It is the responsibility of the auditors to assess the business risks and other key aspects of financial performance and position of the clients in order to identify the areas that require further audit investigation; and this whole assessment is a key part of audit planning. The main aim of this report is to undertake the audit planning of Xero Limited for 2020 audit by taking into consideration the relevant aspects in 2019 audited financial statements. The first part assesses the business risks and audit risks of Xero Limited, the second part reviews the four main aspects of the financial performance and position and the last part assesses the matters need to be addressed in audit planning.
Conclusion
It can be seen from the above discussion that business risks which hinder the ability of a company to achieve its goals and objectives can lead to the development of audit risk of material misstatement in financial statements. Moreover, the auditors are needed to assess the historical movement in the values of major financial performance and position item for assessing the presence of any issues in them which need to be addressed in the audit planning of 2020 of Xero Limited. Consideration of these aspects lead to the completion of a quality audit.
In this report, we are mainly going to discuss about the failure of regulatory framework that ultimately leads to big scandals and big loss for the top listed companies all over the world.
In this part, we are going to discuss about specific regulatory audit failures that arisen in various leading listed companies all over the world. It is an evident fact that generally audit regulatory failures arises when the auditor deviates from the specified professional standards and present the opinion in such a manner relating to the audit report that it represent false information.
Enron scandal is one of the largest accounting scandal of all time. The company was one of the leading company in US based energy, commodities, and Service Company however, the company was able to convince its investors that it is performing well in the market but it was not the real business scenario for the company. The regulatory authorities failed to identify the loopholes in the company and thus, it results to failure of the company. The company was using MTM method of accounting that is mark to market accounting that deals with recording of assets at fair market value (Corporate Finance Institute, 2020). However, fair values are hard to determine, the company was unable to explain its stakeholders, and it is seen that actual cash flow that reflected from company assets was less that cash flows that were initially reported to Securities and Exchange Commission. Even the regulatory authorities were unable to identify the Special Purpose Entities (SPEs) that the company had set up to hide its losses. Most of the SPEs did not exist and were only represented on papers.
WorldCom tends to be one of the biggest accounting scandal in US history. The company was in news after an internal audit resulted to improper accounting of more than $3.8 billion in expenses over the last five quarters (Cbsnews.com, 2020). The business reflected that accounting irregularities consisted of expenses, capital expenditure inflated its cash flows, and if exact audit has been done the financial report of 2001 and first quarter of, 2002 would have shown net loss.
Satyam fraud in India was a corporate scandal affecting India based company in 2009. The chairperson of the company confessed that the company reflected falsification in its accounts. In 7 January 2009, the chairperson of the company confessed to inflating cash and bank balances of the business (The Financial Express, 2020). The company chairperson in an interview claimed that the company is having cash balance of Rs 4,000 crore and it might raise further to Rs 15,000-20,000 crore. SEBI found PWC guilty for the fraud and banned the network entities of PWC from issuing any audit certificates to any listed company in India for two years.
Vivendi faced accounting scandal and Andersen audited the company. The shares of the company fell by a third and it reported that the business tried to flatter its 2001 accounts by almost Euro 1bn. It has been reported that the company instructed its auditor Anderson to book the transaction in such a manner that it reflects profitable situation for the company (Accountancy Age, 2020). However, after conducting various meeting with the regulators the real scenario was revealed.
An effective audit recommendation mainly refers to providing suggestion for correcting various issues and addresses various causes of the issues. Ensuring audit quality is extremely vital for all business organization as investors generally rely on audit report and according to audit findings; they make their further business decisions. The quality of financial report is one of the significant factor in business as audit reports are mainly prepared to inform the markets and investors about the financial performance and position of the company. There must be proper audit procedure so that large public interest entities can reflect true and fair position and condition of its management and governance.
The company needs to conduct effective quality reviews of audits. Findings proper audit evidence to form an opinion on financial report.
It is essential to identify the root cause of findings from the quality reviews and audit inspections. Even after identifying any loopholes in the entire system, development and implementation of action plan must be present to address various findings and ensuring that proper remedies are undertaken by the organization that results to profitable situation.
