Auditing, Assurance And Compliance

The Steps Required Before Doing Audit at BSF Ltd.

Discuss about the Auditing, Assurance and Compliance.

The examiner’s report has been prepared which consists of the tasks which assess the financial statements of the firm that has been given by the management of the firm. The selection of the examiners or the auditors is done by the management of the firm by prior authorization to the given responsibilities as the auditors or examiners hold the authority of taking a decision in accordance with the financial condition of the company or organization (Gramling et al, 2004). Along with this, the auditor has sufficient rights for the relation of the information of the firm with the personal comfort of the examiners which eventually takes the information into a high level of consideration. It has also been said that if the evaluation is expected to be proper, better and of a high standard, then the examiners must find out the accuracy of the information along with the rectification for the presence of any vagueness. The ambiguities like the assets, expenses, and the revenue will eventually help in addressing the financial statements completely (Weidenmier & Ramamoorti, 2006).

It is a must to check all the pros and cons before accepting any audit task; it is the duty of any of the professional accountant. The mulling over the fact is basically not to violate the ethical guidelines so that the overall task must not get hindered due to any of the threat due to the violation of the facts. Due to this before accepting the tasks, it is must to have a check out of all the threats associated with the audit task which is basically done by designing the required guidelines that are required for the particular audit task (Van der Spiegel et al, 2012). The tasking of the audit must consist of the details of the client, the current operation with the records of the business, outlining of the work and the last and important is the figuring out the issues or the complications that will hinder the client dealing in the future (Raghunandan & Rama, 1994).

In all cases, it is always made clear that any type of new task or new proposal must be checked thoroughly with utmost care because there will be any type of threat or issue or complication, and then it can be rejected.

When the auditor finalizes the client, the whole audit team or the audit firm must verify the total task that has been given by the client to make sure about each and every objective of the task given by the client. Again if there is a situation of sharing of the shares in the Client side, then the potential risks are must expect in this type of task. Also if there is any emergence of any type of potential threat, then the dismissal of that task is not a solution by any means, instead of that there must have that much-required safeguard for facing any threat (Woodroof & Searcy, 2001). There must be other safeguard process which will stop the emergence of such issues in further process which will not allow the hinder the auditing process by diminishing all the threats. Again the identification of the conflicts in the task is also an important factor to check up before accepting the task for auditing, along with which there will be an eye upon the presence of the safeguards for the reduction of these type of threat, which also must be available and acceptable in all case of the conflict. Sometimes there are clients like the BSF that is basically working under specialized industry, the if the auditor is planning to take up the task of BSF the efficiency of the audit firm matters as it must have that much capacity by which the performances of the client firm can be evaluated with that efficiency (Kinney Jr, 2000). But sometimes the auditor does the mistake of accepting the proposal of the client without going through the keen details of the client firm, due to which there is the emergence of the threat of self-interest which is also a potential threat. Apart from all these, the auditing task must have the aim to satisfy the need of the customers by the given deadline and with much accuracy (Leslie, Teitlebaum & Anderson, 1979).

Relationship Between Inherent Risk and Auditing

The firm that contains the threat of the audit or an audit threat that can be defined as the particular situation where there is a mismatch of the opinions that has been given by the auditor and the audited financial statements (Hasan et al, 2005). Therefore it can be said that the risks of the audit is not a particular one type, it can be of inherent, control and detection risks.

The organization that is possessing the high subjective work will definitely face the inherent risk factor which has basically happened to the task of BSF Ltd. Therefore the BSF Ltd. has been involved in the presence of the work having high subjective along with the personal judgments and the opinions that indicting towards the unrestricted nature which as a resultant makes the amount of inherent risk quite high.

 As said earlier, BSF Ltd. has it control risk as 5%, defines that this organization is having a comparatively lesser amount of control risk or it. These types of risks arise when there is an incapacity of the controlling of the control mechanisms that has been taken for the checking up of the identification of any of the material misstatements. These issues of the misinterpretation and the misstatements are basically verified as the BSF has the required measures that will take up the internal control of BSF (McCuaig, 1998). So, therefore, it is a must the auditor should check the total amount of internal control measure that is going on with BSF. The auditor finally gives the report of having a fair, effective and well internal control for the BSF Ltd.

As the position and the size of the BSF is not well picturized by the management. Therefore there is having the threat level a bit higher. Also, there is having the addressing of this type of the situation which makes the threat under control.

Another risk that is important for the company is the detection risk which says about the lack of the capability of the auditors in the process of identification of the misstatements in the financial statements when there is an implementation of the procedure of auditing in a proper systematic way (Hamilton & Chervany, 1981). The audit team had missed the identification of the omission and commission which will basically hinder the working process of the company and eventually makes it harmful for the use of the users. The audit team is mainly taking up the sample tests which will eventually make the reduction of the issues.

For this reason, there is a model for the description of the audit risk that includes the overall figure of the threats that are a combination of all the three in their respective aspects. Therefore the total evaluation of the audit risk will be done after evaluating and calculating them in all which will eventually increase the audit risk (Hasan et al, 2005).

