Auditing and Assurance services

Analysing Audit Risks and Services

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Introduction to Auditing and Assurance Services

Auditing and assurance services are essential for gaining organization's actual performance as well different ideas, guidelines achieved for proper management. However, risks occur at workplace and solutions to reduce are guided by chartertered accountant or any certified public accountants. The present report is based on understanding case studies related to auditing and assurance services for Clarke & Johanson as well Crampton and Hassad to present risks/ threats including safeguards for them. In this regard, auditor independence and occurred threats including their safeguards are to described. Along with this, business risks and different ideas for decreasing risks can be expressed through this assignment. Hence, learners are able to understand significance of auditing and assurance services for both business entities through this report.

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Clarke & Johanson Case Study

a) Evaluation of threats in relation to auditor independence

Auditor independence is an complex approach that considers as independence of auditors from parties that have interest in business that is to be audited. Therefore, different risks and threats are obtained to present company's efficiency. As per the given case scenario, a business scenario of Clarke and Johanson (a travel company) is presented (Kend, Houghton and Jubb, 2014). Under which, Geoff is audit partner and Chris is CEO of the organization. However, it is suggested for firm re-engaged as auditor for upcoming audit of 30th June 2015 financial report. In addition to this, Michel and Anette are auditor's partners who work as first year accountant and CJ's tax advisory department accountant respectively. In this process, Geoff suggested some issues related to auditor's independence by identifying conversations with Chris, Michel and Annette. However, different threats can be arised for auditing are to be understood as below:-

Self interest threat

In first situation, Chris wants to reappoint CJ as auditor to check out financial statements of the company for next upcoming auditing. However, there is self interest threat occurred for selecting that auditor who has been audited in previous years. On the contrary, it can be considered that there is any personal self interest between both parties regarding business activities (Sanderson, 2013). Therefore, this kind of threat can be raised for auditing in next upcoming future auditing.

Relationship threat

In the case study for providing services to auditor for holiday package voucher for 14 days emerges relationship threat. By which, issue can be raised related to ATO that pays specific close attention to client of company. In this regard, personal relationship with auditor and his family presents auditor independence that can be obtain threat in operating business operations

Ex staff and partner threat

In this situation, being audit manager of the Clarke and Johanson, I identified views of Michael who comes under audit team as well tax advisory of LTH Ltd. In accordance to this, it is recognized that Michael is too much excited and willing to taking part for conducting auditing. In this process, there is threat for occuring risk related to Ex partner interest for checking out and preparing financial records (Birkey and et.al., 2016). Therefore, this kind of threat can be occur for auditing and assuring services. There may be any self interest and defualt for audit obtain that is not so fair in conducting auditing.

Advising threat

Anttee is tax adviser for LTS Ltd who provides different advice for company's effectiveness regarding paying tax. However, it is auditor independence that is considered as risky and threaten for auditing process. It is related with financial position of company as well default in audit team (Knechel, 2016). Therefore, advising threat can be create for auditing due to interfere of Anttee is risky for conducting auditing to identify financial records of the company.

b) Safeguards for identified threats

In case of occurrence of any threat, auditor cannot complete his auditing therefore it is required to put safeguards to eliminate threats. However, it is necessary to address each threat and analyze critically financial advisers advice. In addition to this, for rescuing towards self interest and relationship threat, it is needed to recognize familiarity and link between auditor and owner of the company. Along with this, an external review is able to protection towards ex-staff and partners' threat (García and et. al., 2014). For good working relationship, it is needed for organization to conduct auditing effectively that would be liable for efficiency of economic position for organization's effectiveness. However, auditor of the organization must be professional in nature that would be impact on auditing accuracy as well remains able for effective trust worthy and safeguard regulations. Including this, it is one of the great suggestion for organization owner of the company that if he is not comfort with auditor and his independence then he should decline form business engagement with auditor for checking out company's performance. Along with this, it is necessary for regulator to perform his job effectively therefore auditing can be conducted in systematic manner. All defined situations are unique where there is possibility for threaten. However, fairness in auditing can be created by focusing on its safeguards (Wong and Millington, 2014). Therefore, financial manager can also take effective advice for operating business activities. In this regard, safeguards can be obtained for solving out these situations and its solutions. Hence, effectiveness of organization can be gained through this method that is relevant for further business activities.

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Crampton And Hassad Case Scenario

Crampton and Hassad is spare parts producing company of Australia that provides mobile services and its equipment. There are several branches of company is present in different centres as Perth, Newcastle and Mt. Isa. However, its headquarter is in Melbourne where financing, IT and corporate services are provided (Lau, 2016). Company also create export and import of goods within various countries worldwide. In addition to this, it has various customers including suppliers for production and distribution of products. In this, some risks obtained in operating business activities can be described through following terms.

a) Business risks to MSL

For production and supplement of mobile equipment, some risks are occurred can be understood as below:-

Operational risks

During production and distribution of mobbile equipment, Crampton and Hassad takes charge for maintenance services and for fulfilling warranted conditions. It affects business' operations for in respect of customers. In this process, billing covers daily routine rates as well travel, accommodation and living expenses incurred by mechanic who visit to destination for mobile services for replacement and providing effective services. Due to long distance locations, warranted conditions are billed to consumers that presented in between one day or one week (Chou, 2015). However, this kind of operational risks are occurred at workplace for maintaining and contracting for mobile services. It is considered that if customers of the firm get aware of this activity then operations for producing and supplementing goods would be impacted. However, resources and products service qualities affected for mobile services and incurring expenses for mechanic's expenses including reaching out destination to customers' location. In this regard, it is needed for organization to decide clear terms and price refund as well maintenance services that will be effective for organization's effectiveness. There is maximum one year guarantee is to presented for warranty period. Thus, after selling, in case of default products, business operations are get affected that are interlinked with financial, production of goods and various kinds of tools. Hence, for operating business activities, it is needed to set out warranty period and offer in case of faulty products. It is interlinked with productivity and profitability of firm to maintain its sustain its value as well attraction of customers (Trotman and Trotman, 2013).

