Introduction
Auditing is an independent and systematic examination of statements, records, data,performances and financial state of a business for a spsecific purpose. In all types of auditing, auditors recognizes and perceives all the proposals forwarded to them for review,collecting evidence and evaluation and while using this basis they formulates the final judgment that is disseminated through the audit report. Audits offers third person assurance to many stakeholders directing on wether the subject under discussion was from misstatement or not. All categories of subjects may be audited including internal controls, project regulation,water management,quality regulation, and power conservation.
The main audit risks and the associated responses
Sensitivity of forecasts and budgets
Just like in any other business,there had been great concern relating to the ongoing entity of budgeting and forecast. In evaluating control assessment, the auditors considered the process regulation which was used during the general assessment, the major assumptions through which proposals are based enable making coordination plans for the coming days. As a result,it was essential to assess the likelihood of material misstatements which could result due to fraud or error in subset before investigating the effectiveness and wellness of the internal regulation. The auditor concluded that the budget and forecasts estimates were in accordance to auditing standards. According to their opinion the forecast statements reflected fair and true picture of the business affairs as at 31st of December. The targeted gains, origin and uses of funds were properly made according to Act 1985 of the company.
Internal control
Management assessment on internal control was among the arising issues which needed some considerations.Reason being,internal control defines the extent of business success in light of the current conditions.At the same time,internal management defines the degree of staff responsibility and likelihood of experiencing future crack down on entity management. Therefore, directors were ordered to maintain the integrity of internal relation systems. On the other hand, they are expected to study and write a report with reference to effectiveness and workability of the internal control. However, this was not limited to finances and demand for reviewing functions of internal audit.
Length of period
Time factor is very sensitive to all businesses since it influences planning.Therefore, analysing achievement of the stated income with reference to time is a significant factor because it helps in setting the future date for specific event. Many entreprises make assumptions using past period but this was not relevant because the stated time frame was acceptable.
Assumptions
There was growing concern for the appropriateness of made assumptions on wether material uncertainty was existing. Disclosing explanations to elaborate the given nature of the expected material uncertainties came up.Consequently,all assumptions were to be made according to the business governing constitution.
Other concerns
Systems, obligations, presence of borrowing facilities, directors’ guidelines, assessment and representations were other main areas of concern. To counter act these concerns, learning the operating systems, obligations to be abided with and directions of the guiding environment and the business were expected to generate control objectives after performing risk assessment duties. To achieve this, likelihood of impacts risks was to be alleviated through designed controls and the results from these controls were to be evaluated with aim of assisting in assessing the adequacy of inherent risks to guide controls.
Materiality assessment
Materiality is regarded as an indicator of the relating significance or even importance of the given matter viewed in context of statements of the finances. The underlying fact about materiality is that material misstatement or omission can affect the users’ decisions. If anything auditors cannot afford to forget materiality. This was considered to aid determination of the nature, extent and timing of audit methods as well as evaluating the consequences of misstatements.
Turnover, tax profit, total assets, net assets and working capital are some of the qualitative and quantitative aspects which were assessed. Upon review, auditors made professional judgement since ISAs has neither stated the meaning of material nor given auditors the formula to be used. Through this assessment, provisions were stated and contingent liabilities were defined. To make the whole program effective, all flag bearers are expected to make commitments for the following events in order to define the areas of concern after doing financial review.
The changes in materiality recognize that the the uncertainty are not dependent by category or size of company alone without the likelihood in specificity case of all financial statements. Instead, they must be prepared and presented fairly through the agreed framework. Reason being,it is the only format of gathering sufficient and appropriate evidence on financial usage. Upon materiality review, the final report was found to rhyme with the company results because each and every question and the associated difficulties were resolved.
Conclusion
In each and every business set up, audit engagement is an asset for business growth because it facilitates the process of getting enough upright audit evidence through which auditors make conclusions on consistency of presented proposals. That is why auditors were able to decide on the company that had conformity and fair approximations to GAAP. It should be noted that the secret behind every successful business is defined by capacitance of auditing.
Works cited
AMERICAN ACCOUNTING ASSOCIATION. (1981). Auditing. Sarasota, FL, Auditing Section of the American Accounting Association]. http://aaahq.org/ic/browse.htm.
MILLICHAMP, A. H. (2002). Auditing. London, Continuum.
ROBERTSON, J. C. (1990). Auditing. Homewood, IL, BPI/Irwin.
