Auditing Report: Analyzing Auditing Theory and Practice in Business

This report delves into the practical application of auditing theory, focusing on two case studies: a fashion retail business and a manufacturer of mini-hifi systems. It examines the auditing controls used to assess control assertions, identifies weaknesses in existing systems, and evaluates the impact of autonomy standards. The report also analyzes the importance of financial challenges, marketing strategies, and pricing strategies in the business. It explores substantive procedures in auditing, assesses risks related to auditing provisions, and discusses the importance of human resource management and corporate identity in business growth. The report also addresses the challenges of rapid expansion, including the need for proper financial investments and effective employee training. Ultimately, it provides a comprehensive overview of auditing principles and their practical implications in various business contexts, referencing Australian Accounting Standards.

Running head: Auditing
Auditing theory and practice
Name of the Student-
Name of the University-
Author’s note-

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Solution to question 1..................................................................................................................2
Solution to question 2..................................................................................................................9
Conclusion.....................................................................................................................................18
References......................................................................................................................................19

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3Auditing theory and practice
Introduction
The report is emphasized on finding out the appropriate resolution in assessing of the
auditing controls that are generally used to find out the control assertions. There are two parts in
this report which are defines that Jersy Ltd owning a range of fashion stores in the state of
Australia. The report perfectly defines the condition of auditing standards defines the
establishment of overhead cost related to the business impact of the industry. The autonomy
standard, which the company usually inherits to enjoy, is discussed with giving out the
appropriate reasons particularly. During the second part, it is being defined effectively in
measuring the auditing assertions of the company who is the manufacturer of mini-hifi systems.
The types of substantive procedure are also developed and described with evaluating the process
followed to the Australian Accounting Standards. Special sort of risk in relation to the auditing
provisions are discussed and evaluated with the considerations in the same process.
Discussion
Solution to question 1
It is an organization which is focused on manufacturing a range of fashion clothing
business which mainly target the youths of the country. The store managers of the company are
entitled to perform the highest degree of autonomy in regarding the types of quality of the
clothes that they mainly render to buy and sell at a higher value in the market. However, the
main office of the organization is consigned to provide a standard mark-up cost in the business
which are used by the local managers of the company which is used by them in order to receive
the selling price much higher in the market by comparing through several other companies who

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are entitled with the same sort of business. However, the monthly returns are generally
consolidated by the accountants of the accountants of the company about advising the managers
about betterment of the company.
Weakness existing in the system
There are most of the disadvantages related to the expansion of the business which is
inherited to the concluding of top priorities. Rapid amount of growth in the company often leads
to downsizing that leads to curbing the human resources of the organization. It is the generic
function which often create problem in its self-unintended consequences. Commitment attributed
in terms of pushing revenues into a new level where it is quite possible to sustain the resources of
the company in focusing to the breaking point of the company effectively. Management is
entitled to focus on the type of challenges faced by the company on the point of recruiting the
employees who might be able to handle and sustain the resources quite effectively and
efficiently. It is focused in protecting the future generation if the company to reach the road map
and meeting up the estimated target which was planned during the initial period. There are other
sort of problems which are mainly faced by the management in terms of recruiting employees
who are possessing the capability in order to handle expanded responsibilities efficiently. It is
done through enacting by sacrificing the cost and quality control in focusing to the requirements
in the business.
Rapid growth of the company may lead to downfall of quality. Which is encountered
with different sort of examples, it happened with Toyota where executives focused in achieving
15 percent of the world’s auto market by the year 2012. However, in order to achieving the target
the company did not took care about the quality, they just created a benchmark where they

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embedded their focus to become the strongest company in the auto market. To achieve this
target, the company just ignored about possessing the best quality which is the ultimate demand
of most customers. Companies result by compromising its reputation for the inadequate quality,
which they actually maintain. Corporate identity is very hard to achieve in the market place.
Unique, innovations, integrity and honesty are the key words which are generally linked with
achieving the badge of promoting the best quality in the market. Training and recruiting the best
human resource is one of the crucial aspects of the organization. When the companies are usually
expanding in the market, employees skills are most crucial to envied the best out of them. There
are many instances where employee’s skills do not update in accordance to the changes in
associated with the market apportions. There are different aspects which mainly follows the old
structure of the company, they do not obtain to change their working culture as well as the
hierarchical structure. This affects to the ultimate feedback the company where the clients do not
possess happiness to the company functions. Employees who are usually loyal to their companies
are generally found that they are used to provide the best returns out of them.
Financial challenges are one of the major setbacks in terms of this context. Expansion of
the company mainly require appropriate financial investments which can lead to act as a major
backbone of the company who is looking forward for ending the desired business. However, if a
company do not have proper finance then it would be quite difficult for the business to go
further. There are certain issues which occurred in the selected scenario where poor marketing
strategies and also poor pricing strategies harmed the business in which resulted them as poor
performances and they had to incur variable losses. Surges in the accountings standard of the
company leads to improper apportion through focusing on the franchises where they fail to
attract the customers. Improper pricing strategies where they do not even evaluate the

