“Evaluating the organization’s industry, regulatory environment and other external factors”
TransCanada is one of the publicly listed oil and gas companies that are listed in New York Stock Exchange (Transcanada.com 2017). This company operates in oil, gas and electricity industry or sector and serves many countries such as Canada, United States and Mexico. By conducting Environmental Management Program, TransCanada believes in monitoring facilities that ensures observance with all other ecological requirements. TransCanada aims at regularly monitoring planned changes in environmental strategy as well as legislation and guideline where the potential risks are large or uncertain. The companies eventually comment on tender by making associations with the industry (Sedar.com 2017).
Identifying four factors that increases the business risk for the company TransCanada
Business risk cannot be avoided by any of the company, efforts can be taken to minimize or reduce this business risk as far as possible. TransCanada faces several business risks (Stewart & Shamdasani, 2014). The four factors that are the reason for increase in business risk for TransCanada are as follows:
Why the factor increases business risk
The above factors are listed that affect or increases business risk for TransCanada and this can be minimized by undertaking measures (Sedar.com 2017). Furthermore, TransCanada faces several business risks that include operational risks, HSE risks as well as financial risks. Risk management is one of the integral part that is needed for successful operation within a company and they need to adopt strategy align with the business objectives as well as risk tolerance (Joskow, 2014).
How does management manage those risks?
The Governance Committee Board and Risk Management Committee together look at the risk management activities and plan to take necessary actions. The Board Committee looks at specific types of risk and even accountable for developing as well as implementing risk administration plans and proceedings and this is shown in their compensation (Transcanada.com 2017).
Linking business risk factors to specific risk of material misstatement
Evaluating internal control environment
It is the responsibility of the administration to begin and uphold tolerable internal control over financial coverage for TransCanada (Transcanada.com 2017). In addition, the management of the company is designed in a way that aims at maintaining scheme of internal control over financial reporting that include a agenda of internal audits of carrying the responsibility. After auditing Business Corporation of TransCanada, the administration is responsible for maintaining efficient internal control over financial coverage as well as for its evaluating efficiency of internal control (Zadek, Evans & Pruzan, 2013).
The internal control environment of TransCanada is one of the processes that are designed in order to present rational assurance in regard with consistency of financial as well as preparation of financial statements for external purpose based on Generally Accepted Accounting Principles. The policies and procedures adopted by TransCanada pertain to the maintenance of records that portrays fair transactions and dispositions of assets of the business enterprise. Due to inherent limitations, it is noted that internal control over financial reporting may not avoid or discover misstated figures and these are subject to risk where the controls becomes inadequate. Furthermore, the internal control over financial reporting takes into account communication with management as well as policies that govern ethical business conduct (Power & Gendron, 2015).
Performing an overall audit risk assessment in the context of the audit risk model
|
Audit Risk of TransCanada |
Inherent Risk |
Control Risk |
Detection Risk |
Risk of Material Misstatement (RMM) |
Preliminary Audit Strategy |
|
Does not comply with technical standards and procedures |
Low |
High |
Medium |
Medium |
High reliance upon controls as well as medium level of substantive tests |
|
Technical violations that has an immediate threat to people or environment |
High |
Medium |
Low |
Low |
No reliance upon controls as well as low level of substantive tests |
|
Problems in the pipeline company’s operating practices |
Medium |
Low |
High |
Low |
Moderate reliance upon controls as well as Low level of substantive tests (Zadek, Evans & Pruzan, 2013) |
|
Lack of compliance with welding regulations |
Low |
High |
Low |
Medium |
High reliance upon controls as well as moderate level of substantive tests |
Determining planning, materiality and provide rationale that include both quantitative factors and qualitative factors
At TransCanada, they have conducted materiality assessment for identifying the economic, environmental as well as social issues that is mostly useful for stakeholders. Several issues have been identified that are most material to the company as well as reported recently in the Corporate Sustainable reports (Zadek, Evans & Pruzan, 2013). The company had reassessed material issues that ensure that the company needs to continue for reflecting business goals of TransCanada as well as stakeholder expectations. Some of the material issues are identified below with proper justification:
The company had conducted materiality assessment so that they can properly align the core CSR elements with the interests as well as concerns of the stakeholders (Oswald & Oswald, 2015).
