Auditing American Accounting Association - Myassignmenthelp.Com

Question: Discuss About The Auditing American Accounting Association? Answer: Introducation Examination: Founded on analysis of the present business case, it can be hereby mentioned that all the activities connected to receivables are assumed by executive accountable for handling receivables account. For example, notes drawing in favour of different purchasers and returning of medical devices after proper citation of reasons among many others. Therefore, high risk can be associated to this account (Eilifsen et al., 2013). Risk associated to audit: Risk is associated to the accounts receivable as receivable might get misappropriated by officials of the corporation. Again, lesser amount of receivable also might get registered (Fung, 2014). Steps for decreasing audit risk: Diverse activities related to trade receivables can be delegated among different members for lessening risk of audit. Accounts of Investment: Accounts: Investments can be changed into cash in 3 months to 12 months period (Eilifsen et al., 2013) Examination: Investments subject to diverse system of accounting is said to be at a medium risk level (Fung, 2014). Risk associated to audit: Basically, assessment of inherent risk can be related to investment undertaken without taking into consideration different types of risks (Fung, 2014). Steps for decreasing audit risk: Returns acquired on diverse investments can be appraised at recurrently. Property Accounts: Accounts connected to assets such as properties are essentially associated to fixed assets/resources and depreciation associated to fixed assets (Fung, 2014). Examination: Inaccurate registration of different property resources along with imprecise presentation of depreciation can cause high risk. Risk associated to audit: Assessors might fail to distinguish between assets utilized for a period over and excess of 180 days and for a period lesser than 180 days in a particular year in cases when assets are not properly recorded. Steps for decreasing audit risk: particular ledger for resources, assessment of firms purchases as well as sales of assets (property) can be assessed on a regular basis (Bik et al., 2017) Intangible Assets Accounts: Specific accounts particularly intangible accounts include goodwill, patents as well as copyrights (Bik et al., 2017) Examination: Intangible assets have the need to be assessed accurately in order to evaluate their actual value and way it is recognized. Risk associated to audit: As there is essentially no physical existence of intangible assets, the process of ascertainment of the fair value intangible assets can be very intricate (Bik et al., 2017). Steps for decreasing audit risk: Fair value of this asset need to be ascertained by expert professionals. Essentially, gaining control over the process of ascertainment of fair value of these kinds of resources helps in lessening the overall risk. Research as well as development (RD) of firm: Accounts: Since research and development activities of the corporation GPSA was not very much blooming, therefore it can be said that expenditure on the same can be capitalized only when development was attained Examination: It is very difficult to distinguish between successful and unsuccessful research actions. As expenditure for specific research and development of the firm is very high, inaccurate recognition can direct the way towards highly risk situation. Risk associated to audit: There lies inherent risk in expenditure on research plus development can be associated to cataloguing of research as well as development activities as successful or else unsuccessful (Carey et al., 2013). Steps for decreasing audit risk: Particular ledger linked to expends can be appraised properly. In addition to this, thorough research of the market need to be undertaken prior to process of introduction of products. Examination of important financial ratio for analysis of risk of the firm Thorough assessment of pecuniary assertions of the firm divulges the fact that the return earned on equity has a downward sloping trend. In essence this ratio has declined fro 22.7% registered in FY 2015 to roughly 7.19% in the FY 2017. This essentially denotes reduced capacity of the firm to generate earnings from specific investments along with profitability risks arising from investments of shareholders equity (Eilifsen et al., 2013). Return Earned on Assets: Appraisal of return earned from assets of the business concern is witnessed to have a declining trend. This ratio has particularly declined from nearly 15.5% in FY 2015 to around 4.86% in FY 2017. This necessarily divulges the fact that the capacity of the business entity to generate positive profit from the employment of firms resources is dropping steadily (Fung, 2014). Net Margin of profit: Detailed evaluation of net margin of profit of the business entity reveals a downward sloping trend. This ratio is recorded to be 15.52% in the FY 2015 that again declined to 4.86% in FY 2017. Fundamentally, this replicates the fact that the earnings registered before both tax and specific interest along with the capacity of the firm generate profit out of the available resources is declining. Hence, the firm might probably encounter profitability risk (Fung, 2014). Time Earned Interest Time earned interest for the firm is recoded to be 3.51 in the FY 2015, while this increased to around 4.10 in the FY 2017. Therefore, there is said to be risk associated to saving since the business entity do not have the capability to save sufficient amount that is required for generation of interest earnings (Hardy, 2014). Even if the current ratio calculated for the firm reflects an rising slope, this specific ratio is registered to be 1.80 in the FY 2016. Fundamentally, this replicates the fact that there exist risks in not utilizing working capital of the firm effectually by the firms management (Hardy, 2014). Debt Equity Ratio Evaluation: A high debt equity ratio talks about the high leverage of the firm. basically, this replicates that the business entity has acquired greater amounts of funds through debt financing as compared to equity financing (Hardy, 2014). Payments of bonuses by the firms management can be appraised by the shareholders of the corporate. However, if there remains any variance between budget developed for the firm prepared every month, specific individual who is in charge can be questioned and asked to explain the main reason