Part One
The Ford Industries Inc’s financial operations have been maintained in accordance with the company’s policies and accounting standards. The auditor’s report or assessment plays a significant role in establishing accurate financial position of the organization. The auditor assessments of the balance sheet help in identifying areas or sources of revenue in the organization. Therefore, the auditor is in a better position to recommend for the implementation of measures to increases the sales volumes and profitability of the organization. The auditor outlined the hierarchy of the company’s assets fair value in the balance sheet. The auditor outlines errors or misstatement in the balance sheet and the income statement. The balance sheet contains the total company’s assets, share equity and liabilities. The audit ensures the balance sheet shows a true and fair representation of the organization’s financial position.
The audit uses the financial statement to show that the company comprises of a variety of stakeholders across the world. The key stakeholders of Ford Inc are the directors, agencies, creditors, suppliers, shareholders, and the employees. The stakeholder of the organization plays different roles in ensuring there is smooth operations and realization of the set goals and objectives (OECD National Accounts Statistics, 2016).
The audit defines the relationship between the stakeholder and the organization. The audit states the rate of allocating annual net profits to the shareholders. The review has assisted in the development of a procedure or approach to which the organization relates with its creditors. It has terms and conditions necessary in the issuance of credits to the distributors and the contract manufacturers. The audit defines the relationship between the agencies, contract manufacturers and the customers. The agencies and manufacturers ensure the EOM’s customer receives the products of high quality.
Part Two
The inherent risk is medium due to the fact that the organization has incurred an approximate loss of $0.8 million and $1.4 million in 2014 and 2015. In addition, the financial statement indicates that in 2015, the company had a net cash of $ 2.0 million that was used in the operating activities. The company is in fear of incurring further net losses arising from the continuation of the daily business activities. It is clearly evident that the risk control is minimal. Therefore, the inherent risk is medium because the company has managed to set strategic plans that reduce the chances of incurring more losses. The company has a very low-risk audit hence operating its business at the expense of its liquidation or closure. The auditor’s efforts of curbing the risk factors in the report increase the probability of organization identifying or incurring losses in the current environment. The absence of high-level of assessment or actions aimed at controlling the risks factor increases the likelihood of losses arising (forwardindustries.com).
The planning materiality set is higher due to the low audit risk. The auditor set a higher materiality to ensure the financial reports are prepared in respect of all materials. Ford Inc’s low audit risk shows that the auditor has minimized the level of the misstatement of unknown or known errors in the financial statements. Based on the low audit risk, the tolerable misstatement of Ford Inc is perceived to be 70 to 90 percent. The tolerable misstatement is much higher as compared to the planning materiality. The tolerable misstatement of the balance shows the percentage to which it differs from the actual financial amount.
The audit report reveals that the Ford’s internal control system has ensured there is a credible financial control system. The internal control has attributed to the reduction or less risk of losing assets. In addition, the internal audit control plays a significant role in ensuring there is accurate and complete income statement of the organization. It regulates or guides the finance team of the organization to observe or comply with accounting rules and regulation thus providing true and fair financial reflection of the company. The presence of material weakness means that there is laxity in the internal control system thus opening room for inaccurate financial statements.
Part Three
Valuation
The management would take the assertion that the cash, inventories, and accounts receivable are reflected in the balance sheet at their actual valuations. On the other hand, the accounts payable need to be recorded in the balance sheet at the required valuation. This would help the auditor in determining the actual financial position of the organization.
Completeness
The management relies on the assertion that the financial report should indicate the cash equivalent or cash, accounts receivable, inventories and the accounts payable. The reports need to show the total amount of asset and liability for auditor to determine the net profit or loss. It allows the internal control auditors to establish the accuracy of the financial report.
Right and Obligations
Ford Industries Inc has the right to the available assets. The company is entitled to the assets in the financial reports. In others words, it is obligated to the liabilities recorded on the balance sheet. It implies that the company has the right to ownership of the inventories, the cash, receivables, and payables.
Existence
Ford Industries Inc has the assertion that the financial report has to show all the balance of the company’s assets and liabilities. This includes the cash balances, the inventories, the debtors and the creditors
References
Forward Industries. (n.d.). Retrieved March 04, 2016, from http://www.forwardindustries.com/#inv
Financial Balance Sheets, SNA 2008: Non-consolidated stocks, quarterly (Edition 2015). (n.d.). OECD National Accounts Statistics. Retrieved February 2016, 05.
