Auditing and Assurance Services Report: Clarke & Johanson and MSL

This report provides a comprehensive overview of auditing and assurance services, focusing on case studies of Clarke & Johanson and Crampton and Hassad. The report delves into the concept of auditor independence, identifying various threats such as self-interest, relationship, and advising threats, while also suggesting safeguards to mitigate these risks. Furthermore, the report examines business risks faced by companies like MSL, particularly operational and reputation risks, and analyzes audit risks to propose strategies for risk reduction. Through detailed analysis of these case scenarios, the report aims to provide a practical understanding of auditing and assurance services, emphasizing their importance in ensuring the financial health and operational efficiency of business entities. The report provides various examples of risks, safeguards, and methods to reduce the impact of the same. The report helps in understanding the significance of auditing and assurance services for business entities.

Auditing and
Assurance services
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
CLARKE & JOHANSON CASE STUDY......................................................................................3
a) Evaluation of threats in relation to auditor independence.......................................................3
b) Safeguards for identified threats..............................................................................................4
CRAMPTON AND HASSAD CASE SCENARIO........................................................................5
a) Business risks to MSL.............................................................................................................5
b) Audit risk and results to reduce these risks.............................................................................6
CONCLUSION................................................................................................................................7
REFERENCE...................................................................................................................................9
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INTRODUCTION
Auditing and assurance services are essential for gaining organization's actual
performance as well different ideas, guidelines achieved for proper management. However, risks
occur at workplace and solutions to reduce are guided by chartertered accountant or any certified
public accountants. The present report is based on understanding case studies related to auditing
and assurance services for Clarke & Johanson as well Crampton and Hassad to present risks/
threats including safeguards for them. In this regard, auditor independence and occurred threats
including their safeguards are to described. Along with this, business risks and different ideas for
decreasing risks can be expressed through this assignment. Hence, learners are able to
understand significance of auditing and assurance services for both business entities through this
report.
CLARKE & JOHANSON CASE STUDY
a) Evaluation of threats in relation to auditor independence
Auditor independence is an complex approach that considers as independence of auditors
from parties that have interest in business that is to be audited. Therefore, different risks and
threats are obtained to present company's efficiency. As per the given case scenario, a business
scenario of Clarke and Johanson (a travel company) is presented (Kend, Houghton and Jubb,
2014). Under which, Geoff is audit partner and Chris is CEO of the organization. However, it is
suggested for firm re-engaged as auditor for upcoming audit of 30th June 2015 financial report. In
addition to this, Michel and Anette are auditor's partners who work as first year accountant and
CJ's tax advisory department accountant respectively. In this process, Geoff suggested some
issues related to auditor's independence by identifying conversations with Chris, Michel and
Annette. However, different threats can be arised for auditing are to be understood as below:-
 Self interest threat:- In first situation, Chris wants to reappoint CJ as auditor to check
out financial statements of the company for next upcoming auditing. However, there is
self interest threat occurred for selecting that auditor who has been audited in previous
years. On the contrary, it can be considered that there is any personal self interest
between both parties regarding business activities (Sanderson, 2013). Therefore, this
kind of threat can be raised for auditing in next upcoming future auditing.
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 Relationship threat:- In the case study for providing services to auditor for holiday
package voucher for 14 days emerges relationship threat. By which, issue can be raised
related to ATO that pays specific close attention to client of company. In this regard,
personal relationship with auditor and his family presents auditor independence that can
be obtain threat in operating business operations (Christensen and et. al., 2012).
 Ex staff and partner threat:- In this situation, being audit manager of the Clarke and
Johanson, I identified views of Michael who comes under audit team as well tax
advisory of LTH Ltd. In accordance to this, it is recognized that Michael is too much
excited and willing to taking part for conducting auditing. In this process, there is threat
for occuring risk related to Ex partner interest for checking out and preparing financial
records (Birkey and et.al., 2016). Therefore, this kind of threat can be occur for auditing
and assuring services. There may be any self interest and defualt for audit obtain that is
not so fair in conducting auditing.
