Accounting Standards For The Prospective Clients

Determinants to be selected prior to accepting audit engagement

Describe about the Accounting Standards for The Prospective Clients.

There are different factors, which needs to be ascertained before acceptance of the auditory services, the important factor, which needs to be done, involves is initial screening process for the prospective clients before the offer is being accepted. The integrity is also ensured by providing the client with the non-audit services and adherence to the different set of the regulatory rule for the regulation of the ethical guideline suggested by the auditory practices along with the objectivity of the preparation of the audit report. The degree of the audit varies business to business based on the historical information (aasb.gov.au 2016). The management based on the preparation of the financial statement also exerts the amount of the influence. The degree of the incompatibility among the objectives of the executive with the senior management is also shown with the financial statements. The introduction of the new accounting concepts and the problems in the financial statements during the past two decades has reemphasized then significance for a reliable and robust framework of auditing. This is required to address the various types of the issues related to unethical practices and the use of unethical corporate behaviors, material misstatements and managerial decisions (Hagemann et al.2015).

It has been further observed that the changing set of the audit guidelines in the financial statement around the world has shown various types trends for a more standardized set of regulations needed for the publication of the finance, statement and annual, reports. The standardization process needs to comply with the preparation of the audit transparency report. Different types of observed cases relating to One Tel, AIG, Enron and Lehman Brothers is able to show the level of the understanding of the misstatements in the financial reports. The increasing problem of the agency costs has led to the conflict in the regulation of an auditory framework. The report provides a set of systematic auditory guideline, which is useful for solving the problems in the given study. The answers are prepared following the international auditory guideline. In addition to this the discussion takes into consideration the different types of audit risk relating to BSF Limited (Pelkmans et al.2012).

The existence of accounting scandals from the misrepresentations due to the financial reports including the delay in auditory proceedings related to the independence of external audit selection of clients make the overall auditing process more crucial. It has been further mentioned that before the acceptance of contract related to audit and auditor requires creating a fundamental standard check related to disclosure of the different types of auditory processes (Ato.gov.au. 2016). It needs to be further evaluated that the auditors need to assess the risks involved with integrity of the overall auditory proceedings. It has been further observed that the framework evaluation of the auditors is based on the prepared financial statements. The financial statement is prepared as per the required conceptual framework as per the accounting guidelines by the management (Rogowska 2015).

Factors to be considered on the inherent, control and detection risks of BSF LTD

It has to be further noted that the primary functions takes into consideration the acceptance for the audit assignment and investigates the relationship, which BSF enjoys with the previous accountants in terms of claims made in the liability section. It has been further observed that the examination of previous records helps BSF Limited to assess the criminal proceedings and enforced directives against the company based on the historical data. It has been considered that the reputation related to the previous employment is important for the members such as a board of directors, Chief Executive Officer and chief financial officer of the company. The forms which are responsible for swapping of auditors makes a tough to determine the forms transparency, sustainability and profitability on the basis of ethical grounds following the relevant auditory procedures (Sturm et al.2012).

The record of the different types of regulatory procedures helps to frame the actions taken upon the corporate houses display the ineffective control mechanism. It is critical to review the history collections imposed against BSF Limited for evaluating the effectiveness of internal management structure. It has been further observed that the high amount of revenue observed in the section of cash management has shown several inefficiencies in the internal structure and it has further made it a challenge for the company to accept the different types of audit assignment. Due to the fact that that the turnover ratio related to the revenues of the company had been high, the management has demonstrated itself to be inefficient in the internal structuring. It has further made a challenge for the company to accept the various types of audit assignment. The process related to the audit engagement is based on a “give-and-take” relationship among the client and the different types of external auditors. Hence, it needs to be considered that the degree of the company in involvement in the several types of non-auditory process also needs to be taken into account. The history of the issues relating to HIH insurance, Enron and Fannie Mac has shown that most of the companies rely themselves on the external auditors and for the different types of services associated to the activities in the non-audit sectors (Porter et al. 2013).

The research proposal undertaken by BSF is particularly complex in nature and therefore the various types of risk present in auditing of the company are considered very high. It has been further observed that the research fields are highly sensitive in terms of obsolescence for the emerging technologies and the various types of research findings and developmental activities undertaken by BSF Limited has envisaged the presence of a high degree of the prevalent risk. It has been further stated that the degree of misstatements in the non-financial and financial statements because of omission and errors has contributed to the rising level of inherent risk. It has been further observed that the judgments of auditors related to appropriateness of auditory evidence is relied on the degree of uncertainties related to material misstatements of financial figures and accounting data (Holm-Nielsen and Kirchovas 2012).

