Auditing of Toyota Motor Corporation - Essay Example

Auditing Auditing is one of the most important activities in a business organization. It is especially beneficialto the shareholders of a company. It is important to note that the shareholders do not participate in the day to day learning of the organization. Instead, they hire managers and directors to perform the day to day operations. The managers present a financial report to the shareholders indicating the performance of the organization within a financial year or within a given period as the shareholders may require. Since the financial statement may contain errors or omissions, an auditor is usually hired to verify the statements before they are presented to the shareholders during an annual general meeting. Therefore, the duty of an auditor is to verify the financial statements of a legal entity. He should give an opinion that provides a reasonable assurance to the shareholders as well as to any other user of the financial statement that the financial statements give a fair and true view of the organization and that all material respects have been taken into account. I being an auditor has been an external auditor have been selected to perform the audit of Toyota Corporation. This article gives an audit program of the duties that I will carry out in accomplishing my objective as the external auditor. Audit program An audit program refers to the procedures and policies that are laid down to guide the auditor in in executing their audit job. The audit program is prepared depending on the scope if he audit. The scope of the audit varies depending on the company being audited and the purpose of the audit. It is i9mportant to have an audit program since it helps the auditor to standardize the evaluation process as well as his data collection. With an audit program, it will be possible for the auditor to collect all the relevant information for the audit purposes. The program will further ensure that the auditor complies with the policies and procedures of Toyota and also determine the effectiveness of these policies. At times, I am supposed to evaluate the adequacy of internal controls. This will be possible through the help of an audit program. The following program is to be used in carrying out the audit of Toyota Motor Corporation. The first stage will involve meeting the internal audit general and preparing/planning the documents. The preparation and updating of the engagement letter will be among the duties performed in planning and preparing the documents (Puncel, Pp. 7). The compliance engagement will follow a consideration of whether the company has the necessary competencies that are required to perform an audit engagement. I will then familiarize myself with the policies and procedures of the Toyota Motor Corporation. The internal auditor will guide me through the policies and procedures. This will also involve familiarizing with the systems used as well as identifying and obtaining the previous reviews. The second step will be to make a draft of the major scope and activities that are to be performed in the audit process. The list should also include the names of system(s) used. The objective of the audit is outlined at this stage (Puncel, Pp. 7). In the event that there might be need for any technical assistance, this should be noted. The external auditor should also note whether he or she might need to work in coordination with the internal auditor or the company’s accountant. An audit documentation of all the steps to be carried out should be prepared at this stage. At this planning stage, the auditor should also obtain a design and implement the practice procedures of how to deal with the client’s money. The auditor should deal with the client money as he has been instructed. A trust account should be prepared and accounted for. The procedures of safeguarding the client’s bank account should also be outlined. As part of the planning, I will carry out the risk assessment. Specific considerations should be given to the risks of fraud that might be associated with the client’s money. The materiality and compliance risks should also be assessed. Finally, the test controls that are appropriate given the circumstances at Toyota Motor Corporation will be prepared. The third stage will be to carry out tests, compliance procedures as well as internal controls. Determine whether the internal controls of Toyota can be relied up on. Perform all the tests for the various fields as per the plan. The time for every test should be estimated and listed. For every test conducted, the results should be discussed with the relevant persons or the people who are affected by that test. It is not ethical to document results in conclusion before the issues resultant from the tests are discussed with the relevant persons (Puncel, Pp. 9). The various managers or people in charge of the various departments at Toyota Motors Corporation should be consulted. The managers and personals should be made aware of the results. This is important in that it will help the auditor get further clarifications from the people involved in the various departments. It helps him in coming up with a more accurate result from the tests. The verification of assets and liabilities should also be carried out. All companies have assets and liabilities that the auditor needs to verify. In doing so, all the test techniques should be observed and adhered to. The assets and liabilities are verified for their costs, authorization, valuation, existence, beneficial ownership and presentation. Once all the tests have been performed and the results discussed with the relevant persons, the summaries should be made as well as conclusions. The tests should then be reviewed so as to ensure that all the papers are well completed. Check whether the heading is well stated and that it prescribes the functions and objectives of the audit. Check whether the dates are stated clearly. The page numbers of the audit report should also be well arranged in the correct order. This is important since it helps in following up the flow of the audit. In addition, the review is done so as to ensure that the conclusions are supported by adequate information. The audit report should be independent and should have conclusions that are able to gain the confidence of the users of the financial statements (Puncel, Pp. 10). As a result, the conclusions should be reviewed to ensure they have sufficient evidence. Cross reference the conclusion to summary sheets to support. After reviewing the conclusions, the auditor will be in apposition to determine whether he has sufficient evidence to help him substantiate the details of the account. From the reviewed conclusions, the auditor should be able to form an opinion as to whether the accounts contain specific qualities. The final review will generally reveal whether all is well. It should also reveal whether there is need for further audit evidence or whether it will be desirable to make amendments to the accounts. The review will also reveal whether there is need for a qualified report. It is imperative to note that this stage is very important especially in the modern auditing since the audit opinion should be in consideration of the view given by the users of the financial statements. The final report is then prepared and then presented to the relevant persons. The shareholders of the company are the main users of the financial statements and they are the once to whom the audit report is presented to. This is to be done before or during the annual general meeting of Toyota Motor Corporation. The report will be discussed during the meeting. Works Cited Puncel, Luis. Audit Procedures 2008. Cch Inc, 2007. Print. Read More