Auditing Reflection - Essay Example

Auditing Reflection University Student Id Course Date Auditing Reflection Introduction The essay will reflection on my learning experience of the whole semester to assess my understanding and the nature of knowledge in gained. In this semester I have managed to get a lot of knowledge concerning auditing and assurance. In the semester we were taught twelve chapters that took 14 weeks of the semester. Generally, I gained a lot of knowledge concerning the auditing and assurance in the class. The topics learned in each week are explored in the essay to assess the lessons I learned within the entire semester. The lecturer ensured that we were aware of the various areas that were to be covered in the semester thus shading some light on us concerning the various aspects concerning auditing and assurance. Before the semester started, I was not aware of what auditing entails hence I got an important opportunity to learn a lot about auditing. The group I was working with was a bit uncooperative hence it did not impact much in my learning process. However, I could engage with some of my friends and discuss about the various topics. This proved to be of help in enhancing my understanding of the major issues concerning the topics. I ensured that I consult my classmates whenever I felt necessary, helping in improving my learning experience. Auditing and Assurance In the first week, we started with the introduction to the course where assurance services were defined and the different assurance services discussed. It is also in the first week that we learned the different auditing roles of the auditors and their opinions in the auditing process. I learned the auditing and assurance demand patterns. It is in chapter one where I learned the audit expectations gap and the regulations that surround auditing and assurance. According to what I learned in this chapter, a certain system approach mainly makes use of the audit approach which is recently employed by the professional auditors. Making the necessary decision concerning the approach utilized in the process of auditing financial reports is crucial to the final results. However, there are numerous changes to the method used by various auditors in doing their jobs (Arens et al. 2007). This kind of approach usually lays more emphasis on the understanding of the entity of an organization which is being audited together with its environment. The process of auditing mainly focuses on the business activities instead of paying attention to the accounting cycles. Moreover, this kind of innovative approach came up as a result of the changing dynamics taking place in the markets. Professional ethics In the second week, I learned the professional ethics surrounding auditing and assurance where we started by evaluating the independence of the auditor during the auditing process. It in Chapter two where the relationship existing between the stakeholders and the auditor was explored. I learned the importance of engaging the stakeholders in the auditing process. In the chapter, I learned various issues surrounding the real meaning of professionalism. The term professionalism is used to refer to the either conduct as well as the qualities which characterize a specific profession. Also, the aspect of professionalism is used as an implication of the quality service as well as workmanship. In almost every organization, it is well known that the professional reputation refers to the difference that exists between success and the failure. Therefore, the majority of the organizations always maintain the staff personnel which are professional in order to avoid its failure and ensure that they succeed in their business activities. Before reading this topic about professional ethics, I was not aware that professionalism comprises of both success and also the impact which leads to the reputation in terms of excellence. On the other hand, professional person refers to the individual who influences professionalism under any situation and can lead to success in either in a working place or an individual ambition (Knechel, Salterio & Ballou, 2001). I learned the importance of maintaining ethics in operations. Legal liability of auditors and the client acceptance Legal liability is one of the consequences that an auditor is likely to encounter when breaches the expected ethics in his professional. In the chapter, we learned the legal liability that faces auditor for making an auditing opinions that is misleading. The auditor is liable for making misleading presentations of the audit report where the users of the auditing report have the right of suing the auditory for negligence. Besides, it is in this chapter two I learned the client acceptance concerning audit opinion. According to this chapter, some of the ethical be ethical behavior of the auditor can include the following: Trustworthy: In nowadays, the societies lie on the workers who express trustworthiness as the right person responsible for the professionalism. Trustworthiness entails the fulfillment of a given task at the right time and also being reliable in times of delivering services to the customers. Accountability: An employee should be accountable for all his or her deeds in a workplace and also responsible for their actions. By being accountable, the auditor can be in a position to ensure that the financial reports are accurate. Risk assessment In the third week, we learned risks assessment in chapter three where I learned the different phases of any audit. Before the lesson, I did not know the auditing process necessary for understanding the need of the customer. It is within this week I got to know the fraud decisions, going concern, corporate government structure, the effects of clients’ information technology, and the effects of closing procedures of the reported audit results. In the same week, I learned the various components of audit risk model contained in chapter four that made me understand the materiality that affects decision concerning the audit strategy. In week four we continued with risk assessment where I gained some insights concerning measurement of performance as per the interpretations of the customer. I also realized the analytical procedures that are necessary for assessing the level of audit risk. According to what I learned in this chapter, the aspect of assessing a risk refers to the process of identifying a relevant risk, as well as analyzing it for the benefit of an organization and this helps in determining how the prevailing risks should be encountered. The risk assessment is always used as an implication for the determination of the operating goals. Also, the risk assessment acts as an implication for the systematic identification of the interferences which hinder the achievement of those goals from being realized. However, it is not all risks which are equal hence some of the risks tends to have greater effect as compared to others. The auditor in the process of conducting an auditing task should always first assess the risk procedures which are efficient in providing a reasonable base in which a certain