Presenting the results of key analytical procedures and analyzing the results on the impact on audit work or audit procedures
Analytical procedures are one of the types of evidence that are used by the auditors at the time of conducting audit functions. These audit procedures shows possible problems that need to be investigated in detail and proper financial records of the client (Wells, 2013). These procedures are used by the auditor to make comparisons between various sets of financial as well as operational information for understanding the historical relationships for given period of time.
The National Energy Board had engaged in launching major audit of TransCanada Corporation after the revelations of whistle blower activity on matters relating to problems in pipeline operating activities of the company. It is later examined that the integrity management programs had been conducted to look after the pipelines of the company that takes into account natural gas systems as well as keystone pipe (Sweeney, Grant & Mangan, 2015).
Furthermore, the pipeline firms for maintaining safe operations that comprise inspections of the pipe and procedures in order to secure possible problems majorly use integrity management programs. The Board of Directors expects that TransCanada should be demonstrating as well as providing enough supporting documentation for looking at the sufficiency and efficiency of its integrity management program. The National Energy Board audits are not unusual and it majorly uses new federal financing where it carry out inclusive audits for a year and the audit for TransCanada already had been planned for given period (Kogan et al., 2014).
The audit of TransCanada will be in detail where it will cover corporate management, measurement as well as pipeline inspection and systems planned for identifying hazards, assessing risk and maintaining operational control in both situations, be it normal or unusual ones. Furthermore, there were other concern on matters relating to competence of pipeline inspectors of TransCanada and lack of compliance with welding regulations. The company had spent more than $800 Million for maintenance as well as integrity (Benneworth & Cunha, 2015).
Discussing three key audit issues and identifying two audit procedures to address each key audit procedure
Issue- One of the audit issue faced by TransCanada is inadequate internal controls. The management of TransCanada is responsible to maintain internal control at certain level that is necessary to provide reasonable assurance as it states balances as well as amounts that need to be documented, reported and processed at the same time (Lu, Mohr & Ho, 2015).
Recommended solution- It is responsibility of the auditor to implement policies as well as procedures that ensures all the balances as well as amounts are regularly reviewed as well as reconciled.
Issue- One of the audit issue faced by TransCanada is inadequate accounting procedures. The management of TransCanada is responsible to establish as well as monitoring internal control in its operations (Transcanada.com 2017).
Recommended solution- It is recommended to the auditor to implement procedures and policies that focus upon strengthening the accounting as well as financial reporting process that further include regular review and reconciliation and adequate segregation of duties.
Issue- One of the audit issue faced by TransCanada is inadequate controls over financial reporting. It is noted that adequate controls were not kept in place that ensure all needed activity are included in the financial statements of TransCanada (Transcanada.com 2017).
Recommended solution- It is recommended to the management to implement as well as maintain a system of internal control that is needed to prepare financial statement as it is presented based on generally accepted accounting principles.
Identifying one key accounting process or financial statement cycle for TransCanada
Repayment and Capital Acquisition Cycle- One of the financial statement cycle is repayment and capital acquisition cycle that is considered in this case for the company named as TransCanada. This particular cycle eventually audits attributes like notes payable, capital stock as well as retained earnings and dividends payable (Sweeney, Grant & Mangan, 2015).
Listing financial statement balances and transactions in that process or cycle
From the annual report of TransCanada, it is seen that total notes payable for the year 2016 were $0.8 billion as compared to $1.2 billion for the year 2015. The company attempts to spread out the maturity profile of the debt as well as weighted average maturity of long-term debt is 17 years (Transcanada.com 2017). In the year 2016, notes payable contains commercial paper that is issued by TransCanada Corporation. The company entered into a new US $1.0 billion credit facility. Retained earnings for the year 2016 arrived at $1138 million, $2769 million (2015) and $5478 million (2014). There was drastic decrease in retained earnings that can be seen from the figures and this is not a positive factor for the company. The company needs to find ways so that they can earn profits in the upcoming financial years (Transcanada.com 2017).