 Advising threat:- Anttee is tax adviser for LTS Ltd who provides different advice for
company's effectiveness regarding paying tax. However, it is auditor independence that
is considered as risky and threaten for auditing process. It is related with financial
position of company as well default in audit team (Knechel, 2016). Therefore, advising
threat can be create for auditing due to interfere of Anttee is risky for conducting
auditing to identify financial records of the company.
b) Safeguards for identified threats
In case of occurrence of any threat, auditor cannot complete his auditing therefore it is
required to put safeguards to eliminate threats. However, it is necessary to address each threat
and analyze critically financial advisers advice. In addition to this, for rescuing towards self
interest and relationship threat, it is needed to recognize familiarity and link between auditor and
owner of the company. Along with this, an external review is able to protection towards ex-staff
and partners' threat (García and et. al., 2014). For good working relationship, it is needed for
organization to conduct auditing effectively that would be liable for efficiency of economic
position for organization's effectiveness. However, auditor of the organization must be
professional in nature that would be impact on auditing accuracy as well remains able for
effective trust worthy and safeguard regulations. Including this, it is one of the great suggestion
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for organization owner of the company that if he is not comfort with auditor and his
independence then he should decline form business engagement with auditor for checking out
company's performance. Along with this, it is necessary for regulator to perform his job
effectively therefore auditing can be conducted in systematic manner. All defined situations are
unique where there is possibility for threaten. However, fairness in auditing can be created by
focusing on its safeguards (Wong and Millington, 2014). Therefore, financial manager can also
take effective advice for operating business activities. In this regard, safeguards can be obtained
for solving out these situations and its solutions. Hence, effectiveness of organization can be
gained through this method that is relevant for further business activities.
CRAMPTON AND HASSAD CASE SCENARIO
Crampton and Hassad is spare parts producing company of Australia that provides mobile
services and its equipment. There are several branches of company is present in different centres
as Perth, Newcastle and Mt. Isa. However, its headquarter is in Melbourne where financing, IT
and corporate services are provided (Lau, 2016). Company also create export and import of
goods within various countries worldwide. In addition to this, it has various customers including
suppliers for production and distribution of products. In this, some risks obtained in operating
business activities can be described through following terms.
a) Business risks to MSL
For production and supplement of mobile equipment, some risks are occurred can be
understood as below:-
 Operational risks:- During production and distribution of mobbile equipment, Crampton
and Hassad takes charge for maintenance services and for fulfilling warranted conditions.
It affects business' operations for in respect of customers. In this process, billing covers
daily routine rates as well travel, accommodation and living expenses incurred by
mechanic who visit to destination for mobile services for replacement and providing
effective services. Due to long distance locations, warranted conditions are billed to
consumers that presented in between one day or one week (Chou, 2015). However, this
kind of operational risks are occurred at workplace for maintaining and contracting for
mobile services. It is considered that if customers of the firm get aware of this activity
then operations for producing and supplementing goods would be impacted. However,
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resources and products service qualities affected for mobile services and incurring
expenses for mechanic's expenses including reaching out destination to customers'
location. In this regard, it is needed for organization to decide clear terms and price
refund as well maintenance services that will be effective for organization's effectiveness.
There is maximum one year guarantee is to presented for warranty period. Thus, after
selling, in case of default products, business operations are get affected that are
interlinked with financial, production of goods and various kinds of tools. Hence, for
operating business activities, it is needed to set out warranty period and offer in case of
faulty products. It is interlinked with productivity and profitability of firm to maintain its
sustain its value as well attraction of customers (Trotman and Trotman, 2013).
 Reputation risk:- It is essential for business organization to maintain its goodwill
regarding sustainability. If customer would know about company's operations then
reputation of organization also demand for mobile equipment get affected. In this
process, product failures and interest of consumers impacts for selling and purchasing
products. However, it is interlinked with creating relationship with customers including
customers, retailers, agents and other business entities etc. Including this, negative
publicity for mobile services are unable to present organization's performance. Therefore,
risks are occurred for making reputation to operate business activities same as different
kinds of strategies are presented for organization's effectiveness (Chambers, 2014). In
addition to this, it impacts on product demand, competitive strategies and so on. By
creating faults in mobile services, several risks are occurred for operating business
activities and maintaining its position in market for long time period. Therefore, negative
comments will be occurred that emerges risks.
b) Audit risk and results to reduce these risks
For analyzing business' performance critically, actual quality services and potential of
organization is obtained that affects result and selling of goods. However, it is required to
conduct auditing and identifying actual performance that is needed to make decisions regarding
efficiency and effectiveness. However, it is also required to analyze risks occur in business
operations. Including this, business operations get impacted for production and distribution of
goods as well product demand is analyzed. Moreover, it is risky to conduct auditing including
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wrong predictions for business operations, imbalanced income and expenditures. Therefore,
different substances to operate activities (Glover and et. al., 2014). In this process, audit risks are
related to checking out financial and non-economic performance also taking guidelines for
improving quality services.
