The Financial Position of Allergan Company - Case Study Example

Audit Portion al Affiliation) The Allergan Company The Allergan Company is an organization that deals with health issues in the United States of America. Health is always a critical issue in a state because citizens will only be productive enough if they are healthy thus ready to perform any kind of work in order to boost the economy. The Allergan Company is also well conversant with the emerging or rather biotechnological element hence its products such as drugs from the pharmaceuticals department are of the best quality. For all of these processes to be a success, the top management or the board of directors should be straight forward enough to ensure that the financial position of the firm is at its safest phase (sec.gov). The financial position will be determined through the keeping of effective and efficient financial documents, which will be facilitated by a good auditing system. Introduction The auditing process is a paramount procedure in the operation of a company. A company’s major aim is always the maximization of profits and through a good auditing system: an organization will be able to allocate areas to work on in order to trigger income within the firm by maximization of revenues. This article concentrates on the auditing principles within the Allergan Company thus creating a platform to analyze the financial status of the organization. Finance is one of the major elements that drive a smooth flow of a firm. In cases where an organization cannot generate enough capital to facilitate its operations, it will always seek help from aggressive investors who will then own shares that will generate more income in to the organization thus great returns. Since the Allergan Company, deals with heath that is probably a primary need, facilities, and services from the organization should be the best because the demand for health care rises on a daily basis (sec.gov). Independent registered public accounting firm This actually refers to an organ that critically analyzes the financial positions of the company in accordance to both the internal and external factors. It is always strongly attached to the firm in that the company itself headed by the board of directors and the shareholders (Fields, 2011) sponsors most of its operations. The operations are always based on the criteria established in the internal control. The committee of sponsoring organization of the Tread way commission appropriately issues the integrated framework. The management of the company is clearly responsible for the maintenance of effective internal control over the financial reporting. Another responsibility for the management of the company is the assessment of the effectiveness of the internal control over the financial reporting over the reporting incorporated in the accompanying management report on the internal control over the financial reporting. The responsibility of the company’s independent registered public accounting firm is to express an opinion on the internal control of the company over the financial reporting based on the current audit. The company’s independent registered public accounting firm will always conduct its audit in accordance to the standards of the public company accounting oversight board that is the United States (Fields, 2011). These standards will always require an appropriate plan and perform the audit in order to obtain a standard assurance about if effective internal control over the financial reporting was actually apprehended in all material perspectives. The auditing incorporated retrieving an understanding of the internal control over the financial reports, analyzing the risk that a material weakness is there, experimenting, and evaluating the design and operating efficiency and effectiveness of the internal control. These procedures in the auditing system are very sensitive and should therefore be performed with great accuracy in order to avoid mistakes and misinterpretations thus a reasonable basis for the opinion provided. The auditing firm has served for approximately four decades an external auditor to the Allergan Company. This is a very long period according to the records from other firms. This is so because of good relations between the responsible personnel. This shows that for a deal to flow smooth between organizations, the management or rather the board of directors plus the shareholders must be responsible enough to ensure that the operations for the partnership are carried out successfully. Other services provided on behalf of the company include the assurance of security for the various projects and investments of the Allergan Company in other sectors that are usually concerned with the safety of the citizens’ health (Fields, 2011). Responsibilities of internal auditors The main responsibility of the internal auditors is to independently and objectively review and appraise the bank operations in order to maintain or rather boost the effectiveness and efficiency of a company’s risk management, corporate governance, and internal controls. This is always a success through the following principles: The accounting procedures should be reliable and effective enough. This will ensure that the records in the books of accounts are very appropriate thus, their interpretation will not be challenging as opposed to other administrative controls. There should be an assurance that the internal controls of the company result into accurate and punctual recording of transactions plus appropriate safety of the assets in the company. The adherence to the rules and regulations of the company thus making sure that the management is responsible. This will create an environment that promotes teamwork within the organization. The internal auditors must appropriately understand the main objectives of the company plus its strategic direction that will assist in conducting the operations (Hines, 2009). The internal auditors will eventually communicate the findings to the board of directors or the senior management and the audit committee. The responsibilities of the external auditors The external auditing includes engaging and independent auditor to perform a complete financial statement audit, confirmation of the internal controls over the financial reporting and the auditing on balance sheet only. Internal audit from outside sources are not considered as part of the external auditing principle. Therefore, an effective and efficient external audit organization will always provide the management and the board of directors with the following elements: There should be provision of appropriate information to the management and the board of directors in order to maintain the process of risk management (Hines, 2009). This will help in the transformation of the organization such that activities will be clearly noted as they occurred. Therefore, the view of the company’s activities will be independent and objective plus the operations that strongly relate to the financial reporting. There should be a reasonable