Auditing is a strategic management approach that plays a key role in enhancing that an organization is moving towards achieving its performance standards as well as meeting its missions and visions (Eilifsen, et al., 2013). It is defined as a systemic and independent examination of statutory records, documents, asset, and books of accounts of an organization to ascertain if the financial statement and the non-financial disclosures are presenting a true and fair view of an organization. The purpose of conducting audit practices is to ensure that the book of accounts is properly maintain as required by the law and other relevant regulatory bodies (Gay & Simnett, 2000).
External audit practice is the examination of company book, documents, asset and accounts by an external independent auditor. Clarke & Johnson (CJI) is an audit company that has been known to provide excellent audit services, their work has impressed the company management including the board of directors (Knechel & Salterio, 2016). luxury Travel Holidays LTD (LTH) top management has also proposed Clarke & Johnson (CJI) company to continue offer its excellence audit services. However, there are some threats that might affect the independence of an external auditor, Clarke & Johnson (CJI) LTD.
The self-interest threat is a fatal factor that affects the independence of an auditor. This threats is perceived when the auditor is regularly providing audit services to one client or when the client is proposing only one external auditor to perform the audit services. In this case, Luxury Travel Holidays LTD (LTH) has re-engaged Clarke & Johnson (CJI) Company to provide their service prior the 2015 financial reporting. The self-interest aspects implies that, the auditor fears to lose the client or the client is fearing to lose the auditor, and thus affecting the audit independence since qualified audit opinion could not be provided (Jackson, 2016).
The Multiple referrals threat is also a primary factor that affects the independence of the auditor. The issue relating to this audit factor arises when the auditors receives many referrals from the client. The independence Clarke & Johnson (CJI) Company could be greatly affected if Luxury Travel Holidays LTD (LTH) CEO is conducted. When the top management is conducted in relation to the audit practices, the independence of the auditor could be affected since the management could give information that reflects self-interest, Chris is the CEO of Luxury Travel Holidays LTD (LTH) he could consider giving information that are self interest in order to receive more praises from the board of practices. This information could be given through referral through departmental management or employees (Gay & Simnett, 2000).
Threats affecting the independence of an auditor are explained as interfering with the auditor’s opinion and suggestions. The independence of an auditor is affected by different factors, these factors comprise multiple referrals threat, familiarity and complacency and self-interest threat (William Jr, et al., 2016). When the independence of an auditor interferes, an auditor may not provide the qualified audit opinion that suits the company operations. Self-interest threats, allows the company management to give suggestions to be made by the auditors, and thus failing the auditor to give an independent report. Multiple referrals threat implies when the company management or the auditor is referred to many individuals within the company or any other stakeholder (Gay & Simnett, 2000).
Self-interest threats is a threat that implies making referrals to the auditor. This threat is reduced by implementing appropriate measures that are agreed upon by the client and auditor. This measure and policies comprise; reducing interactions between the client’s stakeholders and the auditor (Messier, 2014). The auditor is obligated to ensure that the interaction with the client is limited; this will give the auditor to make appropriate audit opinions that suit the client business activities. Clarke & Johnson (CJI) Company should not interact with Chris, CEO of Luxury Travel Holidays LTD (LTH), Clarke & Johnson (CJI) Company is recommended not to call the Luxury Travel Holidays LTD (LTH) for any inquiry, but instead, give report on their findings. This will allow them to give qualified and suitable audit opinions and reports (Eilifsen, et al., 2013).
Multiple referrals from the client are also a factor that affects the independence of an auditor. Clarke & Johnson (CJI) Company has proposed to Luxury Travel Holidays LTD (LTH) to be given the tender of conducting auditing practices. By conducting the Chris, who is a top manager at Luxury Travel Holidays LTD (LTH), recommendation and suggestions could be made to Clarke & Johnson (CJI) Company concerning the audit opinions and reports. Auditor are required to take cautions on the specific recommendation and referral made by the client, this will allow making appropriate decisions relating to audit opinion and reporting (Jackson, 2016).
Audit risk is the risk that the financial records of a company are materially incorrect, even though the audit opinion states that the financial reports are free of misstatements. Audit planning is an important part of auditing practices it is primarily conducted at the beginning of the audit process, the main purpose of audit planning is to ensure that relevant attentions are devoted to important areas, relevant potential problems are promptly identified and that whole audit work in completed (Arens, et al., 2012). Audit plan implies the process of developing the general strategy as well as the detailed approach for the expected tenure, timing and extent the audit process will take. Auditors are encouraged to ensure that they develop an audit plan and implement policies stated since it will allow them to expose their professionalism during the auditing process (Eilifsen, et al., 2001). During Audit planning, the Auditor is obligated to ensure that they are ready for audit planning risk that may affect their operations.
