Auditing and Assurance: A Comprehensive Analysis of Key Aspects

This report provides a comprehensive overview of auditing and assurance, beginning with a comparison of auditing and assurance processes, highlighting their differences and significance within an organization. It then delves into the crucial concept of auditor independence, exploring its impact on professional ethics and legal liabilities, and discussing factors that can compromise it, such as integrity and confidentiality. The report proceeds to explain the stages of audit planning, from defining the audit subject to drafting the final report, emphasizing the importance of a well-structured plan for minimizing risks and maximizing efficiency. Finally, it examines internal control systems, outlining their objectives, including safeguarding assets and ensuring accurate financial reporting, and differentiating between preventive, detective, and corrective controls. The report concludes by referencing relevant academic sources to support its analysis.

Running head: AUDITING
AUDITING
Name of the Student
Name of the University
Author Notes

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Answer to question 1
The audit is the procedure of assessing the accounting entries existing in the financial
report of the firm. The assurance, on the other hand is the process of analysing the accounting
entries present in the financial report of the company (Knechel and Salterio 2016). Assurance
is usually followed after the audit process has been made. Assurance is used for the
assessment of the accounting entries of the organization. Auditing and assurance are both
important in an organisation. The major point of differences between auditing and assurance
is given below.
AUDIT ASSURANCE
 Audit is the process, which checks
and evaluates accounting entries in
the organisation.
 Audit is the first and foremost step.
 Internal auditor or external auditor
does audit.
 Audit informs about the
misrepresentation done in the
financial records, any fraud and any
dishonest activities done in the
organisation or by the company
(Barr-Pulliam, Brown-Liburd and
Sanderson 2017).
 Audits includes ethical presentation
of financial records and statements.
 Assurance is the assessment of
financial entries and records of the
organisation.
 Assurance is generally followed by
audit. It starts after auditing has
began.
 Audit firm does the assurance.
 Assurance specializes is assessing
and improving the quality of
information in a company.
Assurance aids the decision making
of a organisation.
 Assurance is generally used after
auditing process to check the
accuracy of the financial records and

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Fair and accurate presentation has
been done by audit. Audit also
checks whether financial records are
as per accounting principals and
accounting standards.
provides assurance to the
shareholders whether any
misrepresentation of records, misuse
of funds, dishonest activities are
present in the firm or not (Schmidt
Wood and Grabski, 2016).
For example, ABC company conducted an audit process in their organisation by their
internal auditor to assess whether their financial statements are showing perfect results or not.
ABC wanted to evaluate the records to check its ethnicity. After the auditing process is
complete, ABC will hand over the financial records to THS audit company for the assessment
of their financial records. This assessment will aid them to evaluate whether there are still any
issues present in the records and financial statements or not. In addition, this will aid their
shareholders to understand current ethical position of the company therefore, they can further
in the organisation.
Answer to question 2
Auditor’s independence is the key factors influencing professional ethics and legal
liabilities of an auditor. Auditor’s independence became a debatable issue after accounting
scandals, questioning on auditors ethics and liabilities (Salim 2016). However, other variables
can also affect the professional ethics and liabilities of an auditor such as integrity,
confidentiality, negligence of financial report. Auditor’s independence denotes to the
individuality of external auditor and this approach is characterised by integrity plus objective
approach of the audit procedure. Auditor independence denotes to the individuality of the
internal auditors or of the external auditors from entities that have a monetary interest in the

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business being audited (Karan 2017). Independence requires truthfulness and an objective
approach to the audit process. The integrity of audit created by the auditor should be accurate
and ethical. Integrity is also one of the most dependent variable related to auditors ethics and
legal liability. Confidentiality is the compulsion that all members of the professional bodies
including auditors refrain from revealing information that is learned because of the
employment to the people. Independence is the ability to act with honesty, impartiality and
with professional skepticism. Absence of auditor independence impacts on the credibility and
dependability of the report. The auditor must be independent and ethical so that the financial
records that are being prepared does not include any misinformation or fraudulent
transaction, which can impact on the liability of the auditor.
Objectivity refers to how the internal audit function comes within the client’s
organizational structure. This is significant as it established the level of independence of the
internal audit purpose from the rest of the organization. The more independent, then more
reliance can be placed upon.
Due care is the obligation which tells the auditor to complete every task thoroughly,
document these financial transactions and finish the audit on timely basis. This assist auditor
to finish the audit of time and reduces the liability of the auditor (Inácio and Vieira 2019).
Answer to question 3
The audit planning is a major part of the audit for internal and external audits. A
proper audit planning will aid to benefit the auditor to minimize the its risks, increase audit
efficiency and meet its objectives at minimum exertion. Proper audit plan ensures that audit
risks are identified and corrected (Ahmed 2019). The steps of audit planning is given below
which will aid to understand the proper audit process of an organisation.

