Crafting A Policy That Fits Process Auditorâ€Myassignmenthelp.Com

Question: Discuss About The Crafting A Policy That Fits Process Auditor? Answer: Introducation (a): According to accounting standards or guidelines in auditing standards, the auditor should not involve in any internal practices or services of the client or business organisation. According to auditing standard, the auditor is required to provide auditing services and consultancy services only and there shall be no link between auditor and client (business organisation). In this case, Thornleigh Accountants (accounting / auditing firm) has supplied one of their staff members i.e. Ellen Davis to Jenkins Ltd (clients firm) and she had prepared accounts for 4 months. Now, she has to review his own work as an auditor, therefore this is the case of self-review thread to auditor independence (Abdul, et. al, 2015). Self-review threat denotes the situation where the auditor is required to give assurance of clients financial statements, which is prepared by any staff member of an accounting firm or by the auditor. Safeguard against such a satiation is to minimise non audit service to cli ent and if provided then client will be responsible for the same. (b): There is no auditing standard or guidelines on the same related to proof supplied by the client to auditing firm. Supplying proof of accounting treatment by the client company to the audit firm is treated as good practice and there is no offence in any way. In the present case, Winmalee Ltd (client organisation) has supplied annual accounts to the auditing firm (Dargin Associates Accountants) and along with this, they had supplied details taken from various accounting standards related to the optimistic valuation of development expenditure capitalised in intangible assets (Blay, 2005). Therefore there is no breach of auditors independence and no threat to independence will be applied. (c): According to auditing standards or guidelines on auditing standards, auditor and client shall not be involved in any friendly relationship or there shall not be any nexus between them. The auditor shall be free from any biases or should be independent in terms of stating his / her views on the financial position of the client or business organisation. In this case, Chocolate Company has invited auditor to the place where they sold defective chocolates at concessional prices. This can be the case of familiarity threat for auditor since auditor get familiar with the staff members or with auditors on such basis (Bolton, 2007). In the present case, this is the visit of the auditor is an indirect gift for auditor and audit staff and this can be treated as a familiar threat. In order to overcome this threat, education to auditors shall be provided related to nature of acceptance of gifts and how to handle this situation. (d): In any case, the scope of the audit shall not be reduced either by the auditor or by the business entity i.e. client. Reducing the scope of audit means reducing the quality of auditing standards, which is not acceptable according to guidelines. In this case, Expert Travel Company (Client Company) has been putting undue pressure on the auditors firm by stating them to be lenient while auditing. Expert Travel Company has been utilising services of same auditors firm from last two years and while finalising the next years auditors, managing director wants to auditors to adopt a flexible approach in the next years audit. In this case, there can be intimidation threat and self-interest threat from the auditors. Since audit partner is concern about losing a client (Cook, et. al, 2009). On the other hand, the client is outing undue pressure on auditors by saying that they should be flexible while auditing. (e): According to auditing standards and its guidelines, no auditor shall be connected to the clients organisation in any capacity. When this case it tends to happen, the auditor will not be able to conduct audit independence and he / she will get biased in his / her opinion. In the present case, Elmtree Ltd.s audit is about to begin, but it is noticed that senior member of an audit team or auditing firm (Elaine Ong) is engaged with a senior accountant (James Bing) of Elmtree Ltd. In this case, there can be familiarity threat to auditors independence. Since one of the audit team members has been associated with a senior accountant at clients company. In order to overcome this threat, procedures shall be laid down when auditing in such a case i.e. having a close relationship with the client (Dart and Chandler, 2012). (f): In order to prove there is close proximity between client organisation or client and auditor or auditing firm, there shall be conclusive proof of the same. In the present case, MCM Accountants, that are about to start an audit of Rangers Ltd, it is noticed that one of the senior auditors (Diane Polo) in the audit section is in same softball team in which senior accountant (Elise Lift) and several staff members are in. In this case, there is no close proximity between audit and clients organisation or there is no familiarity between them (Johari, Mohd?Sanusi and Chong, 2017). Therefore it can be concluded that in this case, there is no threat to independence for auditors. The annual report is the report that auditor submits to the business organisation i.e. to which financial statements were verified and financial position has been reviewed. The audit report is one of the important documents that are relied on in the decision-making process and at the time of reviewing business organisation by any stakeholders. The main aim of issuing an audit report by the auditors is to express their view on the true and fair view of financial statements and financial position of the business entity. But there is many other section or information in the audit report that auditor issues to the management of business organisation (Chen Pevzner, 2012). Following are some sections of the audit report of the financial statements of a public company: Title of independent audit report Statement for acknowledging the attached financial statements are audited Statements that states that financial statement preparation is the responsibility of management and auditors responsibility are to just express opinion on the same Statement that audit has been conducted by adopting and applying all the relevant and required auditing standards Statement that states that reasonable assurance has been obtained while auditing Statement stating that opinion has been made on the reasonable basis Most important section of the audit report is auditors opinion i.e. unqualified opinion, qualified opinion, adverse opinion or disclaimer of opinion. Signature of auditor or auditors firm at the end of audit report City and State of the audit Date of audit report References Abdul Wahab, E.A., Mat Zain, M. Abdul Rahman, R., 2015. Political connections: a threat to auditor independence? Journal of Accounting in Emerging Economies, 5(2), pp.222246. Blay, A.D., 2005. Independence Threats, Litigation Risk, and the Auditor's Decision Process*. Contemporary Accounting Research, 22(4), pp.759789. Bolton, L., 2007. Auditor Independence: what investors think. Accountancy, 140(1369), pp.9495. Chen, Krishnan Pevzner, 2012. Pro forma disclosures, audit fees, and auditor resignations. Journal of Accounting and Public Policy, 31(3), pp.237257. Cook, John K., Brown, Kevin F. Lightle, Susan S., 2009. Voluntary disclosure agreements and auditor independence: crafting a policy that fits the process.(practice management). The CPA Journal, 79(12), pp.6062,6466. Dart, E. Chandler, R., 2012. Client employment of previous auditors: shareholders views on auditor independence. Accounting and Business Research, pp.120. Johari, R.J., Mohd?Sanusi, Z. Chong, V.K., 2017. Effects of Auditors' Ethical Orientation and Self?Interest Independence Threat on the Mediating Role of Moral Intensity and Ethical Decision?Making Process. International Journal of Auditing, 21(1), pp.3858. Kipp, P. et al., 2017. The Effect of Expanded Audit Report Disclosures on Users' Confidence in the Audit and the Financial Statements. The Effect of Expanded Audit Report Disclosures on Users' Confidence in the Audit and the Financial Statements, pp.ProQuest Dissertations and Theses.