The different types of inherent risks tends to consider the misrepresentations or misstatements made in varied financial statements before taking into account the viability of internal control system. At the initial process the auditory proceedings related to the inherent risk, they are beyond the reach of control of an auditor (Aasb.gov.au. 2016). It should be further noted that an auditor is responsible for assessing the inherent risk during collection of audit evidence. The degree of inherent risk is responsible for displaying the shift from the initial proceedings of an audit work progress. Control risk refers to the risk arising because of flaws in the internal controlling mechanisms in the accounts of client’s book leading to accounting errors and false presentation of financial reports.

It is to be further observed that the various types of control risk may often lead to non-detection in the material error or exclude the mechanisms of internal control. The robustness of the internal control is very essential for the purpose of fraud detection and to detect the anomalies present in financial data. The risk reduction also encompasses the various types of risks related to failure as a part of the audit activities in terms of detecting frauds and anomalies in the financial statements. In general, the detection risks the prevalent when the various types of audit evidences are not sufficient for detecting material misstatement or material omission (Lane, Hough and Bostock 2014).

“Audit risk= Detection Risk*control risk*inherent risk”

Hence “Audit risk” = (0.80*0.50*0.90) = 0.036*100 = 3.6%

In the current situation my sustainable feeds Limited has shown considerably a due amount of control risk was further depicts that the company needs to improve its internal control system in order to make sure it does not show any sort of pertinent activities and material misstatements and future. Even though the presence of inherent risk is considered high, it is susceptible to change once the audit process is initiated. The existence of the tools for uncertainty detection needs to be diverted to the presence of reduction for risk which will have a positive impact on lowering the audit uncertainties. Moreover, at a level of 3.6% audit risk the audit form of BSF can consider to accept the assignment (Hall 2016).

The discussions on the fact that include the different types of audit program relevant to a particular situation of auditory technique, which needs to be applied to achieve the desired audit objective. The audit program needs to include the various stages of the verification and examination of the relationship of the auditory process with others. The shift in terms of the degree of operations, products and nature of business requires the auditory program to be customized as per the client’s requirements (Pelkmans et al.2014).

The different types of the program related to the specific item needs and the generalized item needs to be done in the following way.

Assessment of past audit records of the company and making an investigation into the previous auditory procedures undertaken at BSF Limited

Guideline evaluation related to safety of the research activities and making modifications into the audit program for acceptance of the safety standard related to the experimentation and laboratory activities with relevance to development in fish feeds.

Arranging a meeting with executives and managers for the purpose of research and development activities to be carried out in the company.

Examining the minutes related to the meetings for the modifications or changes which is to be implemented in the current research process

Making an investigation into the disposal of machinery for the purpose of development of fish feeds

Making an investigation to check the degree of inclusion or exclusion of newer sets of employer requirements in organization

evaluation of the findings related to the previous auditory reports and compliance standards of the various activities of the company

Making and review of the results from the different types of regulatory inspections which has been arising from the operations of the company

In case of arising of adverse results made by regulatory authority, the audit team requires two discussed with the management for an appropriate and amicable remedy for the problem

Reviewing the hierarchy of the company in terms of research and developmental activities after performing financial statements of the company

Taking a note of the significant items which is required for further evaluation process

Initiation of inspections related to plants of the company

Examining the external structure of client premises

Making and verification of experiments a laboratory and field test performed by a company

Making and verification in the regulation for trial process by using controlled set of samples

Taking into account the validity of reports related to hazard analysis

reviewing of activities pertaining to corrective measures in developing sustainable feeds

Making an inspection of purchase invoices with regards to inputs considered for the development and experimentation of fish feeds.

As per the AASB 1011 norms the broad category of activities related to research and development results in providing of classification for the different types of activities related to research and developmental activities based on different factors. The most critical factor for classification in terms of research and development includes both natural science and social science. It has to be further noted that the standards also reiterates the fact of the subsequent result from the developmental activities which has high probability for creation and development in the nature of production are planning of preproduction activities (Kaivo-oja et al. 2014).

The research and the development activities at BSF Limited are related to discoveries made in newer horizons for the purpose of improving the production in fisheries and it is also a towards the development of the knowledge and various research findings. As per the AASB 1011 guidelines the expenses need to be apportioned at the research and development activities are considered to be as a nature which are integrated in a particular domain of research activities. The government has white a tax relief of 40% to BSF Limited as per the new budget guidelines stated in the year 2014-2015. The offsetting of tax by a 40% tax rate is due to the turnover at BSF Limited, which is $ 20 million every year.

