Management Auditing Report: Risk Assessment and Controls

This report provides a comprehensive overview of management auditing, encompassing various aspects critical to business operations. It begins by defining management auditing and its significance, emphasizing financial auditing's role in assessing financial capabilities. The report delves into assessing inherent risk, outlining factors such as rapid changes, financing availability, economic conditions, and misstatements. It then examines internal control, its limitations, and its connection to audit strategy, including general objectives and how auditors develop specific control objectives. Furthermore, the report discusses tests of controls, emphasizing their importance when relying on controls to mitigate material misstatement risks. It also covers the collection of audit evidence regarding the existence, effectiveness, and continuity of controls, including the use of technology and the involvement of human resources in the process. The report concludes by highlighting the importance of risk assessment and technological processes in effective auditing.

Running head: MANAGEMENT AUDITING
Management Auditing
Name of the student
Name of the university
Author Note:

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Table of Contents
Introduction................................................................................................................................3
Question of Chapter 6................................................................................................................3
Explain the factors that influence the assessment of inherent risk.........................................3
Questions of Chapter 7...............................................................................................................4
Explain the concept of internal control, its inherent limitations and how it links to the audit
strategy...................................................................................................................................4
Describe the general objectives of internal control and how the auditor uses them to
develop specific control objectives........................................................................................4
Questions of Chapter 8...............................................................................................................5
Understand that tests of controls are undertaken when the auditor intends to rely on a
control to reduce a risk of material misstatement..................................................................5
Appreciate that when undertaking tests of controls, the auditor must collect audit evidence
about the existence, effectiveness and continuity of controls................................................5
Conclusion..................................................................................................................................6
References and Bibliography.....................................................................................................7

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Introduction
Management auditing is a systematic examination of different types of decisions and
different kinds of the actions of the management of the business organization in order to
analyse the performance and the capability of the business organization in the most efficient
manner. The different kinds of the business aspects includes the likes of the managerial
perspectives like that of the objectives of the business organization, policies of the business
organization, procedures of the business organization, structure and system followed by the
business organization and many more as such (Guthrie Parker and Dumay 2015). The most
important audit that are performed by the management of the business organization is the
financial auditing which helps to determine the financial capability of the business
organization and the amount of finance that it can actually manoeuvre for to lead the different
operations of the business organization.
Question of Chapter 6
Explain the factors that influence the assessment of inherent risk.
There are a large number of different factors that have a strong influence on the
assessment of the inherent risk. This includes the likes of;
a. Rapid Changes- The change or transformation of the inventory of a business from
modern to obsolete in a short period of time can be said to be suffering from high
inherent risks (Schulze et al. 2017). The more rapid the changes, the more rapid is the
chance of the business organizations to change into a totally obsolete and inefficient
state.
b. Availability of different kinds of business financing- The availability of the business
financing in different manners is highly efficient for the business (Raphael 2017). The

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better the source of financing, the better will be the chances of the business to present
a better and efficient business planning.
c. Condition of the economy- The economic condition of the business is one of the
major factors that helps to determine the different kinds of the inherent risks that can
be faced by a business (Schulze et al. 2017). The presence of a strong economy helps
the business organization to avoid any kind of inherent risks while on the other hand,
the presence of a rugged and struggling economy relates to the increase in the chances
of the inherent risks.
d. Misstatements- The presence of different kinds of the misstatements is a major
problem for the organizations and often leads to problems in the business
organizations.
Questions of Chapter 7
Explain the concept of internal control, its inherent limitations and how it links to the
audit strategy.
The following chapter is based on the discussion of the internal control and the risk
assessment process in a controlled and specific manner. Internal Control is said to be as a
particular process that is designed and implemented by the management of the business.
According to, Dumay et al. (2018) the following process assures the management of the
financial stability of the company in order to stay sustainable and efficient enough to ensure
business success. The study reveals that the internal control process provides reliability to the
entity of the financial based reporting and also helps the management of the business to
comply with all the laws and the regulations of the business in an effective manner (Hut-
Mossel et al. 2017). The test of the control risk and its implementation in the business
organization help the management of the business to ensure a smooth and sustainable
business model in the future.

