Auditing and Assurance Services Report: Financial Statement Review

This report provides an in-depth analysis of auditing and assurance services, focusing on the importance of external audits in ensuring the accuracy and reliability of financial statements. It explores the role of auditors, the significance of audit opinions, and the impact of Generally Accepted Acco...Read More

Running head: AUDITING AND ASSURANCE SERVICES 1
Auditing and Assurance Services
Student’s Name
Institutional Affiliation

AUDITING AND ASSURANCE SERVICES 2
Introduction
The necessity for the financial statements by organizations to be audited by an external auditor
has been the foundation of confidence in the global financial systems. The advantage of an audit
is that it offers a guarantee that management has highlighted a ‘true and fair' perception of
organizational financial performance and position. An audit bolsters the trust and responsibility
of stewardship between the officials who administer the organization and the stakeholders. Based
on the significance if its role, questions have been raised regarding the auditors, audit, and
stakeholders. Firms prepare the financial statements that conform to the framework of generally
accepted accounting principles (GAAP) pertinent to the nation (Sedki et al., 2018). The fair
presentation of these financial statements is assessed by sovereign auditors utilizing a framework
of generally accepted auditing standards (GAAS) which articulate the requirements and guidance
to perform an audit known as auditing standards.
Reasonable esteem is the sum at which the benefit could be purchased or sold in a present
exchange between agreeable partakers or exchanged to an identical gathering.
Question 1
Overview
Audit’s opinion is a certification that precedes the financial statements grounded on an
audit of the opinion of the accountant on the steps and records utilize to generate the statements
irrespective of whether the material misstatements occur in the financial statements. The audit
reports are demanded by law when a company is considered a public one or in a sector that is
controlled by the Securities and Exchange Commission (SEC). Organizations pursue funding and
search to enhance internal controls. The opinion of the auditor is highlighted in the report. The

AUDITING AND ASSURANCE SERVICES 3
audit report starts with an introductory part that highlighted the obligation of management and
audit company. The next section recognizes the financial statements whereby the opinion of the
auditor is provided. The final section presents the auditor's opinion. Even though it is not
discovered in the entire audit reports, the fourth section might be highlighted as an illumination
about a qualified or adverse opinion. An unqualified opinion is the best form of the audit report
that a company can wish for. Additionally, in unmodified audit opinion, the opinion of the audit
company highlights that the reports are prepared in a manner to guarantee that the entire material
conforms to the liabilities, assets, and financial performance of the organization for the reporting
moments emanating from the accounting laws. There might be a circumstance whereby the
auditor cannot show an unmodified opinion regarding the reliability of financial statements. The
auditor is required to take into account the likelihood of making a change.
a.
In this certain question, issues emanate from writing off allowance for doubtful debts in
an insufficient way. Management expressed no interest in altering the essential adjustments for
delivering on bad debts in financial reports for the equivalent. It is essential to grasp the audit
notion of the circumstance as far as possible. The organization should perform a yearly audit for
reviewing accounts receivable in a thorough assessment. Accounts receivable constitutes the
assets. The auditors require changing the considerable duration for attaining assurance for future
analysis motive (Ingram & Wahab, 2017). An audit bolsters of the company trust and
responsibility of stewardship between the officials who administer the organization and the
stakeholders. Based on the significance if its role, questions have been raised regarding the
auditors, audit, and stakeholders. The management requires performing audit activities for
identifying receivables in general ledger and computing the receivable reports. It aims at

