Auditor's Report - Importance And Limitations | AI In Audit Field

Importance of Auditor's Report in Financial Communication

A commentary on the number of material misstatement that were incurred and connected on the audit.

Trade Discounts Payable. Acuracy, Valuation allocation; Check digit.

Material 

Issue 1: Check Digit, Issue 2: Limit Test

A charter should be established.

Occurrence, Accuracy and Cut-off of sales: Accuracy of payroll expenses…..

Integrate multi-level payment approvals.

unmodified

Qualified, Qualified , other matter oparagraph

Occurrence, existence, classification

Advocay and Self-interest

Disclaimer

Check digit

Advocacy and self-interest

Qualified with emphasis of matter

Disclaimer

1,2,3,6

A)unmodified with emphasis of atter.

unqualified

Disclaimer

gas print debtors

ajust, do nothing

adjust

Advocacy, self-review  

• Error 1 can be prevented through entering the invoice numbers in numerical format only and avoiding the alpha-numeric format of different styles. For instance, invoice number should be entered as “234541” only. The reference can be made to the “Supplier number” located on the “Supplier’s table.” This will allow for easy sorting and ranging and as well as for easy retrieval of data as and when required.
• Error 2 can be prevented through proper authorization controls where there needs to be application of both “username” and “password” for making any payment. This will ensure that all payments would be verified by appropriate person before processing it.

1. Account: Inventory. Assertion at risk include “Accuracy” because there may be a tendency for Woolworth to record fictitious movement of inventory and overstate the assets by mentioning theft may have been taken place which actually did not and as a result fraud may take place.
2. Account: Sales revenue. The assertion at risk includes “Occurrence” and “Accuracy” because the company may understate the sales for supressing the profit by tampering the footage and automated checkout process which might save taxes. The company may overstate the sales as well through tampering of the automates checkout process and footage.
3. Detailed test: The detailed test will be for “Sales account” where a sample of sales transactions may be traced back to the generated sales invoices generated by the system and in case of discrepancy, “confirmations” may also be drawn from the sample of customers.

The auditor’s report is an eminent part of the Corporate Communication Process to its related stakeholders especially to the users of financial statements who greatly rely on such published audit reports to make future economic, business and investment decisions with the business entity in question. The auditor’s report contains the eminent parts such as the “title, addressee, auditor’s and management responsibility followed by opinion and basis of opinion and many more such as date and signature.” This information is of material importance to the users of financial information as this information portray whether the financial statements prepared by the entity reflect “true and fair view” of the company financials whether such statements are free from any kind of material misstatements, errors and frauds. However, the auditor’s report does not contain the recommendations about what should the management do in case there is an “modified report.” This means that the auditor does not recommend through his imparted report that what should the management do in order to provide an “unqualified report” if there is a case of “Qualified, adverse or a report with a Disclaimer.” This is how the communicative value concerning the audit report can be greatly enhanced in near future.

The above statement portrays that as per the survey conducted by the “World Economic Forum” on 800 executives, a vast majority commented that AI could replace humans in the field of Audit by 2025. This statements cannot be completely agreed upon because there are some inherent limitations of the application of AI in the field of Audit through one cannot discard the numerous benefits which AI might bring in this field with its implementation. The most eminent limitation is that AI is a software which can do repetitive work within a short span of time that may save a lot of time for the auditor and many work error free; However, AI cannot replicate the human nature and intelligence as it has field memory and intelligence based upon certain kind of programming. Secondly, the auditing is not only restricted to analyse the financial or numerical data only which can be done by the AI, but it also requires a “questioning mind” and certain regenerative analytical skills that cannot be copied or understood by the AI altogether. The auditors are also required to make recommendations which may be difficult or impossible at times for the AI as it depends upon certain fixed program only.