Applying audit risk model and assessing the risk components for the key assertions in the process or cycle
The audit risk model is already explained in the above segment and risk associated it. It is now important to identify the key assertions present in the given financial statement cycle (Transcanada.com 2017). TransCanada is one of the leading energy regulators that had been found to be complying under four major categories and these are hazard identification, operational control as well as inspection measurement and review by the management. There are several allegations that are noted from regulatory non-compliance. The company is advisable to implement actions for correcting as well as preventing similar occurrences for the identified issues in the previous sections (Uno & Bartelmus, 2013). The company had been accused to be the major and signified of its hazards and risks associated.
Listing specific key audit procedures to be performed by stating the associated audit assertions and audit strategy and risk assessment for the balance and transactions in this process or cycle
In order to address the sustainable audit program for TransCanada Corporation, they have created an ISO 9001 based Quality Management System, as it will help in facilitating an audit program for identifying as well as correcting underperforming areas within processes and procedures that is needed to deliver capital projects (Transcanada.com 2017). The company is under constant scrutiny for proving the regulators, local communities as well as partners as they think that the infrastructure projects are not safe and need to be executed with an unparallel level of quality and respect the environment as a whole.
The main objectives of the audit program are to uncover specific process on procedures that need to be correct and get back into the Process Continuous Improvement Cycle (Bebbington, Unerman & O’Dwyer, 2014). The company needs to understand project life cycle so that it improve over the quality, delivery as well as lowering the additional project cost and minimizing project issues. The company needs an overhaul for conducting the audit program and this takes into account technology foundation for making it sustainable with the business growth as well as complex operational control requirements (Sweeney, Grant & Mangan, 2015).
Reference List
Bebbington, J., Unerman, J., & O’Dwyer, B. (Eds.). (2014). Sustainability accounting and accountability. Routledge.
Benneworth, P., & Cunha, J. (2015). Universities’ contributions to social innovation: reflections in theory & practice. European journal of innovation management, 18(4), 508-527.
Joskow, P. L. (2014). Incentive regulation in theory and practice: electricity distribution and transmission networks. In Economic Regulation and Its Reform: What Have We Learned? (pp. 291-344). University of Chicago Press.
Kogan, A., Alles, M. G., Vasarhelyi, M. A., & Wu, J. (2014). Design and evaluation of a continuous data level auditing system. Auditing: A Journal of Practice & Theory, 33(4), 221-245.
Lu, E. Y., Mohr, Z., & Ho, A. T. K. (2015). Taking stock: Assessing and improving performance budgeting theory and practice. Public Performance & Management Review, 38(3), 426-458.
Oswald, L. R., & Oswald, L. (2015). Creating value: the theory and practice of marketing semiotics research. Oxford University Press, USA.
Power, M. K., & Gendron, Y. (2015). Qualitative research in auditing: A methodological roadmap. Auditing: A Journal of Practice & Theory, 34(2), 147-165.
Ridley-Duff, R., & Bull, M. (2015). Understanding social enterprise: Theory and practice. Sage.
Sedar.com (2017) Welcome to the SEDAR Web Site / Bienvenue au Site Web SEDAR. (2017). Sedar.com. Retrieved 22 December 2017, from https://www.Sedar.com
Stewart, D. W., & Shamdasani, P. N. (2014). Focus groups: Theory and practice (Vol. 20). Sage publications.
Sweeney, E., Grant, D. B., & Mangan, D. J. (2015). The implementation of supply chain management theory in practice: an empirical investigation. Supply Chain Management: An International Journal, 20(1), 56-70.
TransCanada (2017). Transcanada.com. Retrieved 22 December 2017, from https://www.transcanada.com
Uno, K., & Bartelmus, P. (Eds.). (2013). Environmental accounting in theory and practice (Vol. 11). Springer Science & Business Media.
Wathern, P. (Ed.). (2013). Environmental impact assessment: theory and practice. Routledge.
Wells, G. (Ed.). (2013). Sustainable business: Theory and practice of business under sustainability principles. Edward Elgar Publishing.
Zadek, S., Evans, R., & Pruzan, P. (2013). Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download
