Auditing Today & Tomorrow - Assignment Example

 PART A: SUMMARY FOR THE PWC REPORT The article recognizes the following as essentials of corporate reporting (Price Water House Coopers, 2011), I. Duplicate information, in relation to the operations of the business. II. Instances where there is need of more explanation. III. Areas in which there is a shortfall in the output because of the frameworks set aside by the organization. PWC advocates for advocates for transparency during the audit process. Transparency in auditing gives it an opportunity to market the services, and demonstrate its role in relaying out data. The article denotes that preliminary statements contain information regarding the main judgments of the company. The report gives investors an opportunity to work together for purposes of gaining confidence for the operations of the company. Currently, investors require more information in areas such as management, accounting techniques, areas of resource management and going concern. The report further denotes that, investors need an assurance on quantitative performance. The report denotes that the current auditing practices are valuable for corporate managements, as opposed to small time investors, and they do not cover areas such as the model of the business operation. The report denotes that the main barriers to changes in auditing and corporate reports are the auditors, and government regulators. It claims that organizations that do not enact an auditing process are not independent and it is extremely important for the capital market to insist on the auditing of the financial records of companies. The PWC report concludes that investment professionals have a mixed view on non-GAAP information. The reasons of this doubts lies on the fact that the quality of the data itself is suspect. Companies do not follow a consistent manner of calculating data, making it hard for investors to make a comparison of the data with (Price Water House Coopers, 2011). The report outlines the importance of an audit opinion. From the results of the survey, more than 80% of the investors prefer to invest in a company whose audit report outlines its financial records as reliable, and stable. Some were of the opinion that audit reports arrives to late, this is after making an assessment of the report. The report further highlights that investment professionals do not read statements of an audit report. The organization argues that it is the corporate organizations that on most occasion, reads this reports. One of the reasons as to why investors do not read these reports is because they do not provide data regarding consultations with external auditors, compromising their reliability. Another reason as to why investors take little interest on audit reports is because it does not make a comparison with an audit opinion. The report is of the idea that auditing methods and techniques must reflect transparency, and credibility. Credibility of the report by these committees is reliable only after investors have read it, and satisfied with the findings. The organization supports the idea that the opinion of auditors should supplement the reports of the audit committees. The report highlights the importance of privacy in auditing, and it denotes that privacy enhances the independent of the organization, accelerating the virtue of honesty (Victoria, 2007). It also highlights that investors are more concerned with information regarding the going concern element of a business organization. There are different opinions between corporate organizations and mainstream organizations in relation to the aspect of the going concern. Corporates insist on the need of more information concerning the issue, while mainstream organizations believe that the information should emanate from the management. Investors need information pertaining to the aggressiveness of the business, in relation to its competitors. The paper further states that auditing provides a high level of assurance in the following area, quantitative performance, corporate governance, and on strategic issues. On quantitative matters, emphasis is on the validity of the financial figures in place. This information is essential for analyzing the company’s economic performance. However, there is limited need of an assurance concerning information regarding corporate governance. Investors need an assurance of the information that addresses risks facing the business. This information is presented as strategic issues. Investors are of the opinion that methods of collecting and disseminating data are reliable, and any information contained in the preliminary statement, must be on the audit report. In conclusion, for purposes of the future, auditing must encompass periodic meetings between shareholders, the leader of the audit committee team, and the auditors. The auditor must be available for consultations, and tripartite channel of communication, such as communication amongst shareholders, the audit committee and the auditors. Other issues in consideration are, availability of investors during the audit process, provision of a risk statement of the company and auditing information must reflect the organizations association with credit companies. Part B: EVALUATION OF THE FINDINGS OF THE PWC REPORT Corporate reports are important, because they depict the process of a company decision making. These reports must address the interests of the readers and provide knowledge on the operations of the company. Regan (2003) denotes that the purposes of this are to explain the performance of the business in relation to its competitors and social responsibility (p.21). It is important for the organization to include figures and graphs while writing the report, because it will help in explaining concepts and ideas to investors, the government and other stakeholders. A good corporate report must identify its target, and the purposes of the report. Rittenberg et al (2005) are of the view that auditing reports must identify areas of the business operation where there is a shortfall in production, and explain the mechanisms the institution puts in place to rectify errors emanating from such (p.24). Transparency in the auditing process is an essential requirement for the reliabity of the audit reports. Government and corporate organizations require an independent investigation of the shortfalls within the organization for purposes of finding a solution to these problems. However, it is not advisable for every audit report and procedure to be available to the public. This is because it will reveal sensitive matters affecting the company, and the impact of highlighting such issues might affect the day to day affairs of the corporation (Regan, 2003). Transparency in the auditing process will result to mistrust between auditors and the corporate management, and lower the ability of auditors to add value to the operations of the company, by pointing out the weaknesses of the organization. Moellar et al (2009) explain that transparency results to the marketization of the auditing services, in the long run, companies will not seek the services, because they will adopt internal control mechanisms that will help in solving their problems (p.56). Information contained in preliminary statements denotes financial responsibility. These reports mainly target the stakeholders of the company, and to write an effective preliminary statement, the corporate organization must ensure that the reports depict a consistent financial records and operations of the company. The statements must identify important data, and set them aside for purposes of efficiency