Auditing and Assurance in Australia: SBF's Bletchington Limited Audit

This report, prepared as a business memorandum from an audit manager at Samway Baker Fitzgerald (SBF), addresses the audit of Bletchington Limited, a defense industry company. It explores the audit expectation gap, highlighting the differences between financial users' expectations and auditing standards, and recommends measures to bridge this gap. The report identifies threats to auditor independence, including self-interest and intimidation, and outlines safeguards to mitigate these threats. It emphasizes the importance of auditor independence, sound audit procedures, and effective safety measures. The report also references relevant legislation and auditing standards, providing recommendations for auditors and management to ensure the accuracy and transparency of financial statements. The report concludes with a bibliography of relevant sources.

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
Name of the student
Name of the university
Authors note

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Business Memorandum
Fitzgerald Samway Baker (SBF),
To: William Albanese
From: Mr X
Date: 6th August, 2019
Subject: Relevant legislation and auditing standards
In the response to the query on seeking the advice on the expectation gap of the audit for SBF
Company the whole scenario have been understood and advices are provide which are as
follows-
The audit expectation gap is the gap which is used to signify the difference in the expectation
of the financial users and the other auditing standards. However the expectations are all about
the needs and requirements which could be defined in a number of ways. Hence the
difference in the expectation could possibly look to explain the effective difference between
the engagements over what the auditor finds and believes. Further I can also say that the
understanding difference between nature audits agreements can also be established which is
basically what the users believe about audit and what it actually is. Hence as per my view the
company auditor have to try to reduce the potential risk on an acceptably low level to attain
the possible resource. Hence the resource gap can be defined in the area of the users who are
using the financial statements and hence the process can create the expectation gap. In a
nutshell it can be said that the audit expenses and what the others are expecting from the
company auditor. Hence since for a number of the audit expectation gap had been debated for
a number of times. Thus the same process could reduce the stakeholders and the forums
expectation gap of the client contentions. Thus the company auditor and the other peoples

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could use the financial statements. On careful ways the analysis gap is one of the reason to
understand the different connecting gaps. Hence the gap does not only hold the lacking in the
part of audit expectation. Hence the audit gaps and the efforts are invested in those areas
where all the required expectation gaps could be bridged upon to ensure that there are no such
audit expectation gaps any further. Thus as per my view the auditors of SBF company could
the following recommendation. These are-
The users must understand why the auditors can provide any reasonable audit assurance and
not the actual evidence and the inherent audit limitations.
 The users need to understand the general purpose of the financial statements are made
up of general user needs and even if the same is audited in a best way possible.
However the audited principal of the financial statements can help to make effective
decisions.
 The users need to realise the auditors evidence is related to the circumstances which
sometimes wrong statements. Although the auditor is guilty of diligence and
sometimes could make wrong judgements over the statements which he could
possibly look to ignore and ended up doing it.
 On the other hand the company auditor and management could be required to produce
the financial statements whether the users could gain a minimum number of
knowledge of how to use and interoperate the statements. The financial statements are
not for everyone to understand and make use of the same.
 The company auditors in order to understand the rules and regulations of the auditing
must arrange some workshops for the company auditors and look to inject some
knowledge to them. The auditor must look to wipe out all the discrepancies among
them.

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 The auditor of the Blechington company auditor could make the final audit report to
see if the company had meet the required audit areas in the annual reports. Hence the
auditor reports must be clearly understandable to the masses.
Threats to auditor independence
The auditor independence threat is the risks stated limits for the auditor who is
prevailing them from acting to the potential behaviour. Hence to identify the threats which
includes the client dependency, overdue the fees, actions or limitation, family or personal
relationships and investing to the shares and other investment areas, beneficial interests, trusts
and loans, audit apartment voting and acceptance of the goods and services to the audit client.
The IFAC had initially identified five audit threats approach namely threats and safeguard
approach. Hence in this approach there are certain basic audit threats to be identified for the
auditor independence. These are as follows-
Self-interest threat: it is a threat to the auditor independence resulting out of the self-interest
conflict.
Self –review threat: the difficulty of maintaining the objectivity of the situation where the
audit objectivity is done as per the previous audit and the assignment needs to be challenged
and evaluated over the reaching audit conclusion.
Advocacy for the client threat: the audit objective results the auditors being the advocates for
their clients position for any advisor client processing or the situation.
Intimidation of the client’s threats: there is a possibility that the auditors need to show the
concerns intimidating by the auditor personality or by any other pressure or by the directors
or managers to the client and any other party.

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Trust or family threat: the threats arising out of the auditors becoming over influenced by the
audit quality of the clients or auditor or the senior managers or by the other parties. Similarly
the audit authority of blechington can also look to implement the same within the
organisation.
Audit independence Safeguards
It is a safety measurement techniques which is subjected to the activities of the service
operators provides as systematic critical evaluation. Hence an audit may include many
components such as safety policy, change management or SMS as a whole or any operating
activities to disclose the strength and the weakness to identify the areas of rectification.
Therefore a report is made followed by the action plan. Hence the safety measure shall be
monitored by the supervisory authority. Hence the safety audit measures are as follows-
The organisations have a sound structure and adequate staffing level.
Approved audit procedure and the instructions complied with.
The required personality level of compliance and training to operate the competency of
equipment’s and facilities by maintaining the performance is achieved.
The equipment performance is adequate for the safety levels of the service provided.
The effective arrangements exist in the performance safety and by monitoring the safety
issues.
Adequate arrangements are needed to handle the forcible emergencies.
Thus the safety audit is carried out by the single individual or a team of people who are
competent to have an adequate safety techniques which is very independent to the company.
Hence the audited frequency depends upon the regulatory or management process. For
example the state authorities could conduct safety audits on a regular and systematic basis.

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Thus a full systematic audit needs more time to get into. Thus the ICAO standards follow the
audit rules. Safety audit process is fixed on a fixed and dedicated annual salary to fulfil the
safety measurement process. The integrated audit rules are very safe to the other business
process and performance area such as the quality, capacity and cost efficiency.
All the audit should be pre- planned and supporting documents of the audit evidence and the
proposed schedule and try to identify the information which is needed to be added before
commencing the audit. It will also be necessarily to specify the critical audit process which is
conducted and used to develop a detailed plan to the audit use. Hence in the same case the
blechington company could be using the same process for auditing.

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Bibliography
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