Describe about the Auditing & Assurance Services for Significant Business Role.
The importances of Auditing & Assurance Services are ever-increasing in current business context for the cotemporary business entities and these play significant role in the process of identifying the inherent risks exist within the organization. These particular services help in identifying the own strength and weakness of a business organization (Arens, Elder and Beasley, 2006). Specially, the weakness in managing the records of the transaction of the company can be performed by the Auditing & Assurance Services. Apart from this, it helps in making reports from the information recorded by the accountant of the company on the financial events, which took places within this financial year. It helps in recognizing the in house issues and the operational inefficiencies and by providing extra attention to the issue the issues can be reduced and so that the company can improve its efficiency and effectiveness (Botica Redmayne, 2012). In this way the company can ensure its further growth and development thus the entire stakeholders of the company are benefitted by Auditing & Assurance Services. The fundamental roles of the Auditing & Assurance Services are to analysis the financial statements of the company and compare the data from the financial statement with the actual data. The auditors use to provide audit report after completion of the auditing tasks. The audit report on a firm provides actual information about the financial condition of the specific firm. Therefore, the audit report improves the trust on the firm as well as it improves the reputation of the company among the investors, shareholders and customers of the company. As usually a third party conduct the auditing thus, its reliance is increased. The auditors basically take care of entire stakeholders’ benefits and the benefit of the companies (Dong, Paul and Zhang, 2009). For this report an Australian business entity named One Tell has been undertaken and al the requisite theories and concepts will be discussed based on this firm.
Discussion on features contribute in rising inherent risk estimation
There are several factors which significantly contributed in growing inherent risk assessment. Few of the critical factor, which are detected in the undertaken case study such as building insufficient structure of the business entities as well as lacking of the professional ethics (Eilifsen, 2006). In the undertaken case study of One Tell it is observed that the company was one of the most established Australian companies, fourth largest telecommunication company in Australia. Despite accomplishing substantial success the company has been collapsed only within its six operation year. It is found from the case that the senior most management staffs of the organization are indulging with corruption for this reasons the company was lacking from adequate professional ethics. Apart from this, the company had deficiency professional competency, integrity and objectivity that led the company to its awful destination (Gay and Simnett, 2012). Auditors’ role was heavily criticized in the case of One Tell Company. Moreover, for this reason the company’s financial actions have to go through stringent scrutinized process. Besides this, the company has to face the danger of liquidation. Moreover, the hiding financial information is described in a detailed way. The auditor’s performance in this matter has been taken in an excellent way; however, in this case their performance was not proper in order to judge of the firm (Hasan et al., 2005). In the case of auditing the firm, the effectiveness as well as efficiency of the auditor seemed to be eliminated, as the risk assessment in order to the process of Auditing has been absent. By making effective judgment, the deficiency of the professional ethics can be judged. Moreover, in this specific way the deficiency in corporate governance can be found moreover, in this way the company was going to the liquidation state. The company made huge loss by making wastages of the resources of the company and inaccurate decision by the top management of the company led the business firm to the liquidation level (Hay, 2014). Therefore, in the case of One Tell both the auditors firms BOD and Ernst & Young are deficient in integrity and they were biased for the top members of in the management.
According to the financial report of the business entities, it can be watched that in the balance sheet /financial position report f the company the liability ratio is continually grown. Apart from this, it is also observed that in the cash flow statement of the firm the operation profit is much lower than the operation cost. The suppliers’ payment as well as the salary of the staffs is also much higher the payment received from the customers of the business firm (Imoniana and Perera, 2016). Thus, the company has to face loss for the business operation by the company. Apart from this, the investment activities of the company were also loss for the company because the firm invest huge amount of money in the plant and equipment. Moreover, only financing activities by the company made profit for the company. Moreover, according to the income statement or profit and loss statement of the company, the business firm has incurred severe losses. In 2000, the business firm got success in achieving huge growth but in spite of the growth the business firm was running in losses. Generally the business firm and its management have similar objectives as well as target for the future of the business firm. However, sometimes the rule does not work and the company’s objectives vary from the objective of the management staffs of the company. Moreover, in those cases the problem begins, as in the case of One Tell happened (Knechel, 2013). This particular situation of the business firm is called Principle Agent Problem. One Tell face the similar issues and it was the key reason for the collapse of the company.
Improper corporate governance is noticed in this specific case, it was the key reason for the demise of the business firm, and that led the business firm to the state of liquidation. Because of the poor corporate governance the management structure of the company became very poor and with poor management structure the company could not be able to deliver adequate performance that help the company in surviving. The management of the company was comprised with 4 members, who are the non executive director of the company (Knechel et al., 2006). Out of the 4 directors 3 were subject to every year election. The fourth one is Jodee Rich, the CEO of the company who was not elected by the shareholders of the company. At the end of 1988 the company extended its board and adds four more members. Moreover, among the eight board members at that time there are 3 members who were high school mates of Jodee Rich. The audit and financial committee of the company included two members who were very close to Jodee Rich the CEO of the company (Louwers, 2005). The financial committee members were not independent directors with the positions they hold in the company. Investigation conducted by ASIC along with Institute of Chartered Accountants of Australia detected that the business firm had deferred expenditure of 48 million AUD. Besides this, the company incurred losses that was greater than 40 million AUD. The audit partner and the external auditors were found guilty, because of overstretching the Australian Accounting and Auditing standards and charged forty eight million. In is watched despite of bigger salary of 2.3 million AUD the executive directors of the company got bonuses of 82.5 million AUD when the business firm was going through the losses of 292 million AUD in 2000 (Messier and Emby, 2005). It is identified that in order to hide the information from the public these bonuses were marked as delayed expenditures and the establishment cost of the business firm in Europe as per the strategic global expansion plan of the company.