assurance about the effectiveness of the internal controls. This will adequately promote the accuracy in the recording of transactions and regulatory reports. The company will probably operate on the safer side as its activities will be compatible to the rules and regulations of auditing. The criteria established in Internal Control Integrated Framework The internal control assists organizations to achieve fundamental objectives, sustain, and improve their performance. Committee of Sponsoring Organizations of the Treadway Commission internal control-integrated framework helps organizations to develop efficient and effective systems of internal control. These systems adapt to the evolving businesses and operating environments, transform risks to acceptable levels, and support appropriate decision-making and perfect administration of the organization. The process of designing and implementing an appropriate system of internal control is always tricky since the operation of that particular system effectively and efficiently on a daily basis is always not an easy task. The emerging and rapidly changing business structures, the intense use and dependence on technological principles, a rise in the rules and regulations governing a firm, globalization and other challenging issues in the system of internal control to easily adapt in the operating and regulatory business environments that are in constant change (Hines, 2009). An effective and efficient system of internal control requires more than only adherence to the policies and procedures, as it needs elements of judgment. The board of directors and management do always use judgment to examine the control that is adequate for a perfect control in an organization. The element of judgment is therefore always used in organizations by the management and board of directors to develop and implement controls within the organization. The internal auditors and management plus the board of directors will always apply the aspect of judgment in order to supervise and analyze the effectiveness and efficiency of the system of internal control. The framework will always assist the board of directors, management, external stakeholders and other personnel who are close to the organization to carry out their duties in accordance to the internal control principles without being biased (Hines, 2009). This is always done successfully by provision of a view that creates understanding of the constituents of an internal control and facilitates an effective and efficient implementation of the internal control. Requirements for audit documentation, working papers, and analytical procedures First, the auditor should make sure that the preparation of the audit documentation is time conscious. The documentation of the audit procedures should be performed and the evidence of the audit to be obtained. The form, content, and extent of the audit documentation: The auditor should prepare the audit documentation in an effective or rather an appropriate manner in that an experienced auditor that is having work experience but did not come into any contact of the audit prior should easily understand and interpret the documentation effectively. The audit procedure carried out should always be well conversant with the International Standards on Auditing thus applicable since it is legal to the regulatory requirements. Te results of the audit documentation that create the conclusion should be professional enough in order to create an aspect of trust within the audit procedures (Hines, 2009). The date in which the audit started and ended should be clearly indicated. This helps at the time of reference as it also hinders confusion that may be created during the comparison of various audit reports. Another important activity that must be operated on the document is the review and the dates that the activity happened should be indicated for purposes of future reference. This shows that the element of recording dates is a very important procedure in the documentation of audits (Saxena, Srinivas, Rai, & Rai, 2010). The auditor will document the discussions of the important matters with the management and this information should be properly examined because it may be required to make very sensitive or rather crucial decisions within the business organization. There are situations that an auditor is forced to depart from relevant requirements. The auditor may reject some procedures in the International Standards on Auditing due to some reasons that he or she should clearly indicate on the documentation (Millichamp, 2012). The reasons should be valid and convincing enough according to the rules and regulations in accounting. The matters arising after the auditor’s report date: These issues come up after the closing of audit documentation. The additional audit procedures will always include the circumstances encountered, the new or additional audit procedure, the evidence and the conclusions drawn plus their effect on the auditor’s report. The person who made the changes should be identified and when they were done plus an analysis if they are appropriate. The audit documentation procedure is therefore a very important factor that will help the Allergan Company to have clear records of their financial status because a proper analysis is done in this process thus mistakes are very minimum to encounter. Organizations should therefore ensure that audit documentation is done in their financial departments so that no traces of inconveniencies should be found in the books of accounts (Saxena, Srinivas, Rai, & Rai, 2010). Once the procedure in audit documentation is efficient and effective then an organization or rather a company is always on the safe side. Analysis and explanation of the Generally Accepted Auditing Standards The generally accepted auditing standards provide a measure of auditing quality and the quality objectives to be achieved in an audit. The auditing procedures will always differ from the auditing standards. Therefore, auditing procedures are the operations that an auditor will perform at the time an audit is complying with the auditing standards. In the general standards the auditor must maintain a clear assurance in all the cases that relate to the audit, prepare the audit report through a performance that is greatly professional and lastly the auditor must have appropriate technical knowledge and experience to perform an audit effectively and efficiently (Millichamp, 2012). This shows that the process of auditing should be very accurate and no guesswork should be accepted in the process. The standards of field work In this case, the auditor must understand the work plan for the operation and then strictly watch over the assistants. The auditor must make sure that the environment in which the operation is taking place must be appropriate and safe in that no problem can occur and interfere with the auditing process. The auditor must make sure that during the auditing procedure, the financial statements should perfectly tally with the auditing activity thus this will