behind the variance (Hay, 2015). Maintaining password protected access: Application program was suitably shielded with passwords that restricted easy access. Trade Receivable: Receivables are necessarily fused with debtor powers during month end Aging Evaluation: Analysis of aging for specific receivables acquired from trade are usually presented using devices such as computers (Hay et al., 2016). The invoices of sales can be properly processed into the specific system. This action is necessarily undertaken by the finance controllers of the firm. Receivables for period above than 890 days are segmented and executive responsible for handling this is asked to answer for this payment delay. -Doubtful debt: at the time of developing follow up strategy for doubtful debtors if the balance surpasses the given limit, then the shipment of additional goods to specific client is essentially held back (Hayes et al., 2014). Despite password protection system is implemented, the access to specific programs linked to IT functions, admittance to database of the firm is not properly shielded by password. This in turn can lead to the risk of unlawful admission (Houghton Campbell, 2013). Basically shipment of product such as tiles to clientele directs towards generation of manual/physical notes. Fundamentally, this leads to different intentional or else intended errors connected to delivery. Diverse business activities related to trade receivables can be undertaken by the executive of the business concern. For example, returns acquired from different customers on particular medical devices, credit notes particularly drawn for customers can be appropriately analysed by executives accountable for managing receivable (Knechel Salterio, 2016)..l can be regarded as a process of evaluation of effectiveness of processes of firms internal control. The tests of control can be classified in the following manner: New business transaction: Under this particular system, a new transaction can be started to examine the method of internal control (Jia, 2016). Investigation: Under this specific arrangement, the related documents are analysed to examine the entire system of internal control Examination: Under this particular arrangement, the related documents can be examined using certain things that include stamps, signatures and many others for evaluating control (Louwers et al., 2015). Thorough Observation: Observation policy under this specific system helps in detailed examination of diverse procedures of business together with linked system of internal control Effectual Methods of control: Paying off bonus: Observation scheme of control test can be carried out for this case (Moroney et al., 2014) Password strengthening- Inspection approach of control test can be carried out for this case Grant of discount- Re-performance policy of control can be carried out for this case Receivables acquired- Re-performance policy of control test can be carried out for this case Aging scrutiny- Both the strategies namely observation as well as inspection policy of control test can be carried out for this case Doubtful debt- particularly, Re-performance scheme of control check can be carried out for this case (Reporting et al., 2017). Sales of the firm: The business entity under consideration disburses bonuses to diverse management executives founded on the sales figure. However, there are probabilities of misleading enhancement in sales. The business entity offers physical delivery notes for particularly its tile sales that are vulnerable to different errors, mistakes, scam else wise material misstatement (Sookhak et al., 2017). Sales journal for the firm are essentially prepared as well as presented on periodically, nonetheless, there are probabilities of misplacement of manual papers Trade Receivables The executive of the firm who is particularly liable for receivables is also answerable for actions that consequently might show the way to planned else wise unintentional deeds of scam, faults otherwise material misstatement. Trade Receivables are also combined with bank proceeds at the ending of all month that is rather good time for resolution of major stuff such as, receivables (Stewart Shamdasani, 2014). References Bik, O., Hooghiemstra, R., Bishop, C. C., DeZoort, F. T., Hermanson, D. R., OfficersJudgments, F., ... Glover, S. M. (2017). Auditing: A Journal of Practice Theory A Publication of the Auditing Section of the American Accounting Association. Carey, P., Knechel, W. R., Tanewski, G. (2013). Costs and Benefits of Mandatory Auditing of For?profit Private and Not?for?profit Companies in Australia.Australian Accounting Review,23(1), 43-53. Eilifsen, A., Messier, W. F., Glover, S. M., Prawitt, D. F. (2013).Auditing and assurance services. McGraw-Hill. Fung, S. (2014).Hong Kong Auditing: Economic Theory Practice. City University of HK Press. Hardy, C. A. (2014). The messy matters of continuous assurance: Findings from exploratory research in Australia.Journal of Information Systems,28(2), 357-377. Hay, D. (2015). The frontiers of auditing research.Meditari Accountancy Research,23(2), 158-174. Hay, D., Stewart, J., Botica Redmayne, N. (2016). The Role of Auditing in Corporate Governance in Australia and New Zealand: A Research Synthesis. Hayes, R., Wallage, P., Gortemaker, H. (2014).Principles of auditing: an introduction to international standards on auditing. Pearson Higher Ed. Houghton, K., Campbell, T. (2013).Ethics and auditing(p. 354). ANU Press. Jia, X. (2016).Auditing the auditor: secure delegation of auditing operation over cloud storage. IACR Cryptology ePrint Archive, https://eprint. iacr. org/2011/304. pdf. Accessed 10 Aug. Knechel, W. R., Salterio, S. E. (2016).Auditing: Assurance and risk. Taylor Francis. Louwers, T. J., Ramsay, R. J., Sinason, D. H., Strawser, J. R., Thibodeau, J. C. (2015).Auditing assurance services. McGraw-Hill Education. Moroney, R., Campbell, F., Hamilton, J., Warren, V. (2014).Auditing: A Practical Approach. Wiley Global Education. Reporting, D. W., Berger, L., Perreault, S., Wainberg, J., Courtois, C., Gendron, Y., ... Li, C. (2017). Auditing: A Journal of Practice Theory A Publication of the Auditing Section of the American Accounting Association. Sookhak, M., Gani, A., Khan, M. K., Buyya, R. (2017). Dynamic remote data auditing for securing big data storage in cloud computing.Information Sciences,380, 101-116. Stewart, D. W., Shamdasani, P. N. (2014).Focus groups: Theory and practice(Vol. 20). Sage publications.