Reputation risk

It is essential for business organization to maintain its goodwill regarding sustainability. If customer would know about company's operations then reputation of organization also demand for mobile equipment get affected. In this process, product failures and interest of consumers impacts for selling and purchasing products. However, it is interlinked with creating relationship with customers including customers, retailers, agents and other business entities etc. Including this, negative publicity for mobile services are unable to present organization's performance. Therefore, risks are occurred for making reputation to operate business activities same as different kinds of strategies are presented for organization's effectiveness (Chambers, 2014). In addition to this, it impacts on product demand, competitive strategies and so on. By creating faults in mobile services, several risks are occurred for operating business activities and maintaining its position in market for long time period. Therefore, negative comments will be occurred that emerges risks.

b) Audit risk and results to reduce these risks

For analyzing business' performance critically, actual quality services and potential of organization is obtained that affects result and selling of goods. However, it is required to conduct auditing and identifying actual performance that is needed to make decisions regarding efficiency and effectiveness. However, it is also required to analyze risks occur in business operations. Including this, business operations get impacted for production and distribution of goods as well product demand is analyzed. Moreover, it is risky to conduct auditing including wrong predictions for business operations, imbalanced income and expenditures. Therefore, different substances to operate activities (Glover and et. al., 2014). In this process, audit risks are related to checking out financial and non-economic performance also taking guidelines for improving quality services.

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Therefore, it is needed for any organization to select appropriate auditor to identify business performance same as taking guidelines for effectiveness of firm. Risks occur at workplace are required to be reduced therefore for increasing efficiency and operating business activities effectively. In addition to this, auditing must be conduct in systematic manner to analyze business performance and risks occur at workplace by auditing all operations including balance sheet and other statements that present organization's product services (Bowling, 2014). In accordance to this, risks can be reduced through preparing strategies for making decisions related to business operations. For the purpose of organization's effectiveness, it is necessary for conducting auditing and implementing action plans for adequate production and distribution. Including this, it will be effective for identifying business risks and reducing them efficiently. However, organization can enhance its product services through adequate auditing and following on ideal guidelines provided by auditor that will be impacted on customer satisfaction approach. Thus, it will be effective for increasing efficiency and reducing obstacles occur at workplace. Therefore, appropriate results will be achieved through this system that is useful for MSL for producing mobile and its equipment services. In this regard, expenses for mechanics related to providing services in various placed would be effective. Apart from this, expenditure incurred on production and supplement of goods can be effective through this process system. Hence, audit plays significant role in business activities that presents actual organization's performance as well varieties of ideas for implementing action plans

Conclusion

The report is concluded that auditing and assurance services are essential for effective operations of business organization. However, actual financial position and potential of entity is identified that is related to making further decisions. In addition to this, different case studies are understood regarding auditing and business risks. Therefore, various kinds of threats for auditing as auditor independence is considered that is linked with effectiveness and reputation of company. Along with this, various qualitative tools are obtained for making decisions related organization's performance. Moreover, safeguards for rescue towards threats are introduced. In this process, proper understanding related to business operations and decision making process is obtained for reducing auditor independence complexity. Apart from this, through this report, audit and business risks are presented including different guidelines for reducing those risks are determined that is interrelated with organization's effectiveness and its efficiency.

References

  • Bagshaw, K., 2013. Audit and Assurance Essentials: For Professional Accountancy Exams. John Wiley & Sons.
  • Birkey, R.N. And et.al., 2016. . Does assurance on CSR reporting enhance environmental reputation? An examination in the US context. In. Accounting Forum.
  • Bowling, A., 2014. Research methods in health: investigating health and health services. McGraw-Hill Education (UK).
  • Chambers, A., 2014. New guidance on internal audit–an analysis and appraisal of recent developments. Managerial Auditing Journal.
  • Chou, D.C., 2015. Cloud computing risk and audit issues. Computer Standards & Interfaces.
  • Christensen, B.E. And et. al., 2012. Extreme estimation uncertainty in fair value estimates: Implications for audit assurance. Auditing: A Journal of Practice & Theory.
  • García, F. J. and et. al., 2014. Usalpharma: a cloud-based architecture to support quality assurance training processes in health area using virtual worlds. The Scientific World Journal.
  • Glover, S.M. And et. al., 2014. Auditing & assurance services: a systematic approach. McGraw-Hill Education.
  • Kend, M., Houghton, K. and Jubb, C., 2014. Competition issues in the market for audit and assurance services: are the concerns justified?. Australian Accounting Review.
  • Knechel, W.R., 2016. Audit quality and regulation. International Journal of Auditing.
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