies: Introduction of social audit as assurance of quality. Calitatea.
19(164). pp.63-73.
Jizi, M. and Nehme, R., 2018. Board monitoring and audit fees: the moderating role of CEO/chair
dual roles. Managerial Auditing Journal.
Maroun, W., 2019. Does external assurance contribute to higher quality integrated reports?. Journal
of Accounting and Public Policy. 38(4). p.106670.
Schmidt, P. J., Wood, J. T. and Grabski, S. V., 2016. Business in the cloud: Research questions on
governance, audit, and assurance. Journal of Information Systems. 30(3). pp.173-189.
Steinbart, P. J. and et.al, 2018. The influence of a good relationship between the internal audit and
information security functions on information security outcomes. Accounting,
Organizations and Society. 71. pp.15-29.
Zhang, C., 2019. Intelligent process automation in audit. Journal of Emerging Technologies in
Accounting. 16(2). pp.69-88.
12