The relaxation of $ 500 can only be obtained if the company is able to maintain the expenses within $ 100 for every year. Hence, the grant is to be considered on conditional basis. It has been further observed that the payment of grant is based on the advance and is to be therefore treated as prepayment unless the conditions based on the ground have been successfully fulfilled.

The treatment of books of accounts for receiving the grants for next five years is to be done through the following journal entries:          

Date	Particulars	Amount (Dr)	Amount (Cr)
2013	Cash A/C…………………………………….Dr	500,000,000
	To CSIRO A/C		500,000,000
	(Being received the grant from CSIRO for scientific research)
2014	Research and Development A/C………………Dr	360,000,000
	To Cash A/C		360,000,000
	(Being expenses borne four research activities)

2014	Plant Feed A/C……………………………….Dr	360,000,000
	To Research and Development A/C		360,000,000
	(Being payment made in cash for plant-based feed)
2015	Research and Development A/C………………Dr	160,000,000
	To Cash A/C		160,000,000
	(Being cash payment made towards research activities)
2015	Development Cost A/C.………………………Dr	160,000,000
	To Research and Development A/C		160,000,000
	(Being payment made in cash for expenses related to research and development activities)

It has been further observed the different types of the assumptions taken into consideration by the government needs to be given to BSF as a separate expense. This needs to be allocated for the purpose of expenditure of research and patent. The total amount of $ 100 Million obtained every year is needed to be allocated in the expenditure relating to scientific area. Any amount pertaining to exceed the same shall be treated as “capital expenditure” on the patents.

According to Clemente (2015), the arguments related to the field of development of animal feedstock and fishes have displayed the tremendous ability for improvements over the past 10 years. The presence of a minor acid in the stock of aquaculture provides the necessary nutrient requirements for fish species, which display a higher growth potential. The cultured aqua species, which is primary in terms of shrimp, trout and salmon, have led to the emergence of high-protein feed with high intake of enriched with omega 3 variant. The consideration of lipid rich pellets in the feeds provided to the fishes is intended for human consumption has shown the overall improvement in the outer portion of the membrane and bone density of the fishes. Hence, it makes less susceptible in terms of damage for the indoor refrigeration. The different types of changes in the role of “reduction fisheries” have shown the improvement in overall marine and fish production. It was observed that in the 1980s and 1990s there was a drop in the fishery activity and this is directly led to the increasing requirement of fishes, which were previously not consumed. Indirectly these are considered to be of high value. It has been further noted that the inclusion of other forms of aquaculture feeds for fisheries such as Glutton, soya beans, canola and various other forms of proteins. These have been observed to be derived from the plant and led to the reduction in overall cost of feedstock thereby providing a high level of nutrients to the fishes (Temu et al. 2013).

The inclusion of patent with regard to treatment of bacteria based technology in terms of production of methane feats has not been acquired by “bio sustainable feeds limited”, as it is observed that the R&D activities are continued as per the data group provided in the case study. It has been further stated in the case study the lower amount of success achieved by bio sustainable feeds Ltd is due to the use of bacteria based bio sustainable feeds. Although, the company successful in securing the patent rights in form of feedstock it is not correct to assume that it enjoys the exclusive privileges for using bacteria based bio feeds. Through the various types of discussions it can be observed, and auditor cannot say that BSF Limited owner of the patent of the technologies related to bacteria feed. The auditor also cannot state that the company has the sole right of manufacturing the same. The development of the different types of prototype such as the trout has shown decreased by 10% relating to the growth in the absence of fish feeds. Therefore the growth relating to the non-presence of the fish feeds date for the complete removal of the same from the diet as it is not viable include any form of alternate dietary nutrients (Patton-Mallory, Skog and Dale 2012).

Conclusion:

The report states the overview of treatment of governmental grants awarded to BSF Limited. The report further illustrates the definition of scientific expenditure and discovers that the developmental operations carried out by the company directly comes under the view of research and development expenditures. It has been further observed that the decisions made in the acceptance of the audit engagements has been accessed based on the present guidelines and best industry practices. The discussions of the past records relating to the investigation of the turnover ratios by the management team related to the frequency of the involvement of the company has given the reason for audit engagement. It can be further assume that the guidelines related to the research and developments are considered for the purpose of analysis By BSF Limited. The rates are exempted and enjoyed by the company as per the government grants and has revealed that the company is entitled to get an exemption of 45% over the $500 million grants given by the government. This is subject to the fulfillment of conditions which is required by the company spend an amount exceeding $ 100 million which is above the research and development of plant and aqua based feed. The assessment made in terms of the accounting treatments has been done concerning the patents. It has been further revealed that the company is set to gain more than $ 700 million depending on the rate of development of sustainable aqua feeds.