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requirement in the market, organic demand of the customers in the market place are required to
analyze properly in order to produce the best production to them. There are proper steps which
are needed to follow perfectly to gain optimal amount of revenue. The managers of the company
set standards in the very beginning of the business where they state the requirement very
effectively. However, due to improper financial budget of certain companies, managers do not
have the proper conditioning of prepare the best marketing plans to fit in the competition of the
business standards. There are certain losses of control where the chief executives do not really
survive in the market due to certain reasons. It is understand that once the company outgrow
their involvement in the original concept of ideology in the obtaining source of involvement
made by the organization, it is been followed by them through overall decision by considering
short-term loans from the financial institution. The company undergo with this concept in order
to fix up the issue of shoring up the organization financial procedure. Whatever is the range of
the business, it is either smaller or bigger the owner is expected to lose the recognition approach
when the person is comparing the selected business in comparison of the business of category
leaders.
Business which is been selected in this report focuses on the clothing segment which is
quite segmented throughout every selected age. However, the company is mainly focused in
young segment by making a proper survey. If the owner of the business is going to compare his
business with the business of the leaders in this particular segment within the country. This is
considered as one of the weakness of business. Customers mainly appreciate companies which
are certainly famous in terms unique category and the unique way which are mainly available to
the business. Likewise this is a setback for the small or mid-sized business which are eventually
locking for better growth in the market. Instantly every people usually recognize those firms,

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which are quite popular in the market place, and they do have loyal customer base. Even if they
do not really produces bets quality of products in the market. However, companies, which do
prepare best quality but do not have any brand value, will lose to them eventually.
Lack of resources within the company which would not allow them to grow at a good
pace. An organization shall be quite feasible enough to construct visions and missions of the
company, which would be allowing them to construct a plan to bridge the differences, create
earlier. It is also necessary to avail optimum amount of resources to gain momentum in the
business. Innovative ideas can only be implemented successfully then itself it will help the
organization to become successful. Obtaining the visionary statement and then transforming the
short-term planning into long-term growth of the business will help them out to evolve into the
next level. Putting better amount of innovation and creativity will enhance the struggle into
better amount of cash flow into the business. The selected company is very into the business
which is considered as an outsider in the market-place. The loyal customers are mainly focused
into the successful existence companies. However, in the conceptual study, it defines that newer
companies with innovative ideas and proper implementation can really break records and sustain
with increasing number of demands of the clients. It is the opportunity of the newer companies in
terms of obtaining better way to perform in doing things in the market which had not been done
by none in recent times. Though considering the tagline of the term “outsider”, a virtue will let
the company to perform much better than anyone else in the “market-place”. However, there are
certain ways which can let down the company in order to reduce the performance of them; if the
newer company donning the structure and policy of the market which is mainly focused of old
strategies then it is quite difficult to sustain in the business.

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There are possible problems where expert employees are not highly scaled but they are
even highly priced in the company. It is problem for them when they are not being able to recruit
employees who are generally the industrial experts. It is disadvantage for the company and it is a
big setback for the owners and chairman to some extent. In the appropriate scenario it is being
involved that hiring the appropriate person with considering the perfect attitude to be conducted
within the organization who is involved in maintaining every aspects of the rule and regulation
involved in the organization. The person is recognized as valuable in each and every bit as the
most valuable segment that is upbringing all the skills which is appreciated by the company. The
person is required to carry all the Morales and traits that is being required to run for a long
distance inheriting for the purpose of preparing itself for accepting every challenges. For
carrying all these attributes within the employee, it is highly required by the management to train
the person to achieve all these targets. The most important attribute that is practiced by the
company is making the person to become adjustable with the working chemistry practiced within
the organization.
The company focuses on recruiting those candidates who are generally inexperienced or
fresher in nature. Often it is been experienced that these fresher turn themselves into the best
employees in the industry who outperform their skills. In considering Jersey Ltd, owners feel that
his competitors are possessing with cheaper prices in the market. However, there is no condition
to feel this anxiety because the goods which is produced by this company is way too high in the
context of other companies within the nation. The raw materials which is mainly involved in
producing the goods are not that cheap which is the scenario in terms of other companies. The
labor cost, which is mainly included in this organization, is quite higher but they provide the best
output, hence it is usual that prices might be much higher comparing to other entities. There are

