Coordinating Total Audit Coverage - Essay Example

AUDITING 8 College Disclosure of information is vital to an auditing process from the beginning to the end of the process. The client is required to disclose all the financial information to the auditors before an audit exercise begin and the auditors are as well required to disclose all the findings to an audit after the closure of the exercise. To conduct a legitimate audit, an auditor needs to have access to all the business financial transaction, records and all its operational accounts (CLERP (Audit Reform & Corporate Disclosure) Bill, 2003). The auditor needs all the bank accounts of the business so that they are able to determine the financial aspects they are needed to have findings on such as revenue, asset base, and cash flows. Full disclosure also has the impact of keeping finances and the operations of accompany open and transparent (Crist, 2009). Not disclosing an account containing $500,000 is gross and has the impact of rendering the auditors work unsatisfactory. It is negligent on the part of the new owners not to be aware of the existent of such an account. To avoid compromise, the auditor should note this in the final report. 2. According to Securities and Exchange Commission actions needed to improve Public Company Accounting Oversight Board selection process. (2002); a public accounting company shall be deemed to be independent in the performance of professional services like auditing of clients as stipulated by the standards promulgated by the bodies authorized by the council such as SEC, DOL or AICPA SEC. The independence of a public accounting company will be considered impaired with regards to a client when the employee of the accounting firm gets employed by the client after leaving the accounting firm unless some conditions are met. However, it is not easy to mention instances when the appearance of independence may be in question. Depending on the type of auditor employed by the firm, they can be paid in terms of audit fees or audit salaries (Funnell, & Robertson, 2005). Audit payments are competitive with the sole objective of ensuring that auditors do not indulge in unethical, unfair practices in the process of their work. To give the true and fair position with regards to a client’s financial position, auditor’s independence is paramount. 3. Representation letters are quite different from audit evidence due to the fact that they may involve transactions with massive impacts on the financial statements of the company without being able to produce corroborative evidence (Engel, 2005). Given the two main reasons for letters of representations that is: the acknowledgement by management of their responsibility for the financial statements and to get audit evidence where none exists. Auditors will reliably perform their work based on an authentic representation letter duly executed by a Chief Financial Officer of a company (Batten, 2011). The former CFO resigned which is normal and the current CFO is responsible given the office bearer of such a position takes charge from the previous. This will enable the auditor continue with their work after obtaining written representation on matters material from the management. When the auditor realizes that there is a contradiction between the audit evidence and the representation letter, they will commence an investigation into the same. In the event that no one is willing to execute the representation letter from the CEO, the auditor should issues a qualified or disclaimer of opinion. 4. My current work environment ensures internal control by employing the components of control. First, my work place has a defined structure with values, integrity, mission as well as modes. Coupled with this is the communication environment which is sufficient, clear and appropriate to users at all the levels. Communication is therefore passed efficiently and in a timely manner (Ramos, 2008). Risks are considered as threats to the achievements of the objectives of the company hence their timely assessment and management through effective tools. This happens by way of identifying the existing obstacles and formulating appropriate and new ways including technologies to help absolve them. This place thereafter, has put in place a variety of control activities among which are: documentation, approval, verification, reporting among others. These have ensured that the risks are reduced or prevented hence the organization is able to achieve its goals. The organization is as well involved in constant monitoring of the organization’s activities and transactions for the sake of quality and effectiveness over time (Graham, 2008). 5. Sampling is appropriate given its ease and efficiency as opposed to 100% testing. In an effort to ascertain whether the sample by the intern are correct and can be relied upon: the objectives of the audit procedure must be determined as well as the attributes of the population from which the sample is derived (Guy, & Carmichael, (2004). The establishment of the objective of the procedure will make it possible for the auditor to know the conditions which constitute an error as this is very important. Tests of control will be conducted by the auditor to access the rate of errors involved from the population tested which is 10,000. The auditor will therefore need to perform tests of completeness and appropriateness on the samples by the intern and determine whether they can be relied upon (Guy, & Carmichael, 2008). When the auditor expects a very high rate of error then they would rather conduct tests of control. 