References and Bibliography:

Aasb.gov.au. (2016). Accounting standards. [online] Available at: https://www.aasb.gov.au/Pronouncements/Current-standards.aspx [Accessed 7 Sep. 2016].

Canestrino, R., Magliocca, P. and Guarino, A., 2016. Environmental sustainability and organic wine production: evidences from italian industry.MERCATI E COMPETITIVITÀ.

Chandran, S. and Mesta, J.N.P.N., 2013. Adopting Clustering Approaches-Ecology Integrated Sustainable Development of Uttara Kannada.

Clemente, J., 2015. Bio-Fooled.

Dewil, R. and Appels, L., 2014. Anaerobic digestion as a key technology in bio-energy production: Current achievements and challenges.

Hagemann, H., Kies, U. and Schulte, A., 2015. Sustainability certification of short rotation coppice in Germany. Bioenergy from Dendromass for the Sustainable Development of Rural Areas.

Hall, M., 2016. Techno-Environmental Analysis of Generating Animal Feed from Wasted Food Products.

Holm-Nielsen, J.B. and Kirchovas, S., 2012. SUSTAINABLE BIOMASS POTENTIALS FOR FOOD-FEED-FUELS IN THE FUTURE. ESPACIOS PARA LA BIOENERGÍA EN CHILE, p.5.

Kaivo-oja, J., Panula-Ontto, J., Vehmas, J. and Luukkanen, J., 2014. Relationships of the dimensions of sustainability as measured by the sustainable society index framework. International Journal of Sustainable Development & World Ecology, 21(1), pp.39-45.

Komives, K. and Jackson, A., 2014. Introduction to voluntary sustainability standard systems. In Voluntary Standard Systems (pp. 3-19). Springer Berlin Heidelberg.

Krug, M., Rabczuk, G. and Cenian, A., 2015. Addressing Sustainability Risks of Bioenergy—Policy Strategies and Corporate Initiatives Energy and Power Engineering.

Lane, A., Hough, C. and Bostock, J., 2014. The long-term economic and ecologic impact of larger sustainable aquaculture.

Madan, M.E., 2012, February. Environmental Auditing As A Management Tool For Evaluation Of Category Wise Biomedical Waste [bmw Rules, 1998] And Its Practices In Hospitals In India. In International Journal of Engineering Research and Technology (Vol. 1, No. 5 (July-2012)). ESRSA Publications.

Patton-Mallory, M., Skog, K.E. and Dale, V.H., 2012. Integrated Forest Biorefineries: Sustainability Considerations for Forest Biomass Feedstocks.Integrated Forest Biorefineries, (18), p.80.

Pelkmans, L., Devriendt, N., Goovaerts, L. and Schouwenberg, P.P., 2012. Prospective study: Implementation of sustainability requirements for biofuels and bio-energy and related issues for markets and trade. IEA Bioenergy, 40, p.38.

Pelkmans, L., Goovaerts, L., Goh, C.S., Junginger, M., van Dam, J., Stupak, I., Smith, C.T., Chum, H., Englund, O., Berndes, G. and Cowie, A., 2014. The role of sustainability requirements in international bioenergy markets. In International Bioenergy Trade (pp. 125-149). Springer Netherlands.

Porter, W.P., Horn, M.J., Cooper, D.M. and Klein, H.J., 2013. Auditing laboratory rodent biosecurity programs. Lab animal, 42(11), p.427.

Rogowska, D., 2015. The system of biofuels sustainability in Poland. Nafta-Gaz, 71(7), pp.487-493.

Sturm, B., Butcher, M., Wang, Y., Huang, Y. and Roskilly, T., 2012. The feasibility of the sustainable energy supply from bio wastes for a small scale brewery–A case study. Applied Thermal Engineering, 39, pp.45-52.

Temu, S.G., Mshandete, A.M. and Kivaisi, A.K., 2013. Tanzania palm oil industry: Auditing and characterization of oil palm wastes potential bioresource for valorization. Journal of Chemical, Biological and Physical Sciences (JCBPS), 4(1), p.804.