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no scenarios of losing customers in the market while maintaining higher prices, if products are
generally superior to any other entities then it is being considered that the entity is undergoing
with proper innovation strategies with referring better usage of human resources effectively.
It is considered as a truth in few areas where technology is not claimed as the biggest
strength if the company. There are numerous number of companies which do not possess their
own website or even undemanding the completive scenarios in understanding the technological
resolution by understanding the demands in the particular market where they have targeted the
business. The technology shortcomings are inclined in choosing some of the IT works which
could have quite useful in context of the company, however in regard of the given company in
this report, which is Jersy Ltd; they are focused in manufacturing clothes. Technology is not that
much important in the context where they shall not be worried in a factor that technology is the
ultimatum of selected business. There are instances where company might hire people who are
capable of involving their technological thoughts much superior than the owner will do within a
fraction of time. However, cost allocation in this factor will be generating into much higher than
what it is estimated by the management. If it is considered that, a technological specialist
recruited in order to enhance the position in order to handle every particular uses of
technological proportions focusing to utilize better or higher network. This segment will be much
fruitful in comparing to the earlier segment of task that was discussed, hence it is considered as
the valuable task which might be good for the company if it is installed.
Suggestions, which are required for the management in order to proceed for the
betterment shall implement in the course of meeting the market demands applied in the
organization for the greater degree of innovation. It shall be practiced on the context of
customers who are implied in rising expectations from the market. Competitors of this company

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are basically much more practical in the scenario who are practicing and involving much better
technique to beat the pace. Changing with incurring adaptability is gently required for the
company, which is mainly missing, and regular updating of technology is mainly required for
boosting up the performance wherever it is required. Minting the effectiveness in business
standard required to generating better productivity. Better ideas, efficient process in marketing
and productivity, innovation of productivity, giving valuable services to the clients and
maintaining after sales services in order to build up a strong future bonding with the clients who
is expected to stay loyal to the company.
Solution to question 2
Sweet sounds is an Australia based company which is mainly involved in manufacturing
mini hi-fi systems. The organization maintains a year end which is on 30th June on 2015.
However, during the year of 2014, the company started to change its production process and
manufacturing in order to make it more degree of reliable. As the company became more reliable
in relation to the activity which is practiced by them on their manufacturing team, they even
decided to change the warranty period from 3 year to 5years in relation to all the sales in
absorbing from the period of January 5, 2015. However, it was found that the claim went down
from the provision of warranty which was earlier consists of $4,00,000 went higher from
considering the last year’s value of $3,500,000.
Auditing assertions
Auditing assertions involving in this concept is mainly implied by all entities in
accordance to the companion of Sweet Sounds Ltd. Contingent liabilities, contingent assets are
maintained with the acknowledgement except the resulting figures of executor contracts which

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are generally implied in the kind of onerous contracts (Bryson., 2018). These are also being
covered with the alignment of another standard. These are the standards which do not even apply
to the financial instruments which includes warranty standards that is featured with segmentation
within the scopes of AASB accounting standard of Australia. The company mainly follows the
accounting principle enacted within the country in featuring of the conceptual reasoning
attributed with certain conditioning of leases and any other sort of obligations that is inclined
with the process which generally applicable to short-term leases featuring for the underlying
assets. Warranty is applicable in the context of insurance contract, general insurance contract,
contingent liabilities, contingency assets with also involving the obligations and rights involved
in the scopes sustaining about the consumer essence. There are specific requirements, which are
embedded with structuring the conceptual framework regarding the concept of provisions
inherited regarding warranty to configure the uncertain timing of amounts. It is a perfect
instrument for assisting the company in term of acquiring the business combination which is
required by them in order to adjust the carrying amounts of assets and liabilities of a particular
company.
Types of substantive procedure
It is the process which is mainly involved in the conception of verification of transactions
and even analyzing the warranty schemes relating to the testing of controls that is evident to the
source of auditing structures assorting of the evidences, accounting estimation, and also relating
aiding to avoid downfall and pitfalls experiences by companies (Shingo., 2019). Analytical
procedure which is gently described in resulting out the roadmaps involving the correct source of
budgeting analysis in order to maintain the misstatements which are mostly occurred in the
financial statements of the company (Browne et al., 2019). The analytical process is helpful on