Mining Supplies LTD (MSL) is an international company that has extended its operation to Europe, China and US market. This company is about to conduct its 2015 financial report, Crampton and Hasaad are to provide audit services to Mining Supplies LTD (MSL). Mining Supplies LTD (MSL), is to develop an audit plan that will provide detailed approach, timing, extent, and strategy of ensuring that whole audit work in completed. Mining Supplies LTD (MSL) is a business organization, the company is having its own missions and vision. On the other hand, the company can perform its services outside it location, for instance providing audit and assurance services to international markets such as US, China, and Europe. Therefore, conducting business in international market carries many risks that will negatively influence the business performance (Kachelmeier, et al., 2014).
International business complicates the operations of the specific business organization, it affects the supply chain as well as presents distinctive logical concerns. An international business enterprise is mandated to ensure that its services and products are delivered on time and appropriate budget measure. Mining Supplies LTD (MSL) is an international audit firm; the company provides equipment to the international market. On the other hand, Crampton and Hasaad is an international firm that provides audit and assurance service to international organization. Crampton and Hasaad Company is required to conduct auditing to Mining Supplies LTD (MSL) that operates in different markets (Sadgrove, 2016).
Mitigating the logical risk mandates implementation of supply chain diversification, the process of diversifying the supply chain reduces other fatal aspects such as severe weather and political unrest. Apparently, an exclusive license may limit the operations of an international business organization, mitigating the logical risk obligates giving license and exclusive distribution of agreements. While providing exclusive distributions companies are necessitated to develop terms and conditions, which will guide their operations (Eilifsen, et al., 2013).
Legal risk is a critical risk that affects the activities of international business enterprises. Legal risk implies legislations, rules, and regulations that are installed by the government agencies to protect the interest of their country business activities. Mining Supplies LTD (MSL), Crampton and Hasaad Company are international companies that operate in international markets, both companies operations are affected by the legal policies that are installed by the government agencies. In the US, US English Common laws provide regulation to companies that operate in its markets, on the other hand, European Civil Laws regulate the activities and the performance of international business organizations. International business organizations are mandated to understand the existing laws such as European Civil Laws and US English Common laws (Gay & Simnett, 2000).
Operating in an international market is bonded with many risks where financial risk is the critical business risk. Mining Supplies LTD (MSL), Crampton and Hasaad Company are International Corporations that anticipate continuing operating in different markets. Mining Supplies LTD (MSL) business activities are affected by US dollars, which is now unreliable as it used to be, this has affected the company business activities (Kachelmeier, et al., 2014).
Long term and complicated relationship
Long term and complicated relationship is an audit risk that affects the activities of international audit organization, it relates with the financial business risk. This risk implies that, an organization that operates in international market have different relationship with other firms in the market. The anticipated relationship between the companies is joint venturing, merging and souring of employees, products and services. Mining Supplies LTD (MSL) is an international enterprise that operates in US, Europe and China. This risk will arise when the Crampton and Hasaad Audit Company will face challenge when trying to audit company, which has business relationship with other related companies (Kachelmeier, et al., 2014).
A large network of related companies is also a risk that affects the business activities of international operating organizations. This implies that, when many related companies are located in one region different opinions could be affected since the company’s will hinders with each activities with an interest of getting competitive advantage in the market. Mining Supplies LTD (MSL) operates its business activities in regions that have large network of related company. The risk relating to large network of related firms arises when the company fails diversify it supply chain. Crampton and Hasaad Audit Company will spend a lot of resources to travel from Australia to other countries with the purpose of providing audit service to only one company (Jackson, 2016).
Legal and regulation risk affects the operations of international operation companies. It implies legal procedures and regulation that need to be observed before entering into a new business market. Crampton and Hasaad Audit Company may fail to understand the legal procedures of entering into a new market, this risk will affect it activities and thus hindering with the activities of both Crampton and Hasaad Audit Company and Mining Supplies LTD (MSL) (Messier, 2014).
References
Arens, A. A., Elder, R. J. & Mark, B., 2012. Auditing and assurance services: an integrated approach:. Boston: Prentice Hall..
Eilifsen, A., Messier, W. F., Glover, S. M. & Praw, 2013. Auditing and assurance services.. s.l.:McGraw-Hill..
Eilifsen, A., Knechel, W. R. & Wallage, P., 2001. Application of the business risk audit model: A field study. Accounting Horizons. s.l.:s.n.
Gay, G. E. & Simnett, R., 2000. Auditing and assurance services in Australia.. Sydney: Mcgraw-hill.
Jackson, R. A., 2016. Business at risk: keynote speakers for this year’s IIA International Conference identify emerging risks facing organizations. Internal Auditor,. In: s.l.:s.n., pp. 40-46.
Kachelmeier, S. J., Majors, T. & Williamson, M. G., 2014. Does Intent Modify Risk-Based Auditing?. The Accounting Review. s.l.:s.n.
Knechel, W. R. & Salterio, S. E., 2016. Auditing: assurance and risk. s.l.:Routledge.
Messier, w. f., 2014. An approach to learning risk-based auditing.. Journal of Accounting Education, 32(3), pp. 276-287.
Sadgrove, K., 2016. The complete guide to business risk management.. s.l.:Routledge.
William Jr, M., Glover, S. & Prawitt, D., 2016. Auditing and assurance services: A systematic approach.. s.l.:McGraw-Hill Education.
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