as an example, the auditor audit the Lemon Company. The auditor should know that the method of the financial statement that the company used and the material that they purchases.
During the process of audit the operation must stop that is because of to make sure that the amount of transaction was correct. The management and governance of the auditor should become aware to the company organisation structure and also the reporting arrangement. The auditor must understand the client objective of financial statement report and the effectiveness and the efficiency of the operation will going effect to the company.
The auditor also need to evaluate the client performance and measure the how good the company operate their business. The reason to
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The audit should have strategies for the information to evaluating the client business risk and also provide the objective to the assessment to the business risk. The risk can give another affect to the client business to achieve their objective. The internal and external also can affect the client business. As an example, the change in the technologies can change the client business environment and it also can reduces the cost for paying people fee. The risk of the material misstatement due to the client business risk is the auditors’ primary …show more content…
Perform the preliminary analytical procedure for better understand the client business and to assess client business risk. The preliminary test can change in ration from the previous year as the average industry. It also help the auditor to know the area of the client business risk and also the increase of misstatement that the auditor giving attention during the audit. As an example, the auditor found that there is the have material misstatement for the previous financial statement. The auditor will check the more detail for the current year financial statement to avoid the material misstatement.
The five step is set materiality and assess acceptable audit risk and inherent risk. During the audit the auditors must have information’s of the material and the operation also have to stop during the auditing. The information is material if misstatement or omission and affect the economic decisions of the user taken on the basis of financial statements. As an example, the auditor audit the Orange Company financial statement. The audit found that there is not correct in the net profit. The audit need to report to the management the net profit is not correct according to the amount of the
SEC has a significant influence on the audit of Smackey Dog Food, Inc because it sets certain auditing standards that need to be adhered to while conducting and audit of any organization. One of the standards is ensuring a professional independence of auditors as they carry out their audit. Keller CPA would be more objective in their opinion by maintaining independence in all maters and be free from conflict of interest in performing their professional engagement. Thus, although SEC does not possess direct control over privately held companies like Smackey, it, however, sets up generally accounting principles and disclosure requirements for all auditors to follow in order to prevent fraud and misstatement and to ensure fairness to users of audited financial statements for investment purposes or decision making. Therefore, Keller CPA would be required to follow the six generally accepted auditing standards established by ASB of the AICPA with regards to field work and reporting which were established through the influence of SEC.
Auditors do not provide audit opinions for different levels of assurance. Therefore, auditors consider providing more or less assurance when modifying evidence for engagement risk to be unnecessary. However, auditors should be professionally responsible to accumulate additional evidence, assign more experienced personnel, and review the audit more thoroughly, particularly when a client poses a higher than normal degree of engagement risk. The auditor should also modify evidence for engagement risk when high legal exposure and other potential actions affecting the auditor
"The next step is to determine the impact that the threat could have on the organization. It is important for auditors to understand that not all threats will have the same impact. This is because each system in the organization most likely will have a different value (i.e., not all systems in the organization are worth the same or regarded in the same way). For instance, to evaluate the value of a system, auditors should identify the processes performed by the system, the system's importance to the company, and the value or sensitivity of the data in the system" (Edmead). To understand the important of a risk helps point out the businesses weaknesses. It is important that the degree of impact caused by different risks are determined. The
The audit committee should follow certain criterion to choose internal auditors and external auditors, and also supervise their activities and interaction thus ensuring the function of audit both internal and external.
Analytical procedures are used at the initiation of an audit in order to carve a clear path into what areas, accounts in particular, of the financial statements of the company we will be placing more emphasis on in order to identify and assess the risks of material misstatement
Assessing audit risk correctly and completely is important to the beginning of a successful audit. Not only should an auditor have an understanding of the individual risk factors of the company itself, but also how those risk factors are affected by external influences. A crucial external influence affecting audit risk is the state of the economy. When an economy enters a recession or an economy bubble bursts, there is a greater likelihood that inherent risk and control risk will increase. These increases are mainly driven by the sudden pressure placed on employees and management to keep the appearance of a positive financial status, which sometimes leads to fraudulent activity.
The effectiveness of tax auditing means that the tax auditors had performed an effective work without any impact on the tax payers. There are five factors that considered as the determinants for the effectiveness of tax auditing, which are audit quality, management support, organizational setting, attributes of the audited party and organizational independence. The tax audit effectiveness also refer to the ability and capability of a tax audit to provide useful findings of auditing and recommendations which would attracted the management’s interest. The management that support with resources and implement the recommendations of tax audit is essential for reaching the tax audit effectiveness. Besides, the organizational setting in operations
Audit Sampling is very important to auditor to make their audit because easy for auditor fulfill their job with give opinion and make a conclusion from the account balance. It is not practical for auditor to audit 100% of the items in the account balance, that why auditor apply for audit sampling to obtain audit evidence from the account balance. Audit Sampling is testing less than 100% of the item within a population on a company client to obtain and evaluate evidence about some characteristics of that population. Population means that the entire of set of data which sample are selected. The objective auditor apply for audit sampling is to provide a reasonable basis for auditor to draw a conclusion about population from which sample
An auditor needs to follow, abide and comply with the standards, rules and regulations of their profession, as these will help the auditor to recognize when independence and objectivity are compromised. Works Cited Gray, Iain and Stuart Manson. The Audit Process: Principles, Practice and Cases. London: Thomson Learning, 2008. Print.
The level of assurance that the audit report will offer should be foolproof in that it will cover all the risky areas. The report will make sure that the company is covered from an audit professional perspective. All the risk that may face the company in this regard will be covered completely (Turley, 1997).
The fundamental duty of an external financial auditor is to form and express an opinion on whether the reporting entity’s financial statements are prepared in accordance with the relevant financial reporting framework. In discharging this duty, the auditor must exercise “reasonable skill, care and caution” (Lopes, J. in Kingston Cotton Mill Co 1896) as reflected in current legal and professional requirements.
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.
Are Auditors Becoming Too Cozy With Their Clients? By: Briloff, Abraham J.. Business & Society Review (00453609), Summer85, Issue 54
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.
The major characters of the tradition audit are all information what is needed by auditors are on the paper and the manual calculators and without high communication technology. Auditors usually were limited by the place in the paper time. When a several people are working on the same auditing project for a client with offices in cities across the country, even worldwide, it takes a lots all time those auditors get the information which they need from the client, even there is risk paper information disappear for many reasons. on the another hand, mail paper information increase the auditing cost. The mistake caused by the manual calculators inevitably, no matter how fixed auditors concentrate on recalculate is, after all auditors are human. The global business become major in the modern business world, some example, several auditors who are in different locations are working a same auditing project, or auditors are in different city even country with the client, when there is issue among these auditors or between auditors and client, they only can communicate with each other by phone or be together and have meeting. Phone call can not make sure information been watched in the same time when the voice is talking about the issue, but having a meeting takes time and money make all people together, it increases auditing cost.