Auditing and Assurance
The aim of the assignment deals with the auditing and the assurance where the rules and the norms of the ASX corporate guidance principle shave been depicted in that case. The detailed study regarding the advantages taken by the auditors and the opportunities grabbed by the auditor is discussed in the conducted study thoroughly. The risk management and the implications of the risk management have been discussed accordingly. The decision making process of the auditors are shown in the study and the further information regarding the audit work have been depicted in the conducted study. The auditors tries to take advantages regarding the negligence in the internal management system of the company.
The ASX corporate government principles must disclose the recommendations set by the council during the reporting period. If an organizations statement regarding the corporate governance is not included in the annual reports then it becomes the breach in the rules and regulations of the company. The statement of the corporate governance must be current and the effective date must also be included in the statement (Fuhrmann et al., 2017). There are certain objectives of the company which must be maintained in order to increase the increase the interest of the stakeholders of the company. If the stakeholder’s interest is enhanced then it will definably increase the value of the company which will further attract the shareholders of the company in that case.
Far Faraway Pastoral Limited (FFA) is a major agricultural company which is originated in Orange and further listed in the Australian Stock Exchange (ASX). To improve the corporate governance of the company it is needed to increase the diversity of investment process which will increase the revenue growth of the company. The directors or the board members of the company must be appointed on the basis of the parameters regarding the industry knowledge to support the board. Providing timely information from the management of the company will further help the company to take right decisions. The effective risk management of the company will further enhance the decision making of the company along with the performance of the business (Fernandez-Feijoo, Romero & Ruiz, 2016). Evaluate the performance of the board as per the strength and weakness will further increase the growth of the company. The growth of the business of the company must be enhance in order to meet the financial objectives of the company in order to further increase the growth of the company.
ASX Corporate Guidance Principles
American Accounting Association Model Decision-making process
- Determine the facts: The facts which are uncovered or rather considered as a bribe in the information’s are the FFA’s methods of recognizing the revenues on sale of the cattle’s is very doubtful (Schmidt, Wood & Grabski, 2016). The facts or the information are important for the auditors to perform the audit work. The auditor always tries to find issues lying in the reports or the information’s of the company and duly try to take advantages based on the situation (Dowling, Knechel & Moroney, 2018).
- Define the ethical issues: The ethical issues is regarding the above problem which the auditor Steve Barker noticed while performing audit as the responsibility of the auditors to review the financial cycle of the company (Edgley, Jones, & Atkins, 2015). Ethics is a very important element which must be taken care of by the auditor while performing the audit work. Auditor always tries to take advantages of the internal issues in the management system of the company. Here in this case, Steve Barker must not accept such bribe while performing the audit duties. The doubtful cases must be further studied by the auditors and the relevant information’s must be collected in that case. The auditor have to collect the relevant information’s otherwise without proper information’s if the auditor accept such bribe then it will fall under the illegal activity.
- Identify the major principles, rules, and values: The norms, rules and values must be identified by the auditors in order to further ensure that the company is showing true and fair view of the financial situation. In order to ensure that the financial statement is free from the material misstatement, the auditor have collect all the relevant information’s regarding the revenue report of the company. If all the relevant information’s are collected as per the norms and the values associated with it, then the auditor will be able to audit the revenue statement of the company (William, Glover & Prawitt, 2016).
- Specify the alternatives: There are two alternatives in the course of actions which are related to the acceptance or refuse of the audit work of Steve Barker. If the auditor accepts the bribe then the audit work will be based on hypothetical information’s which further reflects in misstatement in the financial statement. Accepting such bribe will be illegal and it will also create the ethical issues in that case. Refusal of the bribe without further research indicates that the auditor is remaining negligence on the duties and responsibilities and in that case the auditor will take further appropriate actions accordingly (Wilkinson & Coetzee, 2015).
- Compare values and alternatives: If the payment desired by the auditor is not received in case of accepting the bribe then the auditor will take alternative action to perform the audit in such a way that best interest the shareholders of the company in that case. The auditors always tries to give value to the advantages and takes decision based on the best alternatives which suits them and they usually don’t take decision based on the benefits of the company rather tries to maintain balance in the situation (Lewellyn et al., 2017). The auditor takes decision based on the interest of the clients for maintaining long term relationships with the client. As for the auditors, maintaining the perspective of the clients or further maintaining the objectives of the clients is significant.
- Assess the consequences: If the auditor accept the bribe, then it will definitely increase the wealth and the standard of living of the auditor in an illegal way. Performing audit by accepting the statement will also benefit both the party in that case. The client will get more benefit and will remain indebted towards the auditor. If Steve Barker in this case accept the bribe then it will definitely put an impact on the financial statements of FFA but Steve Barker and both FFA will be benefited in that case. The auditors main objectives is to maintain or rather enhance the relationship of the clients. Maintaining strong relationship with the clients will definitely increase the benefits of the auditors in the long run (Holt, 2018).
If the auditor refuse the bribe then it will definitely put an impact or rather negative consequences on the clients. This will put an impact on the future relationship of the clients negatively. On the other side it will definitely enhance the reputation of the shareholders and will serve as the best interest of the shareholders. In such a situation, Steve Barker will perform the audit work in such a way that the shareholders of the company is benefitted out of such statement.
- Make your decision: As per the ethical conduct of the auditors, Steve Barker will perform the audit work by accepting the second bribe in order to maintain the ethics. Accepting the second bribe will further enhance the interest of the shareholders and will also provide transparency in the income statement of the company (Knechel, 2016).