risk can be identified and assessed from. Moreover, a risk may be as a result of material misstatement, an error and also as a result of fraud. For instance, the risks caused from material misstatement can be as a result various sources such as external factors such as conditions in an organization, nature of the organization and also the environment surrounding an organization. Additionally, the risks which are as a result of material misstatement may be related to the employees who do not have the necessary competency in terms of giving a financial report. Therefore, the procedures of auditing are usually necessary for the process of identifying as well as assessing the risks which result from material misstatement in a manner which is more appropriate. Audit evidence In week four I also learned about the audit evidence in chapter five that is necessary for explaining the audit assertions. Before the reading about audit evidence, I was not aware of the audit evidence types and the sufficiency of the audit evidence. I learned the persuasiveness of the auditing evidence, issues surrounding works of other experts and auditors, and the procedures necessary for gathering evidence during the auditing process. I realized that in most cases, the audit evidence entails the essential information which supports as well as collaborating with the assertions management in relation to the financial statements. Importantly, the aspect of sufficiency is used as a measure of the audit evidence quantity. Evidence review and risks assessment Week five entailed assessing the various issues surrounding the evidence review and risk assessment as presented in chapter three, four, and five. It is during this week that we used an audit case in class to assist in making us understand better the process of assessing risk and providing audit evidence. The aspect of audit evidence comprises of all the relevant information regardless of whether acquired from the audit procedures or other various sources. All the relevant information is usually used by an auditor who is auditing a certain organization in the process of arriving at ta certain conclusion which is based on the opinion of the auditor. I learned the risks that are associated with material misstatements in organizations. In the case, this risk goes high, and then definitely the quantity of the evidence which the auditor can obtain also increases. For instance, more quantity of evidence is required in response to the risks which are significant. However, there are some factors which in most cases have an influence on the quantity of an audit evidence which is required and can include quality associated with the evidence used. However, acquiring a similar audit evidence cannot actually in any way be used as compensation to the poor quality of given evidence. Control risk and internal control Week six we were in chapter six where I learned the internal controls and the major objectives of internal controls in any organization. The various elements associated with internal control were explored at both entity and transaction level where I learned the techniques employed in the internal controls documentation. Before I was not aware of the weaknesses and strengths of the internal control system where I learned the ways of communicating the weaknesses and strengths to the team in the governance position. I realized that an internal control which is efficient about the financial reporting gives an assurance which is reasonable concerning the reliability of a financial report as well as the preparations of statements related to finance (Chandler, 2008). However, if there are various material weaknesses which are found in an organization, then definitely its internal control over the financial reporting cannot in any way be termed as efficient. Audit sampling Week seven were I chapter seven where I learned the use of audit sampling in auditing process and the differences existing between non-sampling and sampling. Before this topic, I was not aware of the non-statistical and statistical sampling, factors affecting the sample size in testing controls and the influence of sample size in substantive testing. I learned how to draw audit conclusions, differentiate substantive tests and tests of control, and how to arrive at the conclusions while considering the gathered evidence. According to what I learned in this topic, audit sampling refers to the application which is related to the audit procedure which is used in the process of evaluating the various features of either balance transactions or class transactions. I realized the benefits that can be associated with the auditing sampling where I found that it provides guidance for the planning as well as performing the auditing task. However, auditors should be aware of the various misstatements which are possibly likely to be found in both account balances and also in some transactions. Therefore, the majority of the auditors consider these obvious misstatements in their process of planning procedures with inclusive of the audit sampling. Hence, the auditors will have no specific misstatements for some account balances and the transactions since the auditor is required to achieve the audit objectives which are set. I learned that there are two main approaches which are used in the audit sampling which are; non-statistical approach and the statistical approach. The aspect which is common in these two approaches is that both of them make use of professional judgment in their process of planning and also evaluating a sample. Additionally, these approaches of audit sampling may end up providing an effective evidential matter when it is applied appropriately. The size of a certain sample required on the provision of a sufficient evidential matter is usually determined by the set objectives of a given sample. Performing control tests Week eight was in chapter eight that is about test control during auditing where the types of controls are outlined. In this chapter, I learned the different techniques employed in test controls where I gained some knowledge concerning selecting and designing the test controls. It is within this chapter that in learned how to contrast and compare the testing results controls and the necessary procedures for documenting the test controls. According to what I learned in chapter eight, in the year 2006, the tests of controls were not needed by the standards of risk assessment. Therefore, substantive evidence which is sufficient can also be acquired from other various assessment procedures and also from analytical procedures which made expressions concerning the financial statements (Whittington & Pany, 2001). However, the tests of controls are in many cases conducted as a measure of the possibility of mistakes occurring and which are not detected in the sampling process. The compliance procedures for the tests of controls usually comprises of some aspects such as observations, inspections and also inquiries. However, documented evidence concerning the procedures of the internal control which are conducted by a client is of great benefits in the process