Audit and Assurance Report: Key Elements, Risk and Audit Process

This report provides a comprehensive overview of audit and assurance, detailing the key elements within the audit process. It explores the roles and responsibilities of auditors in scrutinizing financial statements to provide accurate audit reports. The report discusses the importance of adhering to ethical standards and Generally Accepted Accounting Principles (GAAP). It delves into the International Auditing and Assurance Board (IAASB) framework, highlighting the identification of issues, collection of facts, consideration of alternatives, and decision-making processes. The report emphasizes the assessment of inherent, control, and detection risks, along with their impact on audit opinions and financial statements. Factors considered by auditors during risk assessment, including material misstatements and the effect of risk assessment on the overall audit process, are also discussed, along with the role of ISA 315. The conclusion summarizes the auditor's obligation to assess all aspects of financial statements and the effects of risk management on the audit process. References include books, journals and online resources.

AUDIT AND ASSURANCE

Table of Contents
INTRODUCTION...........................................................................................................................4
TASK...............................................................................................................................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
Books & Journals........................................................................................................................9
Online........................................................................................................................................10

INTRODUCTION
The principal activities of Audit and Assurance defines that the team carrying out these
special activities have some ethics and standards relating to their professions. They perform the
task of scrutinizing of books of accounts to provide a audit report which depicts the true and fair
statement of company (Bowling, 2014). Its the legal obligation of auditors to perform their duties
in true and fair manner so that they can provide an unqualified report on financial statements that
all the records are prepared and maintained in accordance with Generally Accepted Accounting
Principles (GAAP).
TASK
Key Elements in Audit Process:
The International Auditing and Assurance Board (IAASB), has released a framework for
audit quality. With the help of outlay provided, it aims to raise the awareness about elements of
audit quality encouraging key stakeholders to challenge themselves to perform audit in a
systematised manner and to reach the level of ethics which provide a benchmark that this
particular level of sincerity is to be achieved, facilitating greater dialogue between key
stakeholders and the audit committee (Leung, Coram and Cooper, 2007). This provides some
important guidelines which involve in practical experience, by executing in report management
group which help in assessing in audit. This innovation provide some base are provided at
aspects of audit activity because they help in making decision. Therefore, some official emissary
are considered by involving of organic announcement which consist of balancing theory and
combination of particle and theoretical activity.
Current problem faced by an auditors is of opinion expressed by them with proper
evidences which will further can create significant changes due to discovery of external
evidence. This problem can be overcome by using proper decision making process which will

consider accurate assumptions in order to expresses reliable judgement on the financial
statements. Some of them which are given as follows:
Identifying some issues: This is not so easy because they are depend on whole ability
which consist of some perspectives by involving of information which contravene organization
assertion(Christensen, Glover, Wood, 2012.).
Collect some facts and content which help in identifying criteria: It does not contain any
limits for business edition which includes of some communication within firm. Some of
assessment and their indication like piece of land, memorandum, process, collection of journals,
externals sources of relevant information, also engage in particular process.
Consist of different alternative: Listener need to be comprehensive during evaluation of
their prospective, moreover, they also be cautious while founding of some facts which could
controvert demand from management's positions (Christensen, Glover and Wood, 2012).
Make the decision: According to resources, its obligatory for auditor to reconsider the
process and evidence obtained, if supportable judgement process has not been followed.
Conclusion for documentation: The process of confirmation need to be performed which
includes of judgement and also enable in making appropriate decision with consist of
competitive measure.
Accessing inherent and control risk:
Audit risk refers to risk which includes of financial statements which are incorrectly even
when audits opinion are free from misstatements in financial report. In this hazard auditor issues
are not proper therefore, these impact on financial statements. Some instance of improper audit
views are discussed here:
 Unqualified report issued when auditor has mentioned some criteria for being justified
therefore, some qualification is being require.
 Supplying eligible audit opinion where there qualification is crucial.
 In audit report some important matter will give impact on audit report.
 Opinion on financial statement involve of some limitation in performance of audit report
because they providing reasonable.
Audit hazard may be considered as goods of varied risks which can be clash in
performance of examination (Kolk and Perego, 2010). The auditor must assess level of risk

pertaining to every component of audit risk in order to keep overall audit risk below an
acceptable limit.
Audit Risk = Inherent Risk * Control Risk * Detection Risk
Inherent risk: Inherent risk depicts some misstatement in financial statements which are
rising due to some errors this results in main factors of failure in control because in audit report
financial statement need to be clear and concise. This risk is generally consist of higher degree of
judgement because here, transaction of business and resident are including high level of
complexities (Perego, 2009). For instance, inherent risk in audit of financial institution has
significant trade exposures in various instruments which are considered higher because they are
compared to audit which is conducted at time of establishment of entity with stable competing
surroundings.
Moreover, in inherent risk financial and managerial accounting can be defined by many
possibilities of incorrect information which leads to failure of control in this report. The
appropriate situation where possibility of inbuilt risk accounts are very important because they
help in adopting large amount of judgement in comparison to normal situations, or where
complex financial instruments are involved (Van Leersum and et. al., 2013).
Control Risk:
Organization must have a proper control over the financial statements from frauds and
errors so that the numbers of risks can reduces and the position improves the business. To reduce
the misstatement in the company the duty should be handed over to the eligible person, so that
the number of errors will be reduced.(M.G., Wouters, Tollenaar, 2013.) The person should have
the proper knowledge to reduce the error and increase the turnover of the company for achieving
the targets. Company should assign the task or the duty to the right person so that the work is
done without any errors and frauds. The person who is auditing must have the necessary
technical knowledge of accounting and finance.
Factors considered by auditors while assessing these risk:
The auditor should perform their work for the companies and assess the transactions for
better position according to provisions of the company. If any company changes their prices of
their product than they have to amend their financial statements also. Risks of material
misstatement can arise the errors in financial statements of the company.(Robson, Humphrey,
Khalifa, Jones,2007.) The audit procedures is done for the purpose of convenient results of the