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Describe the general objectives of internal control and how the auditor uses them to
develop specific control objectives.
The satisfactory control of the internal process is important for the success of the
business in a successful manner. However, the use of the inherent properties leads to inherent
controls like that of control breakdowns and the possibility of the management override.
According to, Dumay et al. (2018) the risks are identified and mitigated accordingly in order
to ensure the management decisions are followed out and all the laws and regulations are
complied with accordingly. The presence of a satisfactory and all round internal control helps
the management of the business to control and monitor the internal business risks and
practice sound and effective business auditing and business practice that is important for the
success of the business in a proper manner (Guthrie Parker and Dumay 2015).
Questions of Chapter 8
Understand that tests of controls are undertaken when the auditor intends to rely on a
control to reduce a risk of material misstatement.
The standards of the auditing business generally recognizes and permits different
kinds of statistical and non-statistical methods of the audit sampling process (Dondi et al.
2017). The audit sampling process involves a large number of technological specifications
and advances which have helped to reduce the number of times the auditors have tried to
need only the techniques of the sampling process to gather the different kinds of the
evidences related to the audit calculation (Dumay et al. 2018). The development of the audit
control system has been divided or segmented into two different ways. They are as follows;
a. The development of well controlled automatic systems that helps in the auditing
process

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b. The advent of technologically advanced software has helped in the development of
the recording of client data in a much easier manner
Appreciate that when undertaking tests of controls, the auditor must collect audit
evidence about the existence, effectiveness and continuity of controls.
The case study has revealed that though the use of technology is the most comprehensive
trend in the modern day auditing process, the absence of human involvement is a problem in
some cases as the control process in these cases totally relies on the involvement of the HR
department (Guthrie Parker and Dumay 2015). The study has revealed that most of the testing
process needs to be checked and testified by the management of the business organizations as
well as the auditing manager and thus the use of the technology in such cases cannot be
trusted upon (Dondi et al. 2017). The internal controls of the risk assessment process is
highly necessary and important as this helps to undertake the risk of evaluating the existence
of the internal control and the inspection for the different documents and reports related to the
same. Therefore the risk assessment and the use of the technological process is essential for
the same.
Conclusion
The following report is based on the identification of business auditing, its importance
and its practical use in the business world. The report presents a clear and transparent image
of the different kinds of the perspectives related to the business auditing and makes the most
of the business in the most efficient manner.

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References and Bibliography
Dondi, M., Torres, L., Marengo, M., Massardo, T., Mishani, E., Ellmann, A.V.Z., Solanki,
K., Delaloye, A.B., Lobato, E.E., Miller, R.N. and Paez, D., 2017, November.
Comprehensive Auditing in Nuclear Medicine Through the International Atomic Energy
Agency Quality Management Audits in Nuclear Medicine (QUANUM) Program. Part 1: the
QUANUM Program and Methodology. In Seminars in nuclear medicine (Vol. 47, No. 6, pp.
680-686). WB Saunders.
Dumay, J., De Villiers, C., Guthrie, J. and Hsiao, P.C., 2018. Thirty years of Accounting,
Auditing and Accountability Journal: A critical study of the journal’s most cited
articles. Accounting, Auditing & Accountability Journal, 31(5), pp.1510-1541.
Guthrie, J., Parker, L.D. and Dumay, J., 2015. Academic performance, publishing and peer
review: peering into the twilight zone. Accounting, Auditing & Accountability Journal, 28(1),
pp.2-13.
Hut-Mossel, L., Welker, G., Ahaus, K. and Gans, R., 2017. Understanding how and why
audits work: protocol for a realist review of audit programmes to improve hospital care. BMJ
open, 7(6), p.e015121.
Pascual, T.N., 2016. Examining quality management audits in nuclear medicine practice as a
lifelong learning process: opportunities and challenges to the nuclear medicine professional
and beyond. Nuclear medicine communications, 37(8), pp.785-791.
Raphael, J., 2017. Rethinking the Audit: Innovation Is Transforming How Audits Are
Conducted-and Even What It Means to Be an Auditor. Journal of Accountancy, 223(4), p.28.

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Rowlinson, M., Harvey, C., Kelly, A., Morris, H. and Todeva, E., 2015. Accounting for
research quality: Research audits and the journal rankings debate. Critical Perspectives on
Accounting, 26, pp.2-22.
Schulze, M., Nehler, H., Ottosson, M. and Thollander, P., 2016. Energy management in
industry–a systematic review of previous findings and an integrative conceptual
framework. Journal of Cleaner Production, 112, pp.3692-3708.
Spooner, M., 2018. Qualitative Research and Global Audit Culture. Sage Handbook of
Qualitative Research (5th ed., pp. 894–914). Thousand Oaks, CA: Sage.