AUDITING AND ASSURANCE SERVICES 4
reconciling items and testing invoices in the receivable reports. It assesses the reconciling items
and testing invoices in receivable reports in the most suitable manner. It parallels the shipping
log and conforms with accounts receivable in assessing cash receipts in an effective manner.
The category for this item is under a qualified opinion. The allowance for doubtful
accounts is a decrease of the cumulative amount of accounts receivables highlighted in the
balance sheet of the corporation and is listed as a decrease promptly below the accounts
receivable. This decrease is categorized as a contra asset account. The allowance for doubtful
debts epitomizes the approximate of the number of accounts receivable that will not be paid by
clients. It does not essentially reflect the real experience, which could vary from anticipations.
When the real experience varies, the management changes the estimation methodology to restore
reserve into real outcomes.
b.
In this certain question, it necessitates explaining issues about the valuation of sales
prices in allowance with sales margin for the similar. The auditors have assessed that the
acknowledgment of revenue causes problems due to consignment sales, refunding, round-trip
sales, and returning the rights. The management that is under scrutiny in misstating revenues in
motivating the investor to impress the executive management and the Board of Directors. The
auditors should resolve the problems by performing analytical procedures, including the financial
ratio analysis. It compares the manners for establishing the criteria in the industry in the most
suitable manner. In the event of the revenue cycle, the auditors should assess the net profit
margin and the level of growth in a year in the most effective manner. It assesses the
organization maximum capacity of sales and facilities of workers for full use of future analysis.

AUDITING AND ASSURANCE SERVICES 5
From the above description, the item can be classified as an adverse audit opinion. It is issued
after having extracted enough suitable audit evidence.
The auditor deduces that the misstatements or when grouped with other misstatements are
both material and have a pervasive effect on the financial statements. An adverse opinion will be
given when the auditor finds out that the financial statements of the client are materially
misstated and when taken into account, it does not obey the GAAP standards. It is taken into
account as the audit opinion that articulates that the information constituted is materially
incorrect and inaccurate to evaluate the financial position of the auditee and outcomes of
operations (Ingram & Wahab, 2017). In any event, an adverse opinion has stringent
repercussions for the reporting company.
The bankers, investors, and government seldom accept the financial statements of the
auditee in case the auditor gave an adverse opinion and often request the auditee to rectify the
financial statements and obtain an audit report. Therefore, before providing an adverse opinion, it
will be vital that the auditors should work with them to consult the accountants of the
organization. The auditors will liaise with them to rectify the issues. They conduct this desiring
to get another result as qualified or unqualified opinion. In an audit report, the adverse opinion
paragraph will be included between the opinion and scope paragraph.
In the opinion paragraph, the wording will change due to the circumstances highlighted
for adverse opinion. The financial statements do not provide a true and fair perception or are not
free from material misstatements. The wording of the adverse document can be compared to the
qualified report. The scope paragraph is amended, and an explanatory paragraph is included to
illuminate the argument for the adverse opinion after the scope paragraph. The most substantial

AUDITING AND ASSURANCE SERVICES 6
difference in the report can be compared to the qualified report in the opinion paragraph whereby
the auditor asserts that the financial statements do not conform with the GAAP standards which
imply it is inaccurate, unreliable and do not highlight a true and fair perception of the position
and operation of the customer. Therefore, before the provision of an adverse opinion, it will be
very important that the auditors should work with them to consult the accountants of the
organization.
c.
In a certain inquiry, the auditors require to resolve the problems facing Block
corporation. It has plunged into liquidation by the key clients at 45% for the similar. The auditors
require to perform the sales audit in the imminent. In addition, they require to embrace the
necessary measures on Block firm relying on the sales audit. The latter is comprehensive
whereby its periodic interpretation of business environment and determination of facets in
amassing opportunities in the most suitable manner. According to FASB and AASB, the
essential inspiration for the consolidated undertaking is to join the structures of two sheets for
giving the consistent scholarly premise to the intermingling of two gatherings of principles. It
suggests the actionable steps and enhancing the sales performance of the Block organization
(Hail, Leuz & Wysocki, 2010). The sales audit commences with the objective of headhunting the
procedures of the members of the sales department. It requires to complete the record of officials
in regards to the experience, background, and form of selection in the corporation.
d.
In this certain inquiry, the auditors need to solve the problems that are encountered by
Croucher Company for the future assessment. Notably, it is detected that the buildings are valued

