Wait a second!
More handpicked essays just for you.
More handpicked essays just for you.
Senior essay on internal auditing practice
Senior essay on internal auditing practice
Internal Auditing Procedures
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Recommended: Senior essay on internal auditing practice
Question 3 A) Planning is significant, if a business is targeting an efficient, consistent and 'true ' and 'fair ' audit report. Therefore, in order to participate in the audit planning process an auditor must complete sufficient background research. There are various sources that will provide information that would be valuable.
First of all, financial statements from previous years of Dust&Rolls could be revised in order to understand the financial position of the company; assets, liabilities, income and the expenses stated in former reports. In addition, the published material about the firm also could be useful; the website of the company and articles in financial press could be used to gain in depth knowledge in relation to the
…show more content…
Therefore the objective of an auditor is to minimize that risk to a minimum. The below list represents the audit risks of Dust&Rolls:
1. Risk of material misstatement- The auditors of Dust&Rolls have to verify that all the expenses attributed to the refurbishment are recorded and allocated accurately, since overstatement or understatement may cause loss to the firm. For instance, the Tesco case mentioned above.
2. The cash situation of the business (Inherent risk)- The auditors must consider the solvability of Dust& Roll, since the company has borrowed 1.6 million to fund the refurbishment. If there is any potential risk of insolvency, then that must be addressed to the management.
3. Susceptibility of misappropriation (Inherent risk)- as the current inventory valuation method suggested by the finance director is a close approximation to the cost, the auditor must consider the appropriateness of the suggested method and the probability of any potential
…show more content…
For instance, through introducing a disciplined approach IA can enhance and assess the efficiency of risk management, control and governance processes. The requirement for establishment of IA differs from the requirement for external auditors. However, The UK Corporate Governance code demand all listed companies to obtain an IA department. In order to found an efficient internal audit department, there are several factors that must be considered. Therefore in this text we are going to discuss in brief some of the factors that Dust& Rolls ' finance director must consider prior establishing such department (Millichamp and
The Corporation has sustained losses and negative cash flows from operations since its inception. The Corporation is exposed to liquidity risk as it continues to have net cash outflows to support its operations.
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
Auditors will assess the accuracy of inventory count and movement procedures. Auditors will also discuss any analytical procedures performed that are linked to inventory and talk about it with management about any substantial changes or strange developments in inventories.
The audit committee must certify that the company’s auditors are independent. The audit committee must approve all professional services provided to the company by its independent auditors and ensure that auditors do not provide to the company any of the specifically prohibited services identified by SOX, such as bookkeeping services. The audit committee must receive and analyze key items of information from the independent auditors. These items of information include auditors’ analysis of critical accounting policies adopted by the
By being rational I don’t plan to have any difficulties. Due to the nature of my project and stature it is highly unlikely I will get a Primary Source for this assignment. Other information should be relatively easy to get from online sources. Financial information should be especially easy because both companies involved are required to report information as members of the New York Stock Exchange.
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
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 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
Financial risks include general ledger accounting, accounts receivable risk, accounts payable accounting risk, the risk of payroll, fixed assets accounting risk, cash management risk and cost accounting risks.
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).
In reviewing the company’s balance sheet, the current assets and liabilities were reviewed and liquidity ratios were calculated. The capital structure and the fixed and intangible asset accounting of the company were also reviewed. Off-balance sheet items such as leases and contingent liabilities were reported and noted. All of these aspects of the balance sheet were reviewed in order to do a proper analysis of the company’s balance sheet.
No firm can be a success without some form of risk management. Risk are the uncertainty in investments requiring an assessment. Risk assessment is a structured and systematic procedure, which is dependent upon the correct identification of hazards and an appropriate assessment of risks arising from them, with a view to making inter-risk comparisons for purposes of their control and avoidance (Nikolić and Ružić-Dimitrijevi, 2009). ERM is a practice that firms implement to manage risks and provide opportunities. ERM is a framework of identifying, evaluating, responding, and monitoring risks that hinder a firm’s objectives. The following paper is a comparison and evaluation to recommended practices for risk manage using article “Risk Leverage
The companies I have selected for this assignment is Malaysia Steel Works (KL) Bhd (5098) and Kossan Rubber Industries Bhd. (7153), both of the company is from industrial products sector and its share is traded in main market.
Exercise of “reasonable skill, care and caution” varies according to situations (Lopes, J. in Kingston Cotton Mill Co 1896). Nevertheless, to achieve such in performing an audit, its an auditors responsibility to comply with the requirements cited in ISA (NZ) 200, as follows (1) Ethical requirements
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.