Institute Of Internal Auditor Foundation †Myassignmenthelp.Com

Question: Discuss About The Institute Of Internal Auditor Foundation? Answer: Introducation A whole lot of circumstances should be taken into attention about the client and his business, whenever an auditor fixes up an appointment with a company. The most crucial point that should be taken into account by the auditor at the earliest is that all the authorized rules are followed by the management of the company. For instance, whether the client is keeping a check if his business is in association with the protection of the environment and no harm is done to the ecosystem. It is important to stay at the distance from the unauthorized means and manipulative policies (Arens et. al, 2013). As per the details of the case, the Pharmaceuticals Ltd is found to be guilty of the charge of dispatching its harmful chemical wastes into the nearby river and thus contributing to water pollution which is a very unethical practice. Involvement of the management is such a practice and the consequences of this matter should be paid full attention by the auditor while making an auditing appointment (Heeler, 2009). It is the duty of the auditor to highlight all the unethical means followed by the company regarding the destruction of the environment and shown the same in their reports so as to summon the people at large. So it the responsibility of the auditor to conclude that is the company guilty of the charges that have been put on the same. In cases similar to the one of Pharmaceuticals Ltd, if on knowing the manipulative and the unethical means followed by the company on a large scale, if the management is not getting involved in presuming and setting things correctly, then the auditor should step forward and take the following actions: First of all the auditor should look into the financial statements of the company so as to detect any false data placed in it which did not come into the eye of the management which is enough to fool the shareholders. The auditor should efficiently categorize the false data and measure its effect on the auditors report. If the situations are worsening then the auditor has the full right to undertake assessment procedures to fix the problems. It is the duty of the auditor to detect any flaws in the financial statements related to the manipulative data put up by the management. All the concept of the audit should be thoroughly applied by the auditor under these circumstances before questioning the reliability of the management of the company (Black, 2010). It is very obvious that the Pharmaceuticals Ltd would have carried out a number of manipulative transactions illegally so as to capture and control the seriousness of the matter rather than disclosing it to the public. It is thus the duty of the auditor to detect all those transactions and also to find the steps deliberately followed to record such transactions. Strictness should be maintained by the auditor in each and every flaw made by the company. As in this case, it was seen that the management was weak enough so as to control the manipulative steps taken and in such cases the work of the auditor increases as it is expected that the steps followed by the auditor will be strictly effective and positive in nature (Messier, 2013). Reaction Pvt Ltd received the appointment letter for conducting an audit in the Billing Associates Company. The letter was approved and accepted with respect by the Reaction Pvt Ltd. While carrying out the audit procedures in order to finalize the report, a situation of absence of documentation aroused which had relation with the transactional receivables of the company. Under this circumstance, it was decided that a manipulated report will be shown to the public. It is also possible that the company can cancel the audit letter and ask the latter to only check the position of the company which is enough to define its status. This shows that the working of the audit company is very much confined. It is also seen that the company now proclaims that no audit is needed at this time. This questions the audit company as to why it accepted the letter if their no need of it at present. But this also highlights that the Billing Associates Company is putting effort to conceal its mistakes of the absence of documents. This can be guaranteed because of the proclamation made by the company just after all the audit procedures have been strictly completed (Wood, 2011). But it is also necessary to issue the finalized report which was made in absence of the documents on the part of the invitee company. Many conditions arise which confine the independence of the auditor with a term involve called self-review. If a company has been following manipulative methods then it is the duty of the auditor to inform the effects of such practices on the financial statements. But it should be kept in mind that the duty of the auditor is only to inform the management and not to suggest ways in which the following practices can be controlled and situations can be made the batter (Cappelleto, 2010). If this happens then the auditor has no right to check the modified and updated financial statements as he himself had suggested the ways to change it. Maintaining the independence of self-review of the auditors is very much important for an auditor so to present a checked and legal picture of the company without any flaws. A major threat can be a self-interest threat. For instance, if the client asks for the travel services recommendation and the same is not given by the auditors then it can result in the auditor firm losing its client. This can be avoided if the auditor is at par with the client and maintains an only professional relationship with them. It must also be seen that the auditor should reject any piece of work which is not included in the contract. If any pressure is maintained on the auditor then the audit company must break the contact so as to keep the independence of the auditor at the