Discuss about the Computer Auditing and Assurance Services.
In the practice of financial accounting, the common risk associated with it is inherent risk. Inherent risks occurred at the time of financial report making phase by auditors and it may cause material misappropriation (Champlain, 2003). The two types of major inherent risks are assertion level risks along withentry level risks associated with auditing practice(Griffiths, 1995). The risks associated with the transaction entry process. The factors that may cause inherent risks during the process of financial reporting include integrity among board of directors and the organizational management bodies, handling of organizational complex management conditions, lack of management’s professional experiences, and the organizational characteristics(CREST ‘club’ aimed at reducing risks for banks, 1996). There are various external factors which create inherent risk also.
Integrity between Management and Board of Directors: During the stages of organizational financial crisis, the management influenced the financial information of the organizations in order to show positive financial performances of the companies (Scott and Jacka, 2011). This also may cause inherent risks. The strategy is mainly adopted by the management of the organizations to depict their positive financial performances to the shareholders of the company. This also may help the organizations to retain their shareholders(Champlain, 2003). In most of the cases, the higher authorities also adopted this strategy for getting financial benefits.
Company’s characteristics: All kinds of financial information of the organization are also complicated. International organization concern about to keep all types of financial data in proper way as they cover large geographical areas. The telecommunication brand named as One.Tel has their branches in various countries besides Australia(Griffiths, 1995). They deal in the market of Netherlands, UK, Hong Kong and France. So, being an international brand the organization One.Tel has to keep proper financial records about their financial database. Complexity in the huge databases of the company One.Tel may also formbad debts.
Complex Situation: The international brands also have to work in complex situation; the pressure conditions in their business process also create inherent risks. Thus being a global brand, the company One.Tel also has to work in complex and pressure conditions(CREST ‘club’ aimed at reducing risks for banks, 1996). In most of the cases, the management of the organization has to create financial statements within short time period that cause misinterpretation of the financial reports. In many cases, the management also influences the data of their organization to show their lower profits from their business. In most of the situation, the directors of the companies also influence the auditors for depicting favorable conditions of their companies.
Experience factors of the managements of the companies: The board of the company One.Tel consists of 9 directors. Among them, four are the executive members of the board, the rest ones are the board’s non-executive members. As per the hiring legislation of the directors, there are restrictions in the age limits of the directors and the management executives. Sufficient knowledge in the field of financial data management helps the executive officers of the organization to manage the situation effectively(Warning message against security risks, 1994). The management has to take proper guideline from the expert as they have to reduce the errors of all the numerical values of those financial data. For the reason of effective guidance financial experts of One.Tel create manipulation in the data and financial statement as well. Proper guidance is such a big thing which may be concerned always.
External Factors: At this present time this company is not in a good position. The high expenses of the company One.Tel lead to cause their lower financial performances. Most of the management staffs of the company deal with illegal data sources which may affect company norms. Besides these, the issues associated with the technological factors of the organization also affect theirproductivity. The management issues also lead to influence their financial performances.
There are many factors that directly influence the organizational risks of maintaining appropriate account balance. The major factors among them are:
Accounting Processes: The organizational quality factor is also a leading clause of the inherent risks associated with the organizational management process. For proper performances of the organization, the company One.Tel has to focus on their productivity. In the case of any issues in the accounts work, the organizational profitability is being hampered.
Issues related to maintain of proper financial statement: To reduce the probability of occurring fictitious errors in the balance sheet of the organizations, the management has to maintain appropriate financial statements of their companies. Further, misappropriation in the financial statements of the companies may cause influence in the income statements of the companies.
Transaction Nature: As the telecommunication brand One.Tel is operational across all around the world, the organization has to keep huge financial database(Iyer, 1996). Due to the large financial database, the process to maintain of that database is also a very complex task. In this scenario, the organization has to maintain all the financial records of all its branches effectively in order to manage their financial data base effectively.
Degree of Judgment: The capability of taking suitable steps as per the market situation helps the organization One.Telto handle their financial operations efficiently(Jessop, 1995). In this context, the company also has to take necessary step to maintain their data bases in suitable ways. Besides these, to lower the occurring of inherent issues, the organization also has to consider all the financial transaction appropriately(Iyer, 1996).
