Get Instant Help From 5000+ Experts For
question

Writing: Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing:Proofread your work by experts and improve grade at Lowest cost

And Improve Your Grades
myassignmenthelp.com
loader
Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

Attach file

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

Guaranteed Higher Grade!
Free Quote
wave

Situation 1

Situation 1:

If an auditor is involved in providing advocacy services, it may occur that the ethics are compromised on a huge basis, which in turn will greatly impact the independence of the auditor. In this situation, threat of advocacy is regarded as threat to independence of auditors. In this regard, objectivity is said to be compromised as as the auditors are to make promotion of client business.

Situation 2:

If the auditor receives any kind of monetary or non monetary benefits in addition to the benefits due to the audit services then also there may be threats imposed on the independence of the auditor. Other than audit engagement benefits there can be benefits which are brought by non audit services so it's threatening. Suppose for instance if the auditor is provided holiday voucher by the client for any non audit services, then obviously his independency will be questioned. Also the amount of threats also increases within increase in the services offered to the auditors (Christensen et al. 2013).

Situation 3:

An auditor's spouse or child, daughter, siblings etc are considered to be the close family members. The debts, ownership, short or the long term securities directly owned by the person in association with other people involve all the financial interest. A person who is the financial decision or controls the intermediary, for instance the father is the financial controller of the client's is the proposed accountant, so it will affect the audit team and also will greatly affect the independency of the client.

Situation 4:

In regards of having a close relationship with the employee as well as the directors including the officers, there is always a risk of influence associated with the environmental business of the client. Under such situations or conditions the auditor may become too sympathetic in consideration with the client .If they’re very close relationship with client or the bonding is very strong then often it leads to trust with the client and also the representation is not very sufficient representation (Elder et al. 2015). There is also chance that the representation of the auditor may get impacted by sharing such bonding and trust as he/she has already shared the valuable details which he/she should not  have shared on account of the previous assignment in relation with LTH a month before . It is also known that the auditor is not allowed to carry out the audit of his own work.

The clients must be provided with the list of all prohibited services. Similarly the auditor should not provide those details which he/she is prohibited because it will ultimately endanger his independency. There are several other techniques which can be employed to strengthen the independence of the auditor.

Situation 2

Rotation of partner in audit:

It is a very effective method of saving independency of the auditors by rotating the major partners since it eliminates the chance of getting over familiar and also self interest which will increase the aspect of the objectivity without much losses . In addition to this the entire team will get to know about the institutional as well as the historical details of the company, which will ultimately help in improving the audit quality.

Wide level of transparency and effectiveness of audit committee:

The effective audit committee and transparency plays a vital role in safeguarding the independency of the auditor. The member of the audit team shall be highly qualified and independent and also very well resourced. In addition to this as a part of the audit quality the team of audit must also assess their objectivity should also make the outcome available for the public.

Oversight of independent auditor:

An auditor who is independent can easily regulate and can also contribute in improving the quality of the audit and the independency of the audit. There are significant features of the efficient oversight of the auditor which involves independency of the auditor from different kinds of political and audit profession.  They must be true and fair in all the confidential dates which they share with member of the company working under them.

Global consistent with independence of auditors:

The ethical standard like the auditing standards as well as the code of ethics can be used to strengthen the independency of the auditor. The complexity involved with auditing procedure is decreased by the internationally consistent of high quality independence and also ethical standards.

b) Risk involved with spare parts of inventory:

Risk management is the most essential part of management of the spare part inventory .But in many ways it is carried out in the effective way. It is understood by most of the associations that risk management factor and the necessary measures taken to prevent those risks in their companies .But another factor which needs to be taken into account is the reputational risks, commercial risks and also the risks related to safety and health even, in addition to this there are downtime risks which results in considerable losses in the financial sector. Also the risks associated with the implementation of the technologies employed in spare management .Other risks which are unrelated to the management of the spare parts is its purchasing risks which needs to be concerned (Karapetrovic and Willborn 2013). Other risks are the operational risk and also the strategic risks which  takes into consideration while planning an audit .

Situation 3

Strategic risk:

These are the risks which are not related to the choice of products whether it is right or wrong. The strategic risk management involves mainly the company manages and deals with the stock of spare parts of the inventory. There are basically two ways in which the auditors may choose to manage the spare parts of the inventory that is they may at one point of time make choose ad-hoc  ,meaning spending the items on purchase , not using any policies which are formal in nature ,also evolve the managers in giving their decisions on  major procedurals . In addition to this the organization also may choose to standardize the aspects of the spare part management, more or less in the similar manner as the financial management. The apt approach for the organization is reliable upon the financial investment involved in the inventories and the risk level in association with it . If a enterprise can carry out the extended downtime experience and the losses in association with it in order to manage the risks through the purchase of the large quantities and ad –hoc strategies, but in case the company cannot afford the downtime period and large inventory investment, then the management must take some other effective measures of spare parts management, the organization must also search for better strategy for spare part management in more and more appropriate method (Waldron 2016). This looking or other techniques and strategies to conserve or prevent the expected losses.