AUDITING AND ASSURANCE SERVICES 7
based on the fair value method that requires prompt correction. The fair value is utilized for the
system of financial reporting. It utilizes a diversity of gauging the financial instruments at the fair
value analysis. It computes the shortcomings associated with recording the assets and liabilities
for the similar. It requires to presuming the integration of business operations about the
accounting standard (Ingram & Wahab, 2017). The accounting standard setters ought to continue
turning the fair value realization in the pertinent gauging of the assets and liabilities during the
reporting of the finances in general.
The significance of reasonable esteem Fair esteem is the value that would be gotten from
the sell of a benefit or will be paid to move an obligation in a systematic exchange between the
market members and the estimation date [IFRS, 13 – A501]. Anyway, in bookkeeping and
financial matters, reasonable esteem is the normal and unprejudiced gauge of a conceivable
market cost of a decent, administration or an advantage. Reasonable esteem considers numerous
targets and emotional factors.FAS 157 characterizes reasonable incentive as "the value that
would be gotten to pitch an advantage or paid to move an obligation in a deliberate exchange
between market members at the estimation date (Timoshenko, 2018)." This definition mirrors a
"leave esteem," which means esteem that organizations can take the particular thing through a
deliberate exchange with market participants. According to ASAB When the market cost of a
benefit cannot be resolved, reasonable esteem is utilized as an assurance of the market esteem.
Reasonable esteem is the sum at which the benefit could be purchased or sold in a present
exchange between agreeable partakers or exchanged to an identical gathering. [GAAP] as far as
future markets, reasonable esteem is the balance cost for a future contract. This implies
reasonable esteem will be equivalent to the spot cost of the agreement considering accumulated
dividends. As far as unions, reasonable esteem is the assessed estimation of all things considered

AUDITING AND ASSURANCE SERVICES 8
and liabilities of an obtained organization that will be utilized to solidify the fiscal summaries of
the two organizations being referred to. The utilization of reasonable esteem estimation Fair
esteem estimation is for a specific resource or obligation. [IFRS 13] For this reason, when
estimating fir esteem an element must consider the qualities of the benefit or obligation if the
market members would consider those attributes while deciding the cost of the advantage or risk
at the date of estimation. At that point, the impact on estimation emerging from the qualities will
contrast contingent upon how the attributes would be considered.
Attributes that ought to be mulled over are: The state of the benefit Location of the
advantage Sale limitations Use of the benefit A benefit or obligation that is estimated at
reasonable esteem may be either: An independent resource or risk (eg. a money-related
instrument) or A gathering of advantages or liabilities (eg. a money producing unit) Fair esteem
estimation accept that the advantage or risk is traded in an organized exchange between members
in a market to sell the benefit or exchange an obligation at the estimation date under the states of
the market.
IFRS clarifies that a reasonable esteem estimation requires an element to decide the
accompanying: The specific resource or risk has been estimated For a non-budgetary resource –
decide whether the benefit was utilized as an independent or in the mix with different resources.
The market an incentive where an exchange would occur The fitting valuation procedure is
utilized when estimating reasonable esteem. The valuation strategy utilized ought to boost the
utilization of important information sources. To advance consistency and equivalence in the
estimation of reasonable qualities and their revelation, IFRS built up a reasonable esteem chain
of command that orders into three dimensions. The most noteworthy need is given to cited costs,
that being unadjusted costs. Level two is cited costs that are perceptible straightforwardly or in a

AUDITING AND ASSURANCE SERVICES 9
roundabout way, while level 3 inputs are undetectable sources of info. 4 3. Reasonable esteem
estimation strategies and element will utilize valuation method that are fitting in the conditions
and for which adequate information is accessible to quantify reasonable esteem, amplifying the
utilization of important perceptible sources of info and limiting the utilization of noticeable data
sources.
In this certain inquiry, the organization expresses unwillingness in altering the
deprecation method spanning from the LIFO method to the FIFO method in the imminent. It
requires to utilize FIFO about the accounting benchmarks. It is essential for the audit client to
assess the ending evaluation for the transferring quantity of future assessment motive. It aims at
transferring the amount presents in the balance sheet transaction for inventory account and
income statement assessment in the most suitable manner (Timoshenko, 2018).
f.
In this certain inquiry, the Genome company has eluded the information about the party
related disclosure that damages the reputation of the corporation in an adverse manner. It
requires to be computed based on the FASB and AASB accounting standards for future
assessment. The auditor should bring on board the other officials, thereby upholding the privacy
and confidentiality of information for the smooth operation of the company.
According to significant accounting standard AASB 116 for PPE (plant property and
gear) legitimate bookkeeping figuring for fixed resource and amortized deterioration must be
made as needs are. According to this standard and for the most part acknowledged bookkeeping
rule, a business must keep on following the bookkeeping arrangement as that was taken in the
earlier year bookkeeping explanations. According to AASB 116 and keeping in mind that taking