in analyzing the financial records (Chambers et al, 2010). According to Chambers et al (2009),and Gramling et al (2012), they believe that preliminary statements are important for predicting the future cash flow of the business organization (p.43,and p.12). Information regarding financial and liquidity of the company must be on the statement These information is essential for stakeholders in assessing the flexibility of the company in relation to their financial capability. Investors seek knowledge of generally acceptable principles of accounting in an audit report (GAAP). These are rules that accounts and financial analyst follow in preparing accounting and financial records ((Gramling et al, 2012). Every organization must prepare this information, and rely it to investors, for purposes of knowing how the company perform and to government agencies for purposes of taxation. In preparing the financial records, it must portray the following principles, going concern, monetary unit, the entity assumption and the time period assumption (Moeller et al, 2009). Going concern is an intangible asset of the company, which comes along with its brand name, and the clients it has. It assumes that the business will operate to a foreseeable future. Moeller et al (2009) further believes that auditors must calculate its market value, and reflect it on the financial records (p.16). The assumption based on business entity is the idea that the organization is a legal personality, and must obey rules and procedures. The monetary unit assumption is the belief that auditors used a standard currency, while the time period assumption explains that the financial report depicts a certain period of time. The report identifies barriers enacted by auditors and government agencies. Auditors view changes in the procedures and methods of conducting an audit as a threat to the profession. Auditors view these changes with suspicion about its motive, and a belief that the changes will create a rift amongst the auditors themselves, their clients and government regulatory agencies (Rittenberg et al, 2005). It is also difficult to initiate these changes because of the human capital required. These changes need expertise on designing and analyzing the new requirements and procedures of the auditing process. Training new staff on this approach is expensive and time consuming, and this limits the application of new auditing procedures and practices. Scholars recognize the following areas in the auditing practice that need further training (Gramling et al, 2012), and they are, I. Proposal writing and analysis II. Instrumentation design III. Identifying and initiating objectives IV. Appropriate data collection procedures. Beale and Russ (2012) denote that audit opinions are important to the company because they relay information concerning the viability of the business organization (p.38). From these opinions, the corporation gets the opportunity to effectively design internal control procedures of the organization. The opinions help in assessing the vulnerabilities of the company, and therefore initiate risk control measures. In analyzing quantitative material, auditors must take into consideration all the relevant auditing evidence. The auditor must analyze all information pertaining to the overall financial performance of the business, and any mis-guided statement he comes across during the process of auditing (Arens, et al, 2012). They must review the accounting procedures of the company, and any factor that relates to the financial performance of the company. This will ensure the reliability and accuracy of the audit report (Moeller, 2008). Auditing concerns itself with the performance of the corporate governance team. The report must identify their qualifications and competencies, and analyze them in relation to the functioning of the corporate. A report on strategic issues must identify specific risks the organization faces, and recommend the necessary mitigation measures to reduce or prevent the risk from occurring (Millichamp, 2012). On this note, the report must identify the main risks facing the company, conduct an analysis of the situation, and write a report on it. Scholars agree with the notion that for future purposes, auditors must involve shareholders to access information and data during the process of auditing (Chambers et al, 2010). PART C: CONCLUSION Auditing is an important field in business management, and its reports are relevant to investors, to the management, to government agencies and to its employees. Various stakeholders such as investors need to know the operations of the company, and to prevent the theft of its assets. The only way of identifying the operations of the company is to make an audit of all aspects and the organization of the institution in consideration. From the audit reports, shareholders will analyze the tangible and non-tangible assets of the company, the market position of the company, its profitability, the employees of the company and the skills in their possession. All this information is useful to shareholders of the making in making a decision on whether their company is on the right direction. Investors also require the audit reports, as it will guide them on whether to invest in the company or not. Nobody will invest in a company that is making losses; therefore their main area of concern is the profitability of the company, and its long run prospects. Government agencies require these reports for taxation purposes, and it will guide the government on the amount of tax to claim from the organization. In conclusion, the future prospects of auditing are bright. There is an increased interest on the auditing profession, and the auditing skills. Companies require internal auditors as well as external auditors, and this creates vacant position for the auditing skill. To effectively tap on this demand, government agencies must create a framework of training personnel in this field. The institutions should liaise with the private sector for purposes of developing a relevant curriculum. Bibliography Audit, Today and Tomorrow. Price Waters House Coopers, 2011. Print 2009 director's case practice audit reports. Victoria, B.C.: Ministry of Children and Family Development, 2007. Print. Arens, Alvin A., and Randal J. Elder. Auditing and assurance services: an integrated approach.. 14th ed., Global ed. Boston: Pearson, 2012. Print. Auditing, assurance and ethics handbook 2012. Frenchs Forest, N. S. W.: Pearson Australia, 2012. Print. Beale, Jay, and Russ Rogers. Nessus network auditing. 2nd ed. Rockland, Mass.: Syngress ;, 2007. Print. Chambers, Andrew D., and G. K. Rand. The operational auditing handbook: auditing businesses and IT processes. 2nd ed. Hoboken, N.J.: Wiley, 2010. Print. Gramling, Audrey A., and Larry E. Rittenberg. Auditing. 8th ed. Mason, Ohio: South- Western/Cengage Learning, 2012. Print. Millichamp, A. H., and John R. Taylor. Auditing. 10th ed. Andover: Cengage Learning, 2012. Print. Moeller, Robert R.. Sarbanes-Oxley internal controls: effective auditing with AS5, CobiT and ITIL. Hoboken, NJ: John Wiley & Sons, 2008. Print. Moeller, Robert R., and Victor Zinn Brink. Brink's modern internal auditing a common body of knowledge. 7th ed. Hoboken, N.J.: Wiley, 2009. Print. Nessus network auditing. 2nd ed. Rockland, Mass: Syngress ;, 2007. Print. Regan, David. International auditing practical resource guide. Hoboken, N.J.: J. Wiley & Sons, 2003. Print. Rittenberg, Larry E., and Bradley J. Schwieger. Auditing: concepts for a changing environment. 5th ed. Mason, Ohio: Thomson/South-Western, 2005. Print. Top of Form Bottom of Form Read More