make sure that there are hardly mistakes within the final reports of the audit. The standard reporting The auditor must make sure that the report on the financial statements of the organization is must be in accordance to the rules and regulations that boost the accounting principles. This creates a platform of better financial records that can be used by an organization to present financial information that may be used to motivate upcoming organizations by strengthening them financially (Khan, 2011). This is a very important aspect in the auditing section that should be given an optimum consideration to facilitate the smooth flow of financial operations in a firm. The Generally Accepted Accounting Standards are therefore a vital factor in the auditing operation as it really caters for a great portion in accounting. It is highly embraced by the United States of America since it is a very standards principle that integrates an organization to the appropriate standards in terms of finance or capital that is always a fundamental element in the success of an enterprise. The generally accepted auditing standards provide a measure of auditing quality and the quality objectives to be achieved in an audit. The auditing procedures will always differ from the auditing standards (Saxena, Srinivas, Rai, & Rai, 2010). Therefore, auditing procedures are the operations that an auditor will perform at the time an audit is complying with the auditing standards. Explanation of the ethical, professional, and legal responsibilities of the accounting profession An organization should have a management system plus the board of directors not forgetting about the employees who are well conversant with the ethical issues in an organization. Ethics will always create good moral values that automatically create a valuable picture to the organization. With this kind of factor in an organization, the goals and objectives will be easily met since everyone will be responsible enough to take the organization to perfect levels (Khan, 2011). Professionalism in an organization is another important factor that should always be maintained in the company. This is because professionals are the employees who have the appropriate knowledge of the task that they do in the organization. This creates the idea of specialization and division of labor in the organization thus making the goods and services produces by the organization to be of the standard quality. Legal responsibilities should always guide the accounting operations in order to make the auditing of the financial statements ideal. According to the Generally Accepted Accounting Standards, a procedure in accounting and auditing will only be approved when it adheres to the rules and regulations set in the financial framework. Description of the importance of a working knowledge of contract law There will be always an enforceable agreement between organizations with the aim of generating income from business deals. The partners should make sure that their financial operations embrace the Generally Accepted Auditing Standards. The contract law will always provide the optimum period that an organization needs to be active in an official operation in activities that generate finance. The operations should always be legal and adhere to the accounting rules and regulations. The operation will be guided by internal framework that is concerned with the effective operations that will adequately generate revenues that provide profits that is always a major aim of a company. In cases where an organization cannot generate enough capital to facilitate its operations, it will always seek help from aggressive investors who will then own shares that will generate more income in to the organization thus great returns. Since the Allergan Company, deals with heath that is probably a primary need, facilities, and services from the organization should be the best because the demand for health care rises on a daily basis. The impact of agency relationships and the liabilities and authority of agents Authority is always the major determinant to know whether a principal is liable for the contracts made by his or her agents. The affirmative form of authority is the one in written form. The principal approves the actions of the agent and a third party may depend on the document as the agent will be relying on the principal (Khan, 2011). In the express authority that is greatly attached to the banking and finance, thus accounting sector there is a standard signature card. In these cases, the agents are given the opportunity to issue checks on the in relation to the credit of the organization. The principal is always exposed to great danger in case the agent considers his or her own interests. In the case of accounting, an accountant in the bank may act as the agent and the Allergan Company is the principal. The accountant may always check into the proceedings of the company’s account and giving the company feedback on the results. The agent may decide to drain the principal’s account since he knows the account details in order to do personal projects and this will greatly interfere with the financial position of the company. It is therefore clear that the agent is always the determinant of the principal’s success (Millichamp, 2012). Differentiate between GAAS requirements for audited financial statements and standards governing reviews of financial statements These are two concepts that are very important in the accounting and auditing procedures in an organization. They are always paramount in organizations thus noting their differences are always hard because of their close functions in enterprises (Khan, 2011). However, there are some differences as listed below: The accounting languages in both principles are different thus; communication of issues is not similar in the procedures. The International Standards on Auditing provides for the reporting of financial statements that are created in accordance with the financial frameworks in report and the compliance financial reporting framework (Fields, 2011). The Generally Accepted Accounting Standards address reports on financial reports that are structured in relation with the moderate presentations only. The Generally Accepted Accounting Standards has two levels of professional requirements known as the presumptively compulsory requirements and the unconditional requirements while the International Standard on Auditing entails only a single professional requirement that needs an auditor to abide by the relevant necessities except obsolete situations. References Fields, E. (2011). The essentials of finance and accounting for nonfinancial managers. New York: AMACOM. Hines, T. (2009). Accounting & finance. Checkmate Gold. http://sec.gov/edgar/searchedgar/companysearch.html sec.gov Khan, A. (2011). DOD financial management. [Washington, D.C.]: U.S. Govt. Accountability Office. Millichamp, A. (2012). Auditing. London: Continuum. Saxena, R., Srinivas, K., Rai, U., & Rai, S. (2010). Auditing. Mumbai [India]: Himalaya Pub. House. Read More