company. Factors considered by auditors for risk assessment is to checkout all the transactions
done in the company for getting profit. The assessment report which is provided by the auditors
is effective and efficient for the company to achieve the financial targets.
Effect of risk assessment on audit process:
Risk management procedure must include not only auditor and accounting experts in the
organisation but it must include management and an individual who is related to the organisation
on upper level management. An organisation must follow double check policy in the
organisation in order to reduce risk of misstatement in the organisation and in order to protect its
business turnover. All the business transactions must be protected and must be double checked in
the organisation by having ISA 315 determining techniques.
The management should also focus on periodically reports based on financial statement in the
business organisation or company.(Cheng, 2010.) Top management level must ask time to time
reports from finance department in order to prevent any fraud and cheat case in the working
organisation.
In audit there is a risk of misstatements to assess that risk of material misstatement risk
procedure of risk assessment , financial statements must be correct or in the right form so that an
auditor could audit statements easily and correctively.
The chances of misstatement in financial system or statement must be reduced and having
accurate data or account or statement of the company. However risk assessment procedure it self
does not provide sufficient appropriate audit clue or evidence but therefore it may reduce the
chances of misstatement in the financial statements and it helps the organisation to prevent the
chances of misleading and fraud in the financial statements.
International Standard on Auditing 315 is to assessing the risks of material misstatement
through observing the entity and its environment.(Free, Salterio, 2009.) The top down approach
in the auditing system may affect on balance sheet or financial statements. Therefore cost arising
risk translate into auditing risk. Auditing system must be in strong way or an auditor must have
perfect concept to audit the accounts and accounting statements in the organisation, scams and
scandals could be eradicated from the organisation. Senior officials e.g. board of directors
operating officials have bird's eye on the financial operations therefore an auditor could not
present material misstatement of financial statements.

CONCLUSION
It is concluded that in the above carried out analysis about audit and assurance its became
the obligation of auditor to insight every aspect relating to audit of financial statement of an
organisation and whether it have any adverse or favourable affect on entity as well as its
stakeholders. The inherent risk and control risk are also discussed and its impact on the audit
report prepared by the auditor. There are several factors which effect of risk management and
audit process.

REFERNECES
Books & Journals
Bowling, A., 2014. Research methods in health: investigating health and health services.
McGraw-Hill Education (UK).
Cheng, M., 2010. Audit cultures and quality assurance mechanisms in England: a study of their
perceived impact on the work of academics. Teaching in Higher Education. 15(3). pp.259-271.
Christensen, B.E., Glover, S.M. and Wood, D.A., 2012. Extreme estimation uncertainty in fair
value estimates: Implications for audit assurance. Auditing: A Journal of Practice & Theory.
31(1). pp.127-146.
Free, C., Salterio, S.E. and Shearer, T., 2009. The construction of auditability: MBA rankings
and assurance in practice. Accounting, Organizations and society. 34(1). pp.119-140.
Kolk, A. and Perego, P., 2010. Determinants of the adoption of sustainability assurance
statements: An international investigation. Business Strategy and the Environment. 19(3).
pp.182-198.
Leung, P., Coram, P. and Cooper, B., 2007. Modern auditing & assurance services. John Wiley
& Sons Australia.
O’Dwyer, B., 2011. The case of sustainability assurance: Constructing a new assurance service.
Contemporary Accounting Research. 28(4). pp.1230-1266.
Perego, P., 2009. Causes and consequences of choosing different assurance providers: An
international study of sustainability reporting. International Journal of Management. 26(3).
p.412.
Robson, K., Humphrey, C., Khalifa, R. and Jones, J., 2007. Transforming audit technologies:
Business risk audit methodologies and the audit field. Accounting, Organizations and Society.
32(4). pp.409-438.
Van Leersum, N.J., Snijders, H.S., Henneman, D., Kolfschoten, N.E., Gooiker, G.A., Ten Berge,
M.G., Eddes, E.H., Wouters, M.W.J.M., Tollenaar, R.A.E.M. and Dutch Surgical Colorectal
Cancer Audit Group, 2013. The Dutch surgical colorectal audit. European Journal of Surgical
Oncology (EJSO). 39(10). pp.1063-1070.

Online
Audit & Assurance. 2016. [Online]. Available through <https://www.ifac.org/global-knowledge-
gateway/audit-assurance?discussions>. [Available through 11th November 2016].