of evaluating compliance. Performing substantive tests Week nine the substantive tests in auditing were explored as they are presented in chapter nine. Before this reading about substantive tests I was not aware of the procedures involved in substantive auditing. After this chapter, I become aware of the link existing between substantive procedures and the audit model. I was able to develop substantive audit procedures and document the conclusions reached during the substantive procedures. I learned that the substantive transactions refer to the tests which are done on the various systems of accounting and are usually for designed for testing the monetary errors which are present. In sometimes, the tests of controls are known as the “dual-purpose” tests simply because they mostly perform both compliance and also the substantive tests (Leung, Coram & Cooper, 2007). Auditing the revenue cycle In week ten we were assigned some readings about the understanding of the environment and entity by the auditor while planning audit. I learned how to determine the inherent risks concerning various assertions and the documentation of the trail in the revenue cycle. I was not aware of the internal control and preliminary decisions in the process of controlling risks and fraud before the assigned readings. During the assigned readings I also learned how to perform and design tests for controlling revenue cycle after determining the detection risks and the substantive tests. I learned that it is the role of the auditor to assess the inherent risks that are likely to be linked with revenue cycle. It is crucial to perform the tests necessary for determining the possible fraud in the financial statements. The auditing proved to be important in the process of assessing the potential of misstatements of the revenues by the management. Balance sheet accounts and substantive testing Week eleven involved discussing the relationship of the material misstatements and timing of the substantive procedures in chapter ten. I gained some knowledge in executing substantive procedures aiming at addressing the audit risks that can be associated with inventory, equipment, cash, plant, and payables in organizations. In the chapter, the relevant substantive testing related to other balance sheet accounts were explained together with the assessing the need for additional substantive tests. I realized that the financial statements of the end of the year are crucial in determining the accuracy of the results of auditing process obtained. The recording of the transactions might sometimes be misstated hence creating the need for the auditors to ensure that the various transactions recorded are properly audited. For instance, the balance sheet items can be misstated leading to inaccurate auditing report concerning the financial position of the company (Gill, et al. 2001). Income statement and substantive testing Besides, in week eleven we learned the relationship existing between risks assessment and the income statements. This was in chapter eleven where the differences existing between auditing of the balance sheet and income statements were explored. I learned the execution of the substantive procedures in the process of addressing the audit risks that are related to the expenses that are considered significant. Before reading this chapter, I was not aware of the process of assessing the substantive procedures in the process of determining the tests that might be necessary. I learned that the process of obtaining the necessary evidence concerning the items in the income statement is critical in ensuring accurate final results (Ainapure & Ainapure, 2009). In the process of ensuring that the financial results obtained are accurate, it is important for the auditor to properly assess the possibility of materiality in the income statements provided. Completing the audit Week twelve is when we learned the procedures necessary when finalizing audit as it is presented in chapter twelve. In this chapter, we evaluated the going concern assumptions in the auditing process while assessing the materiality affecting financial report. I learned the differences existing between qualitative and quantitative considerations associated with the evaluation of misstatements. I become able to carry out evaluations of the conclusions that are obtained in performance auditing while ensuring proper explanations concerning the link of the conclusions with the opinion of the auditor concerning financial statement of the company. Reporting the audit In the same week, we explored the various components of any audit report as is contained in chapter twelve. I learned how to ensure proper differentiation of the modifications types associated with the audit reports. Before I was not aware of the benefits of understanding the company act breaches to provide reliable and accurate audit reports. Besides, I learned the requirements necessary for reporting the audit reports to the people responsible for governing the financial reports. Conclusion At the end of the semester, I acquired sufficient knowledge concerning auditing and assurance and the major practices. I realized that the main purpose as to why the auditors conduct an audit in the sector of internal control over its finance is to determine the effectiveness of a certain an individual organization. Since the internal control of an organization cannot be termed as efficient when there is a material weakness, it is necessary that auditors should plan well and also perform the auditing process appropriately. In addition, the issue of material weakness of an internal control may also exist even under the cases when the statements of finance are not materially misstated. Besides, I realized the need for ensuring that the auditing standards are maintained by the auditor in the process of making sure that the audit reports are accurate and reliable. I realized that there are general standards which are applied by the auditors when auditing the internal control over the finances of an organization. However, these standards usually require a technical training as well as the aspect of proficiency. Also, auditors should make use of a framework which is suitable and also recognized when they are conducting an auditing process. References Ainapure, V., & Ainapure, M. (2009). Auditing and assurance. PHI Learning Pvt. Ltd.. Arens, A. A., Best, P., Shailer, G., Fiedler, B., Elder, R. J., & Beasley, M. (2007). Auditing and assurance services in Australia: an integrated approach. Pearson Education Australia. Chandler, R. (2008). Auditing and assurance. Economics, Management, Finance and the Social Sciences, ed. Uo London. Gill, G. S., Cosserat, G., Leung, P., & Coram, P. (2001). Modern auditing & assurance services. John Wiley & Sons, Brisbane. Knechel, W. R., Salterio, S. E., & Ballou, B. (2001). Auditing: assurance & risk. South-Western College Pub.. Leung, P., Coram, P., & Cooper, B. (2007). Modern auditing & assurance services. John Wiley & Sons Australia. Whittington, R., & Pany, K. (2001). Principles of auditing and other assurance services. Irwin/McGraw-Hill. Read More