AUDITING AND ASSURANCE SERVICES 10
reference from AASB 108 an appropriate exposure must be owned in the budgetary expressions
if the impact of progress in approach has its effect on current fiscal summaries or the future
imminent bookkeeping and money related business records (Abednazari et al., 2018). If there
should arise an occurrence of PPE any progressions concerning change in devaluation rate,
change in strategy for computing deterioration, change in valuable life or revaluation of fixed
resource ought to be appropriately accounted and unveiled in the notes to account. According to
the pertinent standard and change in strategy for ascertaining devaluation, there must be review
amendment of deterioration computation and must be accounted and burdened likewise.
Theconceptual framework objective is to make the sound reason for the up and coming
bookkeeping models, which are standards related, inside dependable and all around United. The
new conceptual framework shapes current FASB and IASB standards (Gray ET AL., 2016). The
primary phase of the applied system executes with the reason and subjective highlights of the
monetary detailing (Joshi, Bremser & Al-Ajmi, 2015). The FASB has looked through the
subjective highlights of the bookkeeping which perceive valuable data from less helpful data for
reasons for the basic leadership. In extra, the FASB has sought different imperatives as the
segment of the theoretical structure.
At current, bookkeeping uses different terms which have explicit and unmistakable
implications. The motivation behind the joint undertaking is to offer the reason for the
arrangement of things to come comprehensively combined guidelines of the bookkeeping which
are inside reliable and will bring about offering supportive data in the budgetary report for the
basic leadership for the capital suppliers (Hermason et al., 2016). It is seen that IASB and FASB
reason for the estimation in calculated structure is to offer to bear for picking bases of the
estimation which satisfy the subjective highlights and targets of the money related detailing.

AUDITING AND ASSURANCE SERVICES 11
It is understood that both IASB and FASB as of now have frameworks. The structure of
the IASB is helpful for the introduction and readiness of the budget reports. Its substance mirrors
the strong proclivity with the prior work of FASB. One noteworthy likeness resembles the
structure of the FASB; IASB comes up short on the estimation treatment and fragmented. The
two structures pressure choice convenience, basically to the speculators in the capital market as
the primary centralization of the general target budget summary. The essential inspiration for the
consolidated undertaking is to join the structures of two sheets for giving the consistent scholarly
premise to the intermingling of two gatherings of principles. The combination can't consider as
just inspiration, yet the improvement is similarly noteworthy (McCall, 2017). There are two
angles for development, for example, filling holes for accomplishing fulfillment and taking out
irregularities for improving the intelligibility. The best hole which is required to be satisfied is to
frame the direction on the estimation.
There are different highlights of the rationality of the system of the IASB which require
improvement (Ingram & Wahab, 2017). The locale which has offered explicit trouble as of now
is the obligation definition and for the most part, the distinction among the value and the risk.
The task is considered as genuinely the joint one, while the higher heft of the current system of
the FASB and its strong contribution of the staff demonstrate that the starting position will, in
general, be the current report of the FASB when contrasted with the IASB. In the vast majority
of the cases, there is little refinement among the current FASB and IASB frameworks, with the
goal that particular impact of the FASB is seen enormously in article style.