Audit Risk = Detection Risk x Control Risk x Inherent Risk

The matter of audit risk is finally carried out evaluating and identifying the threats of the task that to be audited which has much effect on the team that is assigned to take up the audit task basically aiming towards the minimizing of the threats. It is said that if there will be any type of decreasing action in the risks or the threats, then there will have the rejection of the proposal or the task of the client. The audit members always must be active in taking safeguards in decreasing the amount of the risk, that is why the detection risk is majorly said to be the residual risk which with growing time leads to the demand for the increased manpower and more period and this is the reason that needed to check in regards to the management before approving for any type of the proposal or the task (Van der Spiegel et al, 2012).

Out of all the risk in the process of the audit risk, if the amount of the detection risk is more, then there will have an increased amount of the control risk and the inherent risk. Same way if there is having an inherent threat so has the increased inherent risk which eventually stated by the audit team about the decreased level of the detection risk in this case. Therefore in a final statement, there is having the high threat in the audit process of BSF also having the higher amount of both the inherent and the detection risks (Flowerday & Von Solms, 2005).

Therefore, the calculation of the audit risk should be:

Audit Risk = Inherent risk x Control risk x Detection risk

                   = 0.9 x 0.05 x 0.8 = 0.036 or 3.6 %

  When the amount of risk comes out of identification to be less than 10 %, then the audit team says it to be moderate in amount. This amount of threat when comes in the account of BSF then a there audit of BSF will be on the lower side which gives the auditor a clear signal in accepting the audit.

There must be a list of the details of the program which must include the audit program of the BSF Ltd., and also there must be a discussion on the above. The program that is to be prepared must include all the general coverage of all the items that are involved in it.

The audit team makes the auditing process in such a way that the audit process should be carried out with much accuracy, in addition to that making the audit team capable of the collection of the proof for the auditing process (Van der Spiegel et al, 2012). The accounting system of any of the client is ready to use only after the evaluation of the auditor by going through proper auditing procedure; i.e, the client here is the BSF Limited. The whole total accounting system is being thoroughly studied or analyzed in the process of auditing which enables is having the control over the tests that are basically meant for the collection of the proof within the given period.  By going through this auditing process, the financial team of the client firm gets more assurance regarding the auditing process.

The listed below are some of the audit programs or audit proposals:

The details of the monthly financial reports, the charting of the account listing, all the records of the audition process and the opinions to that, The company’s trail balance in year-end, the funding list and the reports regarding the allocation to the destinations, the opening balances checking, the checking of the required ledgers, the summing up of total bank details, fixing the bank statements with the official account, checking of the cash utilization, verifying the transfers and their concerned authorization, verifying the accuracy of the assets by studying the books or by physical check-up, verification of the creditors for the checking of the liabilities and finally verification of the interest of bank payments by checking all the long term and short term loans (Kinney Jr, 2000).

The journal entries basically help the external auditors in reducing the financial irregularities by giving much efficient results for the external audit process which will result in the commencement of the auditing process and its regulation by sufficient analysis by the depart of accounting. The accuracy of the entry of the journals will be verified by the audit team which again makes the inquiry among the people or individuals who are mostly handling the process of making entries and the assigning the funds.

In the case of BSF, the research and development are directly related to the success of the business that helps in taking of nay decision of BSF, though the final result is always uncertain and is dependent upon various factors of external force (Hodson & Thomas, 2003). But if there is any type of success in the above then that will in later conditions used in the satisfying the need of the customer.

For this reason, the work of the auditor is to give the assurance of all the activities of the research and development to be performed in a good manner due to which the targets are being identified which eventually makes the journal entries commercially effective. When BSF is intended to take up a new research process, the operating cost will always create an amount of difficulty in terms of expenditures and the capital. This amount of the capital is majorly being invested in the equipment and the collection of the materials. Therefore the audit process is basically can be said to be carried out for the fixing of the expenses which can be beneficial for the company (Chan, 1993).

CSIRO played a major role in this process, as it has given the permission of a particular amount of money, i.e. about $500 million dollars out which there have the spending of $400 million dollars (Anderson, 2003). This is the meaning that the company basically made the utilization of the money in which purpose which in the later situation the management will have to answer by explaining the deviation and the issues that led the expenditure of the money in any other direction.

This process of the total extension is mostly said to be triple bottom which intended to have the contribution of the social, economic and the environmental presentation of the firm. This triple bottom gets fit in the concept of BSF by making its financial statements that are well performed. The works carried out in BSF are mostly environment-friendly and communal which makes the audit process a bit exaggerated. The approach that it has taken was at fits mostly being criticized but in later condition, it became successful in becoming a leading solution. Due to having the arising of these types of issues of the triple bottom, the auditor finds inconvenient in signing the documents for any of the further researches. But it is evident that the whole information has been based on the provided information and the endorsements.

 By going through from every type of actions, the auditor finally got convinced in signing the documents which are basically based on the information basing on the sufficient information received from the sources. The sources consist of the details of the market conditions depending on which the predictions and submission are made (Woodroof & Searcy, 2001). After this process, there will be the production of the revenue. Therefore it becomes evident that there must not be any competition for the company as the process of pricing depends on the market demands and the market conditions. 

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