Financial Auditing Report: Pharmaceutical Industry and Auditing

This report analyzes the auditing practices of Billing and Associates, focusing on the pharmaceutical industry. It examines ethical considerations, including environmental protection and pollution prevention, and the importance of following international standards like ISO 14000 and 9001. The report identifies errors and weaknesses in financial statements, such as inappropriate hedge strategies, and discusses auditor independence, highlighting potential threats like self-review, self-interest, and familiarity. The report also addresses the acceptance of client relationships, considering factors like the availability of financial documentation and adherence to ISA 210. Finally, the report emphasizes the need for ethical and professional standards to maintain auditor independence and achieve short and long-term goals, including safeguarding practices to address potential conflicts of interest and ensuring unbiased opinions.

Auditing

Table of Contents
Introduction.........................................................................................................................................3
Part A1.................................................................................................................................................3
Part A2.................................................................................................................................................3
Part A3.................................................................................................................................................4
Conclusion............................................................................................................................................4
References............................................................................................................................................5

Introduction
Auditing is a systematic process of inspection of quality, process, records to ensure
standards set by government bodies. It is essential for a business organization is to follow all
the guidelines strictly which crate an ideal image. The present report based on Billing and
Associates which is an experienced firm in the conducting audit (Smith-Lacroix and et. al.,
2012). The report will explain about the different types of rules and regulation in
pharmaceutical industry regrading environment protection and other aspects.
Part A1
Today customer is more aware towards environment protection and climate issues which
create a needs for developing business in sustainable way. Therefore, Pharmaceutical Ltd. Is
to follow all ethical principles which are mentioned below:
Developing integrated environment management system at their workplace: As a pharma
company needs to design their own integrated environment management practices which
meet the international standards (ISO) 14000 series which prevent major negative impact of
toxic and other harmful gases (Ni,Yu and Xia, 2014).
Adoption pollution prevention: This is another ethical consideration which is related with the
making various pollution control techniques at workplace and sounding environment. For
example, Pharmaceutical Ltd. required that to minimise the use of harmful material in their
production process. On the other hand, Environment and pollution Act, they should be
developing guidelines and overcome negative impact on climate.
Use of clean manufacturing practices: This is another principle where cited firm required that
to follow all guidelines which meet the international standards (ISO) 9001 good
manufacturing practices which create an ideal image in the market (e Costa, and et. al., 2012).
Recycling and reusing materials: There are various methods and approaches can be used by
the cited firm in order to follow the guidelines of Environment Protection Agency.
Pharmaceutical Ltd. Needs to use their existing waste through recycling process which
having a positive impact on environment.
Part A2
The auditor of Billing and Associates identify various errors and weakness which required
that to minimise the higher authorities. At the time of examine all accounts and financial

statement it has been determined that hedge strategy was not appropriate which increase risk
and different derivative instrument (Worku and et. al., 2014). The main reason behind all
strategy due tom lack of experience and little exposure. Apart from that, they also required
that to identity those areas which are create potential risk due to hedging instrument. Auditors
examine the role of treasurer and other authorities regarding hedge strategy and its
implementation.
Part A3
It is essential for an auditor’s agency before accepting a client relationship, as a professional
need to identify that such relation acceptable or not according to the requirement standards.
There is various issue regrading acceptance such as legal, ethical, conflict of interest and so
on. According to the given case, Reaction Pty Ltd which is small firm having lack of
financial statement and document which is not possible for the firm to conduct their audit in
an appropriate manner (Vasarhelyi and et. al., 2012). Because according to the ISA 210,
auditors should identify the minimum standards of acceptability of financial documentation
framework and its application in the preparation of recording of these data. in the given
context, there is lack of sufficient evidence regarding further proceedings. Additional, the
auditor should obtained make agreement which recognise its responsibilities:
 Preparation of recording and financial statement accruing with international financial
standards.
 To provide all necessary data and information which required to conduct an
appropriate audit.
Therefore, Billings & Associates auditors need to issue modification audit report which
explained that the firm is not having required information and they are unable to conduct
audit for the firm (Hart and Northmore, 2011).
Part A3
a)
The main objective of audit is to examine and evaluating specialise and independent opinion
on the basis of annual financial statement which provide a fair and actual position of a
business unit. According to the given cases there are different threats on auditor
independence which having connect to the non-audit services. It is essential for Auditor that

to provide unbiased and professional suggestion regarding their financial data to its
shareholders. On the other hand, there are few doubts relating to the independence of
auditors. Various experts argued that their opinion can be influenced due to maintain
harmonious relationship with clients. For example, there are various accounting service
providing companies charge less amount as compare to market rate which also influenced
audit firm to protect their commercial interest as well.
These are:
Case 1: In this case management of Hail Pty Ltd wants to review the existing recorded
accounts due to lack of understanding and knowledge in determining impairment. As an
auditor it creates the self-review threat where judgement will be required.
Case 2: In the second case, Travel Time Ltd which also manage all travel arrangement of an
auditor. Now the managing director wants to recommend for their business and operational
activity. In such case it will create self-interest threat to independence.
Cast 3 This case is related with the self-interest threat of auditor independence due to the wife
of one of the audit firm owner of shares at Civil Construction Ltd. It is a client company
which crate the above discussed threat.
Case 4: In this case client don’t have fee for the auditor work which is against the ethical and
professional standards. Therefore, it will create threat on the principle of threat to
independence auditor.
b)
It is essential for the audit firm to follow ethical and professional standard in order to meet its
short and long term targets in an appropriate manner. There are following safeguarding
regrading auditor’s independents are given below:
Make sure that audit team member not performed accounting services. As per the above
given case 1 that audit firm providing advisory services. the another principle is related with
the discussed various issue with board members which and act as an independent auditor
which is too significant. Apart from that, at the time of reviewing financial data provide the
appropriate report to higher authorise and if there is any lack of data they should be
communicate with government bodies.

Conclusion
As per the above mentioned report it has been concluded that there are different provision
and principles which related with the ethics and other business practices must be
implemented by the audit firm in an effective manner. The report also explained about the
different cases regrading auditing which is too essential. Apart from that, there are different
types of threats to independence auditing which reflect their opinion and judgement. It
involves self-interest, advisers, professional standards and so on. the last part of this report
related with the different types of safeguarding regarding threat to independence which help
to attain their short and long term goals and target in an appropriate manner.

References
Books and Journal
Smith-Lacroix, J. H., and et. al., 2012. The erosion of jurisdiction: Auditing in a market value
accounting regime. Critical Perspectives on Accounting. 23(1). pp.36-53.
Ni, J., Yu, Y., Mu, Y. and Xia, Q., 2014. On the security of an efficient dynamic auditing
protocol in cloud storage. IEEE Transactions on Parallel and Distributed Systems.
25(10). pp.2760-2761.
e Costa, C. A. B., and et. al., 2012. A multi-criteria model for auditing a Predictive
Maintenance Programme. European Journal of Operational Research, 217(2),
pp.381-393.
Worku, S.G., and et. al., 2014. Secure and efficient privacy-preserving public auditing
scheme for cloud storage. Computers & Electrical Engineering. 40(5). pp.1703-
1713.
Vasarhelyi, M. A., and et. al., 2012. The acceptance and adoption of continuous auditing by
internal auditors: A micro analysis. International Journal of Accounting Information
Systems. 13(3). pp.267-281.
Hart, A. and Northmore, S., 2011. Auditing and evaluating university–community
engagement: Lessons from a UK case study. Higher Education Quarterly. 65(1).
pp.34-58.