AUDITING AND ASSURANCE SERVICES 12
2.
a.
This certain organization has specialized in the sale of stationery and office equipment
through its retail outlets and chains. Its main objective is selling shop front and internet order
services for the similar. It has acknowledged the weaknesses that the firm does not approve the
credit from the supplier. The transactions of credit assist in luring the supplier to enable smooth
functioning of the corporation. In this scenario, it is advisable that the accountant is designated
for the computation of the sales invoices that utilize the computerized system. The manual
assessment consumes time and has the likelihood of errors for the similar. The clients are paying
via cash at the buying of stationary from the retail chain. It necessitates the preparation of sales
invoices in an automated manner for the proper way. In the event of the order given through the
phone, the client is given the sales order number to verify them. It is recommended to assess the
print payment system and punctually delivered the products (Hermason, Edwards & Maher,
2016). The members of the staff should assess on providing the much-needed attention of the
sales invoice for future assessment motive. It requires the computerized manner of dealing with
task in the future. In the subsequent phase, the driver will deliver the products to the clients and
gather cash from the clients.
b.
This certain organization draws a comparison between deposits for registering and
totaling the invoices for the similar. It precisely draws the similarity with auditing the cash sales
for a certain period. It solves the problems that are associated with cash-handling issues in
conducting business in a general way. It assesses the deposits slips in the event of cash and check

AUDITING AND ASSURANCE SERVICES 13
totals most suitably. It draws the similarity between the sales figures for lapping victim. Lapping
is a scenario whereby the workers get rid of check from the register and record it in the most
effective manner. It checks the daily sales in documenting for the future assessment. In most
cases, workers place review the register and gets rid of the equivalent amount of money (Albu,
Albu & Alexander, 2014). The sales total tends to be equivalent to the deposit totals during the
loss of the money. It notes the cash totals for showing the eradicating of the money in the event
of the sales register. It centers on comparing with inventory sales figures. It assesses the orders of
the client. It constitutes the accounts receivables for epitomizing the buying of the goods by the
clients. It is grounded on the transactions of the credit for invoicing the clients (Timoshenko,
2018). It requires to draw the comparison between the invoices for reviewing and receipts for the
equivalent. It assesses the sales invoice in assessing the deposits records in accounts receivable
incomes. It is crucial in assessing the bills lading, particularly from the stationary department.
Accounts receivable fraud known as lapping happens when a worker is entitled with
processing customer payments though deprives off the money for his individual needs. When a
lapping scheme starts, the next checks are utilized to cover the missing checks. The worker ought
to continually scrutinize so he or she can rob the client to pay one client. Relying on the volume
of the checks, a lapping scheme can be instigated and upheld various months. The losses can be
substantial (Ingram & Wahab, 2017). The corporation will be the victim of fraud, and the clients
become involved in an effort to reconstruct the fraud and guarantee that the payments are
suitably recorded. The corporation may be obliged to enlist with the assistance of the clients by
requesting canceled.
Lapping happens when a worker robs the cash by diverting the payment from one client
and then conceals the theft by diverting money from one client to offset the receivable from the

AUDITING AND ASSURANCE SERVICES 14
initial client. This form of fraud can be performed in perpetuity as newer payments are used to
pay the old debts so that it occurs to be old. Lapping is most effectively occupied with when only
one worker is engaged with all money dealing with and recordation undertakings. This
circumstance most generally emerges in a littler business, where a clerk might be in charge of all
bookkeeping undertakings. On the off chance that these errands are part up among a few people
(known as the isolation of obligations), at that point lapping must be directed when at least two
representatives are included (Gray, Spencer, & Pumphrey, 2016).
Lapping ordinarily necessitates that the individual occupied with the extortion be
included each day thus does not take any excursion time. Along these lines, having an individual
will not take the excursion time that they have earned can be viewed as a conceivable pointer of
the presence of lapping. Lapping can be identified by led an occasional audit of the money
receipts records, to follow installments to extraordinary receivables. The transactions of credit
assist in luring the supplier to enable smooth functioning of the corporation. In this scenario, it is
advisable that the accountant is designated for the computation of the sales invoices that utilize
the computerized system (Timoshenko, 2018). If there is continuous proof that money receipts
are routinely being connected against the wrong client accounts, at that point either the clerk is
amazingly clumsy, or there is a functioning lapping plan in advancement.
c.
In the event of cash transactions, it constitutes the total accounts receivables. It entails
any invoices from the standpoint of clients that rebel the outstanding accounts receivable. In this
particular instance, it requires to review the store manager for the gathering of cash from the
client in the most suitable manner. It requires to check on the outstanding receivable and the