Therefore, it is needed for any organization to select appropriate auditor to identify
business performance same as taking guidelines for effectiveness of firm. Risks occur at
workplace are required to be reduced therefore for increasing efficiency and operating business
activities effectively. In addition to this, auditing must be conduct in systematic manner to
analyze business performance and risks occur at workplace by auditing all operations including
balance sheet and other statements that present organization's product services (Bowling, 2014).
In accordance to this, risks can be reduced through preparing strategies for making decisions
related to business operations. For the purpose of organization's effectiveness, it is necessary for
conducting auditing and implementing action plans for adequate production and distribution.
Including this, it will be effective for identifying business risks and reducing them efficiently.
However, organization can enhance its product services through adequate auditing and following
on ideal guidelines provided by auditor that will be impacted on customer satisfaction approach.
Thus, it will be effective for increasing efficiency and reducing obstacles occur at workplace.
Therefore, appropriate results will be achieved through this system that is useful for MSL for
producing mobile and its equipment services. In this regard, expenses for mechanics related to
providing services in various placed would be effective. Apart from this, expenditure incurred on
production and supplement of goods can be effective through this process system. Hence, audit
plays significant role in business activities that presents actual organization's performance as well
varieties of ideas for implementing action plans (Bagshaw, 2013).
CONCLUSION
The report is concluded that auditing and assurance services are essential for effective
operations of business organization. However, actual financial position and potential of entity is
identified that is related to making further decisions. In addition to this, different case studies are
understood regarding auditing and business risks. Therefore, various kinds of threats for auditing
as auditor independence is considered that is linked with effectiveness and reputation of
company. Along with this, various qualitative tools are obtained for making decisions related
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organization's performance. Moreover, safeguards for rescue towards threats are introduced. In
this process, proper understanding related to business operations and decision making process is
obtained for reducing auditor independence complexity. Apart from this, through this report,
audit and business risks are presented including different guidelines for reducing those risks are
determined that is interrelated with organization's effectiveness and its efficiency.
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REFERENCE
Books and Journals
Bagshaw, K., 2013. Audit and Assurance Essentials: For Professional Accountancy Exams. John
Wiley & Sons.
Birkey, R.N. And et.al., 2016. . Does assurance on CSR reporting enhance environmental
reputation? An examination in the US context. In. Accounting Forum. 53(4). pp. 143-152.
Bowling, A., 2014. Research methods in health: investigating health and health services.
McGraw-Hill Education (UK).
Chambers, A., 2014. New guidance on internal audit–an analysis and appraisal of recent
developments. Managerial Auditing Journal. 29(2). pp. 196-218
Chou, D.C., 2015. Cloud computing risk and audit issues. Computer Standards & Interfaces.
42(3). pp. 137-142.
Christensen, B.E. And et. al., 2012. Extreme estimation uncertainty in fair value estimates:
Implications for audit assurance. Auditing: A Journal of Practice & Theory. 31(1). pp.
127-146.
García, F. J. and et. al., 2014. Usalpharma: a cloud-based architecture to support quality
assurance training processes in health area using virtual worlds. The Scientific World
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Glover, S.M. And et. al., 2014. Auditing & assurance services: a systematic approach. McGraw-
Hill Education.
Kend, M., Houghton, K. and Jubb, C., 2014. Competition issues in the market for audit and
assurance services: are the concerns justified?. Australian Accounting Review. 24(4). pp.
313-320.
Knechel, W.R., 2016. Audit quality and regulation. International Journal of Auditing. 20(3), pp.
215-223.
Lau, T.K., 2016. Commentary on Down syndrome screening in China. BJOG: An International
Journal of Obstetrics & Gynaecology. 123(3). pp. 30-30.
Pitt, S.A., 2014. Internal Audit Quality: Developing a Quality Assurance and Improvement
Program. John Wiley & Sons.
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Sanderson, I., 2013. Tools for IT governance assurance: using recent updates of ISACA's
Information Systems Audit and Assurance Standards alongside COBIT 5 can help
auditors evaluate their organization's information systems governance. Internal Auditor.
70(5). pp. 51-54.
Trotman, A.J. and Trotman, K.T., 2013. Internal audit's role in GHG emissions and energy
reporting: Evidence from audit committees, senior accountants, and internal auditors.
Auditing: A Journal of Practice & Theory. 34(1). pp. 199-230.
Wong, R. and Millington, A., 2014. Corporate social disclosures: a user perspective on
assurance. Accounting, Auditing & Accountability Journal. 27(5). pp. 863-887.
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