first priority (Vause, 2009). Familiarity threat can also be a case with an auditor as the wife of one of the auditors is holding a good amount of shares in the company. This kind of threat takes place when the auditor pays much affection in the form of affection towards the company so as to safeguard the profits of the ones in close contact (Carcello, 2012). This can be avoided if any other charted accountant from any other company is appointed in order to check the reports prepared by the previous auditor who was getting sympathetic towards the company. Intimidation threat arises when the auditor hints the fact that he is not going to be paid for all the hard work he has done. Creation of a doubt is the basis of this threat. Though there is no direct action by the client of non-payment of the fess the matter is suspected by the auditor due to the course of actions followed by the client. This threat can be avoided if the auditor demands his fees from the client before submitting the final report to the company management. This is done so as to guarantee the fees receiving because if the report is submitted then there can be a chance that the auditor doesnt get paid (Church et. al, 2008). (A) Business Risks (B) how it might lead to the threat of material misstatement High Lease Payments: Due to the conversion of the premises and the lands of the company into a residential category, problems are being faced by the same. The landlord demands for 50% more rate which could be a choking expense and and could turn into a massive loss for the company in the future. Manipulative or illegal means can be seen to be adopted and followed by the company as it may try to Depict false entries in the records and may try to increase the received amount and thus show a profit on their part. All this results in a decrease in the losses in the financial statements which have come into action due to the uprise in the rent for the company (Elder et. al, 2010). High level of stock obsolescence: As per the thought to increase the profits of the company, it was seen that CPPL was keen enough to increase their items present in the market. But the products have not found value in the market and as a The result of this the stock obsolescence had an increase way too high. Manipulative or illegal means can be seen to be adopted and followed by the company as it may try to depict the inventory at a high position and in a healthy State and thus concealing the stock obsolescence (Roach, 2010). All this is to depict the company as a profit-making one and to keep up the hopes of the investors and attract the new ones. Constrain on the availability of cash: It is also seen that the company CPPL is facing upsets From its two trusted suppliers. These suppliers have deducted the payment time from 30 to 14 days and have also reserved their volume rebates. There is also a fear that the profits can greatly be reduced to a minimum in the future if the services are provided on a regular basis and continuously. Manipulative and illegal means can be seen to be adopted by the company in order to depict increased cash sales in the book of accounts and thus to depict that ready cash is available with the company to pay off the debt as the time provided by the creditor has been reduced (Riddle, 2015). Drop in the profit margins: To survive in the market and shield against the dominance, the company has concluded to give value added services. This plan was successful in attracting the costumes but affected the profitability by deducting it by 10%. Manipulative and illegal means can be seen to be adopted by the company so as to conceal the losses From the public. For this alteration can be made in the Financial statements of the company. All this is to depict the company as a profit-making one and to keep up the hopes of the investors and attract new ones (Gay Simnet, 2015). High level of competition: A tough level of competition has been seen in the the market as the expanded companies are dominating the minor ones by taking over them. There is also a reduction in the price of the items so as to maximize The shares in the market by upholding the costumes It is very much possible that the company is deciding to Giveaway unexpected discounts in order to avoid them Dominance faced by it in the market and to keep them attracted to the company (Messier, 2013). This can result in an Increase in expense and this discount can be assumed by The management as unrecoverable or as bad debts. (A)Deficiency in internal control Explanation of business risk Arising due to deficiency in Internal control. (b) Control (c) Test of control Deficiency in the internal control can be defined as a situation when the website of the company is not aligned with the inventory status and is not scanned for results Whenever an order is placed. As mentioned, it can happen The inventory is not updated as Per the order paced. This can be A loss to the company because A case can arise in which the Order is accepted by the Inventory is not in a position to Dispatch it as it lacks it. It is advised for the Company to follow ERP so As to align the inventory As per the order which Will enable it to check the Present stock status and Display the correct Result. Placing of a practice order Can be a method which Will help the management To conclude that Whether the inventory is Potentially in system or Not which will be helpful In displaying correctly Results professionally. It may happen in many cases when the delivery of a particular product is made in accordance with The order placed that the signatures of the product receiving person is not demanded which can result in costumer complaints and delay in The delivery of the producs. This can result in decrease of The respect of the company in The market as the company is Not at all aware of the products That has been dispatched for Delivery and only pay attention When the customer complaints. As per the cases the company may lose its customers in the future which