6. In any auditing procedure the audit time is essential and adequate time is fundamental. The time allocated for any audit procedure would determine the quality of audit and the opinion given by the auditor. The issues in this case are limited time to conduct effective audit verses the quality of report to be issues by the auditor. Assumption most so on critical matters would be dangerous for an audit assignment given the number of stakeholders that are likely to rely on such work (Whitworth, & Mauldin, 2010). Quality audit requires that an environment is created where the work is performed in a manner to maximize the quality and the timeframe matters a lot in this case. Enough time will give the auditor room to practice values ethics and good attitude in conducting their work. In addition they will be able to rigorously perform the required processes and quality control procedures without adopting reports based on mere assumptions (Kelting, 2001). They will therefore be able to provide timely and useful reports when allocated enough time. 7. There are requirements as to the requirements and direction that an auditor should follow with regards to the effectiveness of the internal controls of a client’s financial reporting. I am therefore obliged to follow this guidelines together with the information provided by the management letter vide the CEO and this is irrespective of our personal friendship with the CFO. The fact is an effective internal control provides a good basis and reasonable assurance concerning whether we would rely on the financial reporting and statements for public consumption and the auditor is required to express his opinion on the strength of the internal controls (Gray, & Manson, 2009). As the auditor I will therefore plan and perform my audit to get the appropriate evidence for reasonable assurance of the existence of the material weaknesses as stated via the management assessment in writing. This is given my training and proficiency as an auditor requiring me to express my independence and professional care as the auditor (Berry, 2003). The company depends on my report to make key policy decisions and listening to an individual would result into great risk. 8. In performing an attest engagement for Sparks Electronics the Statements on Standards for Attestation Engagements (SSAE) No. 101 will be applied. Here the clients of the company will have to make assertions as to whether they met the company principles and procedures with regards to how Sparks Electronics run their business, their internal controls. This will be in regards to how they execute and handle their customers as well as such controls with relevance to privacy of customer information (Hunter, 2001). As the auditor, I will also attest to the management’s assertions on all the above considered matters. Concerning, the trade in electronics, Sparks is involved with the risks of transaction integrity and the authenticity of the products they offer to the customers. In addition, the organization is faced by the risk of change in technology and the manner of handling their customers (Flood, 2014). The report on the internal control elements and customer handling are aspects that are vital when formulating an advertising campaign hence will be used. References Batten, D. (2011). Gale encyclopedia of American law (3rd ed.). Detroit, Mich.: Gale. Berry, L. E. (2003). Coordinating total audit coverage: trends and practices. Altamonte Springs, FL: Institute of Internal Auditors Research Foundation. CLERP (Audit Reform & Corporate Disclosure) Bill. (2003). Canberra: [Treasury]. Crist, J. G. (2009). Reporting, recordkeeping, and disclosure requirements for an environmental audit. New York, N.Y.: Executive Enterprises Publications Co. Engel, G. T. (2005). Financial audit the Department of States fiscal year 2004 management representation letter on its financial statements. Washington, DC: U.S. Government Accountability Office. Flood, J. M. (2014). Wiley Practitioners Guide to GAAS 2014 Covering all SASs, SSAEs, SSARSs, and Interpretations. (11th ed.). Hoboken: Wiley. Funnell, W., & Robertson, J. (2005). Accounting by the first public company: the pursuit of supremacy. New York: Princely. Graham, L. (2008). Internal controls guidance for private, government, and nonprofit entities. Hoboken, N.J.: John Wiley & Sons. Gray, I., & Manson, S. (2009). The audit process: principles, practices [sic] and cases. London: Chapman & Hall. Guy, D. M., & Carmichael, D. R. (2004). Audit sampling: an introduction (3rd ed.). New York: Wiley. Guy, D. M., & Carmichael, D. R. (2008). Practitioners guide to audit sampling. New York: J. Wiley. Hunter, M. (2001). The four "A"s: agreed-upon, attest, accounting, and assurance services. Lewisville, Tex.: American Institute of Certified Public Accountants. Kelting, W. R. (2001). Audit planning: an empirical investigation into the timing of principal substantive tests. Ann Arbor, Mich.: University Microfilms International. Ramos, M. J. (2008). How to comply with Sarbanes-Oxley Section 404: assessing the effectiveness of internal control (3rd ed.). Hoboken, N.J.: John Wiley & Sons. Securities and Exchange Commission actions needed to improve Public Company Accounting Oversight Board selection process. (2002). Washington, D.C.: U.S. General Accounting Office. Whitworth, J. D., & Mauldin, E. G. (2010). The effects of audit committee financial expertise on auditor changes and subsequent audit quality. Columbia, Mo.: University of Missouri--Columbia. Read More