Organizational assets: The assets are also one of the major holdings of the organization’s financial database. For proper valuation of the organization, they have to provide proper valuation of their assets. Misinterpretation of organizational assets leads to inherent risks for the company One.Tel(Jessop, 1995). Two most important things which has to be maintained by the committee member; proper valuation of the market and what will be position of their company in the market place. In this context, the company One.Tel should consider all changes in their organizational assets; they also should show proper asset values of their holdings (Labadie, 1975).
Transaction: To reduce the probability of occurring of the inherent risks in the business process, the company has to maintain all the records of the all financial transactions. For managing their financial database effectively, the brand One.Tel has to maintain proper strategies for maintaining all the financial transaction record(Moeller, 2005).
The present economic crisis all around the world directly affects the business of the profitable organizationssignificantly. In the same time, it also directly influences the liquidity in the international business. The financial downgrading condition in the world directly influences the organizational performance of the brand One.Tel(Moeller, 2005). In addition, the poor condition of the global economic downgrading situation also leads to influence the organizational performance of the organization.
There are indicators which are based as high, medium and low value. The company rank accordingly to these grades. Such ratings determined whether the company is as high grade or not according to their standard. Those are operational indicators and those are needed to be very specific as well. There are few indicators which are given below;
Financial Indicators: For managing their financial factors effectively, the company One.Tel has to manage appropriate financial statements (O’Regan, 2003). In this context, the organization has to perform all the required calculations effectively in order to reduce the inherent risk factors(Hinde, 1995). The organization also has to consider all the financial indicators effectively in order to compute all the financial data of the company effectively. In this case, the company also has to effectively measure all the current liabilities of their organization and also has to consider all the extensions in their assets efficiently(Hiles, 1991). Borrowing is also one of the key indicators of organizational assets. Proper strategy for repayment of the loan amount is also vital in this situation(O’Regan, 2003). Their inability to repay the loans is considered as the indicator of their poor financial performances. In addition, the inability of giving dividends is also considered a key indicator of the poor performance of the company One.Tel.
Operational Indicators: The operational indicators of the poor performance of the company are the labor issues, lower productivity, issues in the management process of the organization(Hiles, 1991). Lack of proper number of experienced and talented workforce which are also consider as the major causes of the poor performances of the companies(Hinde, 1995). In this context, they should adopt proper plans for managing their business effectively
Equity Indicators: To strengthen their financial growth, The organization should focus on the process of cash distribution in order to maintain effective financial database. In addition, the company also has to take necessary plans for fulfilling their commitments to offer dividends(Piattini, 2000). The investors also perform effective roles in the organizational management process. So, the company One.Tel should offer proper returns to the investors in order to manage their business effectively.
References
Champlain, J. (2003). Auditing information systems. Hoboken, NJ: John Wiley.
CREST ‘club’ aimed at reducing risks for banks. (1996). Computer Audit Update, 1996(1), p.6.
Griffiths, C. (1995). Assessing the risks in major IT projects. Computer Audit Update, 1995(11), pp.4-10.
Hiles, A. (1991). Computer fire risks. Computer Audit Update, 1991(3), pp.11-14.
Hinde, S. (1995).Risks of the unexpected. Computer Audit Update, 1995(4), pp.1-4.
Iyer, N. (1996). SAP: Changing risks, internal controls and fraud prevention. Computer Audit Update, 1996(5), pp.19-22.
Jessop, G. (1995). IT and legal risks management. Computer Audit Update, 1995(10), pp.14-17.
Labadie, M. (1975). An analysis of the risks involved when using statistical sampling in auditing.
Moeller, R. (2005). Brink’s modern internal auditing. Hoboken, N.J.: John Wiley & Sons. Inc.
O’Regan, D. (2003). International auditing. Hoboken, N.J.: J. Wiley & Sons.
Piattini, M. (2000). Auditing information systems. Hershey, Pa.: Idea Group Pub.
Scott, P. and Jacka, J. (2011). Auditing social media. Hoboken, N.J.: Wiley.
Warning message against security risks.(1994). Computer Audit Update, 1994(4), pp.16-17.
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