Reviewing the entire employee structure is extremely essential and to ensure that they are properly resourced to undertake increasingly complex audit into future.
Before heading towards conducting the audit procedures, the company needs to ensure the sustainability of reviewers. Reviewers needs to be independent, must conduct the audit procedures with all the regulatory frameworks, and specifies rules and regulations as per the audit framework. The reviewer must have adequate skill and expertise to identify loopholes in the accounting system and must try to evaluate each aspect of the business that comes under the framework of the audit rules and regulations.
Each findings identified and addressed must promote audit quality and must reflect true and fair representation of the financial report as investors mainly rely on audit report to make any further decision regarding investment opportunities.
Conclusion
Lastly, the report concludes that because of various regulatory complications and inappropriate audit procedures leads to accounting scandals that ultimately results in shutdown of the companies. There are various types of issues that has been discussed, which reflects that because of failure of regulatory authority there has been scandals that arises in the big listed companies.
References
Accountancy Age, 2020. Now Vivendi Rocked By Accounting Scandal – Accountancy Age. [online] Accountancy Age. Available at: <https://www.accountancyage.com/2002/07/02/now-vivendi-rocked-by-accounting-scandal/> [Accessed 8 May 2020].
Camilleri, M.A., 2018. Strategic planning and the marketing effectiveness audit. In Travel marketing, tourism economics and the airline product (pp. 117-135). Springer, Cham.
Cbsnews.com, 2020. World-Class Scandal At Worldcom. [online] Cbsnews.com. Available at: <https://www.cbsnews.com/news/world-class-scandal-at-worldcom/> [Accessed 8 May 2020].
Chou, D.C., 2015. Cloud computing risk and audit issues. Computer Standards & Interfaces, 42, pp.137-142.
Corporate Finance Institute, 2020. Enron Scandal – Overview, Role Of MTM, Agency Conflicts. [online] Corporate Finance Institute. Available at: <https://corporatefinanceinstitute.com/resources/knowledge/other/enron-scandal/> [Accessed 8 May 2020].
Ghosh, A.A. and Tang, C., 2015. Auditor resignation and risk factors. Accounting Horizons, Forthcoming.
Lundin, A., Hallgren, M., Balliu, N. and Forsell, Y., 2015. The use of alcohol use disorders identification test (AUDIT) in detecting alcohol use disorder and risk drinking in the general population: validation of AUDIT using schedules for clinical assessment in neuropsychiatry. Alcoholism: Clinical and Experimental Research, 39(1), pp.158-165.
Munteanu, C.C., 2015. Audit Risk Assessment in the Light of Current European Regulations. Acta Universitatis Danubius. Œconomica, 11(3), pp.94-105.
Pritama, Y., Supriana, T. and Torong, Z.B., 2018, January. The Factors of The Infuence on Audit Quality at The Inspectorate General of Ministry of Environment and Foresty. In 1st Economics and Business International Conference 2017 (EBIC 2017). Atlantis Press.
Rodgers, W., Mubako, G.N. and Hall, L., 2017. Knowledge management: The effect of knowledge transfer on professional skepticism in audit engagement planning. Computers in Human Behavior, 70, pp.564-574.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.
Saha, P., Bose, I. and Mahanti, A., 2016. A knowledge based scheme for risk assessment in loan processing by banks. Decision Support Systems, 84, pp.78-88.
The Financial Express, 2020. What Was Satyam Scam Which Toppled India’S Fourth Largest IT Company From The Top Slots. [online] The Financial Express. Available at: <https://www.financialexpress.com/industry/what-was-satyam-scam-which-toppled-indias-fourth-largest-it-company-from-the-top-slots/1010389/> [Accessed 8 May 2020].
Xero.com. 2020. 2019 Annual Report. [online] Available at: https://www.xero.com/content/dam/xero/pdf/about-us/xero-limited-annual-report-fy19.pdf [Accessed 8 May 2020].
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 formOnce 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 assignmentAs 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