The business firm had high risk along with lower surrender strategies and a range of incentive for the fresh consumers as well as this could not be effective in regular basis in Australia as the market over there is very small. In mobile market, there are six services providers in Australia and as per the report it is 2nd largest in the global market. Furthermore, the expenditures of the business entities were beyond the financial capacity of the firm (Ruhnke and Lubitzsch, 2010). Besides this, the One Tell charge much more for the subscription in comparison to the other telecommunication in Australia. Extensive phone capacity procured from Telstra and Optus was used by One Tell. However, the firm had tried to offer economical package to its customers but still the two dominant firms Telstra and Optus had a nominal operating cost in comparison to One Tell (Saxena et al., 2010).
The firm’s strategies were extremely dependent on Telstra and Optus; however, at the same time both the big companies are key rival of the business firm.
There are other influential aspects, which help in effective decision making were subsequent failure of the billing system. It is apparent in the auditing procedures that the plan of the senior IT staffs of this specific firm is extremely questionable. The individual responsible for development were provided bonuses based on timely building and set up of novel programs and the system (Seetharaman, Sun and Wang, 2011). There was no need of testing or need to provide the essential documents in respect of the quality program. One of the leading accountant of the company disclosed that the company has not any structure or any accounting system, not any method or any control in the billing system of the firm. Primarily the billing system of the firm was accurate for managing the problems because of the small consumer base (Subramaniam and Carey, 2011). For these reasons, in increasing number of consumer the fir was unable to handle the billing system of the firm.
Conclusion
It is apparent that for the demise of One Tell, one party cannot be pointed. There was deficiency in company structure, lacking in professional ethics, as well as deficiencies in corporate governance, which led the company to its destination and the company collapsed. The management of the company specifically the directors of the company as well as ought to pay adequate attention to the business of the firm along with the financial activities, which also require the attention from the directors. Besides this, the directors must play active role in running the business initiative of the business firm. Apart from this, the individuals must be held accountable for the action performed by them.
References
Arens, A., Elder, R. and Beasley, M. (2006). Auditing and assurance services. Upper Saddle River, N.J.: Pearson Prentice Hall.
Botica Redmayne, N. (2012). Essentials of Auditing, Assurance Services & Ethics in Australia: An Integrated Approach20121 Essentials of Auditing, Assurance Services & Ethics in Australia: An Integrated Approach . Massey: Massey University 1st ed. J Acc & Organizational Change, 8(1), pp.120-122.
Dong, J., Paul, R. and Zhang, L. (2009). High assurance services computing. Dordrecht: Springer.
Eilifsen, A. (2006). Auditing and assurance services. London: McGraw-Hill Education.
Gay, G. and Simnett, R. (2012). Auditing and assurance services in Australia. North Ryde, N.S.W.: McGraw-Hill Education.
Hasan, M., Maijoor, S., Mock, T., Roebuck, P., Simnett, R. and Vanstraelen, A. (2005). The Different Types of Assurance Services and Levels of Assurance Provided. International Journal of Auditing, 9(2), pp.91-102.
Hay, D. (2014). Auditing, International Auditing and the International Journal of Auditing: Editorial. International Journal of Auditing, 18(1), pp.1-1.
Imoniana, J. and Perera, L. (2016). The role of IS Auditing in assurance services. MANAGEMENT CONTROL, (1), pp.17-33.
Knechel, W. (2013). Do Auditing Standards Matter?. Current Issues in Auditing, p.130422090429005.
Knechel, W., Wallage, P., Eilifsen, A. and van Praag, B. (2006). The Demand Attributes of Assurance Services Providers and the Role of Independent Accountants. Int J Auditing, 10(2), pp.143-162.
Louwers, T. (2005). Auditing and assurance services. New York: McGraw-Hill.
Messier, W. and Emby, C. (2005). Auditing & assurance services. Toronto: McGraw-Hill Ryerson.
Ruhnke, K. and Lubitzsch, K. (2010). Determinants of the Maximum Level of Assurance for Various Assurance Services. International Journal of Auditing, 14(3), pp.233-255.
Saxena, R., Srinivas, K., Rai, U. and Rai, S. (2010). Auditing. Mumbai [India]: Himalaya Pub. House.
Seetharaman, A., Sun, Y. and Wang, W. (2011). Tax-Related Financial Statement Restatements and Auditor-Provided Tax Services. Journal of Accounting, Auditing & Finance, 26(4), pp.677-698.
Subramaniam, N. and Carey, P. (2011). Risk management, governance and assurance. Managerial Auditing Journal, 26(7).
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