From the above discussion it can be interpretive that the FFA is guilty of the contributory negligence. There is a lot of negligence on behalf of the company regarding lack of information’s in the financial statement of the company (Hines et al., 2015). There is also negligence in the adjustments of FFA and it is needed to take care of by the upper level management of the company. There is problem in the sales of the company where further the management system of the company needs to work on the internal system to improve the business position of the company. The accounting information of the company needs to be revised in that case to further provide the transparency in the financial statements of the company. While auditors perform audit work as per the relevant information and if there is any lack in the information of the company then the auditor will not be able to give proper justification to perform the work (Mizuno et al., 2019)..
Contributory negligence in a random way will hamper the audit work of the auditors as insufficient information’s will put an impact on the shareholders of the company. Material misstatement in the audit work affects the interest of the shareholders of the company. The company needs to properly maintain the records and the information which will also help the auditors of the company to provide the audit work. If the auditor of the company performs the audit work on respect of the clients business then it will be an ethical issue on behalf of the auditors. The advantage taken by the auditors in that case will be an illegal activity and for that the auditor may demand hefty fee. This will benefit the client or rather enhance the relationship of the clients on the long term basis.
If the relationships of the clients is such an illegal way is maintained then it is internal duty of the management to rectify such misstatements in the future or rather adjust the lag in the financial report. This will definitely impact the financial performance of the company in the long run and the company may end up in liquidation. Hence the internal management of the company must take care of such kind of issues from the beginning otherwise the company may end up like Enron due to such huge corruptions. These are the vital things which are needed to be taken care of the upper level management of the company despite of such internal scams (Hiltz & Pierce, 2018).
Risk Management and Implications
The auditors always have a tendency to find issues in the record or the information’s related to the financial statements of the company so that they can take advantages of such internal issues of the company. At that time the auditor take advantages by the method of charging hefty fees from the company for not disclosing the glitches in the internal system of the company (Omoteso, 2016).. This will put an impact on the shareholders of the company as they will not get the right information from the financial statements of the company. This is a disadvantage for the shareholders of the company where it will definitely put an impact on the investment strategies of the company. The auditors basically performs audit to provide transparency in the financial reports of the company which will definitely interest the shareholders of the company in that case(Knechel & Salterio, 2016).
Conclusion
From the above discussion it can be concluded that, auditor plays significant role which ensures that the financial statements of the company is free from the material misstatement. There are certain strategies which are adopted by the auditors to take advantages out of the issues of the management systems of the company. The auditors perform their audit work independently in order to maintain the ethical rules of the audit standards. The auditor must perform audit work as per the values, norms and the ethics in that case which will put transparency in the financial statements of the company. From the conducted analysis it can be said that the auditors of the company must follow the rules in order to ensure that the financial statements of the company is free from the material misstatements.
References
Dowling, C., Knechel, W. R., & Moroney, R. (2018). Public Oversight of Audit Firms: The Slippery Slope of Enforcing Regulation. Abacus, 54(3), 353-380.
Edgley, C., Jones, M. J., & Atkins, J. (2015). The adoption of the materiality concept in social and environmental reporting assurance: A field study approach. The British Accounting Review, 47(1), 1-18.
Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2016). The assurance market of sustainability reports: What do accounting firms do?. Journal of cleaner production, 139, 1128-1137.
Fuhrmann, S., Ott, C., Looks, E., & Guenther, T. W. (2017). The contents of assurance statements for sustainability reports and information asymmetry. Accounting and Business Research, 47(4), 369-400.
Hiltz, A., & Pierce, S. (2018). Quality assurance program for a nuclear pharmacy. The Canadian journal of hospital pharmacy, 44(1).
Hines, C. S., Masli, A., Mauldin, E. G., & Peters, G. F. (2015). Board risk committees and audit pricing. Auditing: A Journal of Practice & Theory, 34(4), 59-84.
Holt, T. (2018). An Examination of Nonprofessional Investor Perceptions of Internal and External Auditor Assurance. Behavioral Research in Accounting.
Knechel, W. R. (2016). Audit quality and regulation. International Journal of Auditing, 20(3), 215-223.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.
Lewellyn, P. G., Ritchie, C. M., Harrison, D., & Harmon, M. (2017). Does Sustainability Assurance Measure Up?: A Critical Analysis. In Proceedings of the International Association for Business and Society (Vol. 28, pp. 173-181).
Mizuno, H., Fukumura, A., Kanematsu, N., Yonai, S., Shirai, T., Yusa, K., … & Kanai, T. (2019). External dosimetry audit for quality assurance of carbon?ion radiation therapy clinical trials. Journal of applied clinical medical physics, 20(1), 31-36.
Omoteso, K. (2016). Audit effectiveness: Meeting the IT challenge. Routledge.
Schmidt, P. J., Wood, J. T., & Grabski, S. V. (2016). Business in the Cloud: Research Questions on Governance, Audit, and Assurance. Journal of Information Systems, 30(3), 173-189.
Simnett, R., Zhou, S., & Hoang, H. (2016). Assurance and other credibility enhancing mechanisms for integrated reporting. In Integrated Reporting (pp. 269-286). Palgrave Macmillan, London.
Wilkinson, N., & Coetzee, P. (2015). Internal Audit Assurance or Consulting Services Rendered on Governance: How Does One Decide?. Journal of Governance and Regulation, 4(1-2), 186-200.
William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic approach. McGraw-Hill Education.
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