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Fig.1 Audit planning
Determining audit subject and requesting financial documents
After informing the organisation of the upcoming audit, the auditors requests for the
financial documents and determines the subject of the audit. These documents includes copy
of audit report, bank statement, receipts and ledgers of the organisation. Additionally, if
required, the auditor might ask for organisational charts and copies of board minutes and
rules.
Defining audit subject
The subject of the audit are defined after collection of the financial documents.
Auditor gazes over the financial info contained in the documents and strategically plans how

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the audit will be lead. Risk workshop should be conducted to identify possible implications of
the audit plan (Suryani and Sitorus 2018).
Defining audit scope and schedule open meeting
After the audit subject are defined and documents are gathered, the auditors defines
the scope of the audit. High-ranking management and administrative staffs are invited to an
open meeting during which the possibility of the audit in presented by the auditor. Auditor
conducts the time frame after the audit scopes are defined. Any possible timing issues in the
audit is discussed and handled in this step of planning.
Pre-audit planning and onsite fieldwork
Afterward, the auditor takes the info from the open meeting and conducts the audit
plan. Fieldwork is then done by speaking to staff members for the preview of the procedures.
The auditor evaluates for compliance with plans and procedures. Internal control are
evaluated to perceive whether they are satisfactory or not (Alam 2018). The auditor may
discuss difficulties as they rise to give the firm opportunity to respond.
Data gathering and drafting the report
After the pre audit process are conducted, the auditor finalises the data gathered and
starts to draft the finalized audit report. The auditors prepared the report based on the findings
of the audit. Any errors found in the process such as payment authorization issues,
discrepancies and mathematical errors are presented in the report. Thereafter, the auditor
writes the observation describing the results of the assessment and recommend solutions to
the organisation.
After the audit process is complete, the auditors asks a answer from organisation that
shows whether it agrees or disagrees with the problems of the report. A report of management

6AUDITING
action plan is also solicited to address the problems and a projected completion date is
declared. At the closing meeting, all parties tangled discuss about the audit report and
management responses and any remaining issues are fixed at this point.
Answer to question 4
Internal control is a policy or procedure by management to defend its assets, increase
efficacy, promote accountability and sojourn fraudulent behaviour. Internal control aids
management to prevent their employees from stealing assets and or committing fraud (Cheng,
Goh and Kim 2018).
The objectives of internal control system is given below.
 To systematically record every transaction accurately with respect to the accounting
period and type of transaction.
 To check and ensure that business transaction that takes place in management is
general and authorised by the management.
 Internal control aims to control and secure the company’s assets from unauthorised
use. For the security of the assets, physical security systems such as anti-theft service,
surveillance cameras are used (Iovu 2018).
 To compare and report assets in the system at regular intervals. Internal control aims
to report it to the governance in case any fraud happens.
 To evaluate the system of accounting of each transaction in the organisation.
 To review and loophole each transaction and take necessary steps regarding to that.
 TO ensure proper utilisation of resources in the management to prevent any misuse of
assets.
 Internal control system aids the management to find out whether the financial
statements are aligned with accounting principals and concepts or not.

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An ideal internal control system is that one which ensures best possible utilisation of the
resources and aids to mitigate risks involved in organisational funds and resources.
There are three types of internal control system available to business organisation.
Fig 2. Types of internal control
Preventive controls
Preventive control methods are introduced in the firm to stop irregularities and errors
in the transactions from taking place.
Detective controls
Detective controls takes place to reveal errors in the transaction of the organisation.
Control controls
These controls are designed to control and prevent errors to happen in the transaction
once they takes place (Allen et.al 2019).

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References
Ahmed, N., 2019. Audit Planning & Documentation Procedures.
Alam, S., 2018. Audit Planning Ahmed Zaker and Co.
Allen, D., Heninger, W.G., Summers, S.L. and Wood, D.A., 2019. The Effects of Different
Types of Internal Controls on Self-Control. Journal of Strategic Innovation and
Sustainability, 14(6).
Barr-Pulliam, D., Brown-Liburd, H.L. and Sanderson, K.A., 2017. The Effects of the Internal
Control Opinion and Use of Audit Data Analytics on Perceptions of Audit Quality,
Assurance, and Auditor Negligence. Assurance, and Auditor Negligence (August 17, 2017).
Cheng, Q., Goh, B.W. and Kim, J.B., 2018. Internal control and operational
efficiency. Contemporary Accounting Research, 35(2), pp.1102-1139.
Inácio, H. and Vieira, E., 2019. The Influence of Internal Audit on External
Audit. Organizational Auditing and Assurance in the Digital Age, p.1.
Iovu, C., 2018. The role and key objectives of the company’s internal audit process.
Karan, S., 2017. COMMERCE.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Salim, A., 2016. The Effect of Qualified Auditors' Opinions on Share Prices: Evidence from
Tunis. Available at SSRN 2846391.
Schmidt, P.J., Wood, J.T. and Grabski, S.V., 2016. Business in the cloud: Research questions
on governance, audit, and assurance. Journal of Information Systems, 30(3), pp.173-189.

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Suryani, D. and Sitorus, T., 2018. The Client Risk and The Audit Planning: Influence of
Acceptance of Audit Engagement. International Research Journal of Business Studies, 10(3),
pp.183-198.