may be massive in nature (Matthew, 2015) The loss to the company. All the processing as from the placement of the order till its delivery, All the information should be timely recorded on the system. also the mandatory the sign should be taken and transferred to the system online. This helps the salesman to take the signature and quickly update it to the server of the company. All this processes helps the company to track the delivery time in the future. It is duty of the auditor to analyze the website of the the company so as to get all The information about the transactions carried by the company (Gay Simnet, 2015). This is done so as to detect the delivery date of the products in compliance to the placed order. If the signatures are done manually, then random verification/ checking of signed receipts shall be done by the audit team. Credit limits and also the Payment date is Analyzed by the retail Sellers before an order is Accepted by them. The Payment date is Concluded by the sales Ledger clerks and not at Higher levels of the sales Directors. A risk prevails in the company because the authority has given the concluding power of The credit limits to a lower level of staff. Cases may also arise resulting in credit limits offered to such person who have a dark background in accordance with on time payments (Geoffrey et. al, 2016). All the problems arising Due to the credit limits Matter can be solved by The decision that the Credit limits are to be Formed by the person Sitting at the higher Levels and so it should not be decided by the lower Staff. The auditor shall check the reconciliations maintained by the company and check the same from invoices held by the the company as well (Ghandar Tsahuridu , 2013). Buying of raw materials by the company can be seen with alteration in ledger departments members. The compilation of the supplier invoice cannot be not be done by the Company anymore. Noncompilation of the supplier statements with the record causes excess or less payments which cannot be later verified as lack of invoice is seen (Heeler, 2009). All this can be avoided easily by setting up a a strong system which will compile the suppliers statements with the company record whether monthly or quarterly. The auditor shall check the reconciliations maintained by the company and check the same from invoices held by the the company as well (Guerard, 2013). Due to the alteration in business over the past six months, new equipment have been purchased in excess without disposing of the old ones. Non-usage of the old equipment mentioned in the books is causing depreciation expense resulting in a deduction in the companys profit (Gilbert et, al, 2005). All the problems relating To this can be eliminated If the out of date Machinery Is sold as fast As possible. All the information required Can be gathered by the Looking into the registers, Records, and the entries. Low materiality range clearly depicts that more work is necessary, more issues and matters may arise, and therefore, the auditor must follow some conservative measures. In contrast to this, high range of materiality portrays that lesser work is necessary, lesser issues and matters may arise, and hence, the auditor must follow a lesser conservative strategy (Guan et. al, 2008). Sequence Case Materiality impact Clarification 1. In the year June 2017, the finance manager of Sali had resigned and no alternative has been found since such time The level of materiality shall decrease in relation to the prevalence of material misstatements in the financials. The financial manager is not present in the company since the last month and therefore, there are higher probabilities of material misstatements that have been undertaken by the concerned employees (Hoffelder, 2012). Besides, such finances must have been supervised by the departments junior authority that clearly assures they have influenced the relevant facts and figures in order to conceal errors or frauds. Therefore, this can result in a decline in materiality, as additional work will be needed to seek evidence. 2. The HR manager of Sali had resigned in June 2017 but his alternative was successfully found in July. In this case, there will not be any impact on materiality. There are various qualitative attributes prevalent in Case I that can possess an influence on the companys financials. However, the HR managers responsibility is to manage and recruit the employees and therefore, in his absence, the recruitment may be undertaken by other superior authorities. Therefore, no impact on financials will occur. 3. During the performance of a complete reconciliation of relevant information on SuperD to information on SuperB in the year June 2017, two material variances were found. Phil (auditor) has made inquiries with the management who has verified the fixation of such errors. The impact must be a decline in the level of materiality in relation to material misstatements in the financials. Two significant variances were found in the transferred data because of errors in the software or intentional frauds on the part of superior authorities liable for such data transfer from SuperD to SuperB. Therefore, a thorough evaluation is necessary to scrutinize the influence of such variances (Johnstone et. al, 2014). 4. Absence of purchase vouchers of the unlisted investments from Dune Ltd that consists of fourteen percent of the net investments There may be an increment in the materiality level. The finalization of audit on July 2017 and receipt of purchase voucher from the company was undertaken even though such document was not present during the audit process (Jubb, 2012). However, before termination of the audit, the same was made available and hence, a thorough assessment is necessary to prevent decline of materiality. References Arens, A. A, Best, P. J, Shailer, G. E. P Loebbecke, J. K, 2013, Assurance Services and Ethics in Australia, 9th ed, Australia: Pearson. Black, W. 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