AUDITING AND ASSURANCE SERVICES 15
cumulative cash receipts when paying using credit cards. It epitomizes the cumulative revenues
for a stipulated period. It entails the total revenues that are equivalent to the net sales for a
stipulated period for auditing reports (Abednazari, Roodposhti, Nikoomaram & Pourzamani,
2018). The auditor tests exercise control over the organization and regulate the cycles in the
company sales and determination of reliability deeds highlighted in the financial statements.
Auditors require choosing a random sample of transactions for future assessment. Auditor
assumes the role of determining the financial statements for sales amount and accounts
receivable for verifying the personal transactions in a general way. The organization utilizes the
audit for individual procedures and transacting to guarantee the regulation in an efficient manner,
ensuring controls strongly. Internet audit relies on the fraud of the workers and coming up with
the control over the process for future assessment motive.
Conclusion
The advantage of an audit is that it offers a guarantee that management has highlighted a
‘true and fair' perception of organizational financial performance and position. An audit bolsters
the trust and responsibility of stewardship between the officials who administer the organization
and the stakeholders. Based on the significance if its role, questions have been raised regarding
the auditors, audit, and stakeholders. Firms prepare the financial statements that conform to the
framework of generally accepted accounting principles. The audit report starts with an
introductory part that highlighted the obligation of management and Audit Company. The next
section recognizes the financial statements whereby the opinion of the auditor is provided. The
final section presents the auditor's opinion. Even though it is not discovered in the entire audit

AUDITING AND ASSURANCE SERVICES 16
reports, the fourth section might be highlighted as an illumination about a qualified or adverse
opinion. An unqualified opinion is the best form of the audit report that a company can wish for.
In the event of cash transactions, it constitutes the total accounts receivables. It
entails any invoices from the standpoint of clients that rebel the outstanding accounts receivable.
In this particular instance, it requires to review the store manager for the gathering of cash from
the client in the most suitable manner. On the other hand, Lapping happens when a worker robs
the cash by diverting the payment from one client and then conceals the theft by diverting money
from one client to offset the receivable from the initial client. This form of fraud can be
performed in perpetuity as newer payments are used to pay the old debts so that it occurs to be
old. According to AASB 116 and keeping in mind that taking reference from AASB 108 an
appropriate exposure must be owned in the budgetary expressions if the impact of progress in
approach has its effect on current fiscal summaries or the future imminent bookkeeping and
money related business records. Reasonable esteem estimation strategies and element will utilize
valuation method that are fitting in the conditions and for which adequate information is
accessible to quantify reasonable esteem, amplifying the utilization of important perceptible
sources of info and limiting the utilization of noticeable data sources.
Finally, the transactions of credit assist in luring the supplier to enable smooth functioning of the
corporation.

AUDITING AND ASSURANCE SERVICES 17
References
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of Global Management Accounting Principles.
Albu, C. N., Albu, N., & Alexander, D. (2014). When global accounting standards meet the local
context—Insights from an emerging economy. Critical Perspectives on Accounting,
25(6), 489-510.
Gray, K., Spencer, A., & Pumphrey, L. (2016). Practical impediments to convergence of US
GAAP and IFRS. European Scientific Journal, ESJ, 11(10).
Hail, L., Leuz, C., & Wysocki, P. (2010). Global accounting convergence and the potential
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accounting standards. Accounting Horizons, 24(4), 567-588.
Hermason, R., Edwards, J., & Maher, M. (2016). Accounting Principles: Managerial
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Ingram, K., & Wahab, S. (2017). Accounting Goes Beyond Number-Crunching! An Alternative
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McCall, N. C. (2017). Financial Reporting: An Analysis of Accounting Methods and
Principles (Doctoral dissertation, The University of Mississippi).

AUDITING AND ASSURANCE SERVICES 18
Sedki, S. S., Posada, G. A., &Pruske, K. A. (2018). Differences Between US GAAP and IFRS in
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