Operational risk:

The operational risks are the one which is not associated with the downtime of the audit operation. Rather this risk is more concerned with the fact that how the chosen approach is executed. Organization is involved in strategic management but fail most of the times to execute it in a very productive manner. For example the organization may implement a policy for the purpose of stocking and also for startegic management for standardization, however the policy is not adequate, or their daily management approach does not make use of the implemented policies. Organizations which do not manage the operational risks by confirming the suitable step are considered to be not taking their inventory management very seriously. Risk management is a smarter and practice method which the organization must take to improve the audit quality (O'Donnell et al. 2013). Risk management in simple words involves taking very suitable and appropriate techniques to carry out correctly.

Situation 4

The inherent risk is the risk that is associated or related to the strategic risk. Any error in the financial report writing in addition to the factor like control failure often results in these risks, in case when the nature of transaction is complex, the situation demands a high level of judgment for the purpose of financial projections. The amount account receivable and the inventory balance is also impacted on account of this (Elliott 2015). Certain transactions are often risks associated with it in form of the inherent risk. For an instance risks related to the inventory management depending upon the class of transaction it greatly affects the accounting balance.

Likewise there are risks which are related with the operation of the audit, these are called the detection risk. In this kind of risk there is a chance that the auditor will be able to budget a material misstatement in relation with the financial statement of the organization by using several substantive tests and analysis. In this kind of risk the auditors find out there are no such detectable errors and faults in the audit of the company. These risks become more obvious if the auditor does not perform the procedures by making of proper processes or procedures. It leaves a great effect on the accounting balance and also which is beyond the assessment of the accountant.  It affects the accounting balance on the basis of the transaction and also the amount of money involved in the transaction. Few accounts which are more prone to or subjected to these kinds risks are the purchase accounts, inventory account, revenue account; sales account (Kend et al. 2014).

We have come to know about the standards of auditing with the help of the auditors in the company, and they have also performed a number of procedures in relation to it . These issues are bit complex since it involves several threats which are a matte4r of concern. Financial reporting is the key to effective operation of the capital market. The basic principles in relation to auditor’s independence are very straight forward, but they may be implied to a number of situations. The clients are mainly involved to perform many other tasks as they are in a believer to think that nit is the most effective method to improve the quality of the audit (Grol et al. 2013). In case of the failure of a particular company the quality of the audit is very often questioned, but keeping in mind all the other factors we can reduce the threats imposed by the several risks associated with the independency of the auditor. It is often regarded that the auditors are involved in allowing or permitting the accounting elements which is improper and their independency can be hampered by the non audit fees which is payable to them by the clients . The auditors must not be engaged in any kind of activities which is not permitted by the company regulation and rules to share with the clients because; it will ultimately hamper their very own independence. As far as the appointments of the audit and their fees is known by the company being audited ,the auditor can be never be economically independent of the client with he/she is serving or not in the company (Christensen et al. 2013) . Consequently there are broader codes of conduct with is used to make both the parties function effectively and smoothly. Therefore other than imposing any kind constraints on the auditor working in the company on the types of money or income which they make it or generate from the concerned client, is better to set forth the ethics which they can employ in business which they conduct . Like it can be said, the income which the auditor makes by providing any service to his client ,the auditor must not generate or produce income more than a certain proportion of the firm’s overall practice income . In that way the dependence on the client cannot be integrated to level at which the decision which the auditor makes could be any way be influenced by the financial constraints .there are several threats which directly effects the independency of the auditor working for the company ,one of the mo0st significant threat which is known to us is the too much bonding or development of trust between the client and the auditor is also needed which  it comes to preserving the independency of the auditor because the ultimate job of  the auditor is to preserve the quality of the audit which he/she generates ,which should be thereby profitable to the company . However the responsibility of safeguarding the auditor’s independency does not simply rely on the shoulder of the auditor ore client but also ethically and according to the combined code on corporate governance requires that the members of the audit committee must should be representative as the stake holders.  It involves overseeing relationship between the auditors and they are involved in seeing that the nature of exchange in between the clients and auditors are also taken into account (Arens et al.2014). On the quality control their task is overviewed and also checked by the standards, thereby it needs considerable attention.

Reference:

Arens, A.A., Best, P., Shailer, G., Fiedler, B., Elder, R.J. and Beasley, M., 2014. Auditing and assurance services in Australia: an integrated approach. Pearson Education Australia.

Arens, A.A., Elder, R.J. and Beasley, M.S., 2014. and Assurance Services: An Integrated Approach.

Baird, J. ed., 2013. Quality audit and assurance for transnational higher education. Australian Universities Quality Agency.

Christensen, B.E., Glover, S.M. and Wood, D.A., 2013. Extreme estimation uncertainty in fair value estimates: Implications for audit assurance. Auditing: A Journal of Practice & Theory, 31(1), pp.127-146.

Elder, R.J., Beasley, M.S. and Arens, A.A., 2015. Auditing and Assurance services. Pearson Higher Ed.

Elliott, R.K., 2015. Assurance services and the audit heritage. Auditing, 17, p.1.

Epstein, M.J. and Geiger, M.A. 2014. Investor views of audit assurance: Recent evidence of the e. Journal of accountancy, 177(1), p.60.

Grol, R. and Wensing, M., 2015. Implementation of quality assurance and medical audit: general practitioners' perceived obstacles and requirements. Br J Gen Pract, 45(399), pp.548-552.

Karapetrovic, S. and Willborn, W., 2013. Quality assurance and effectiveness of audit systems. International Journal of Quality & Reliability Management, 17(6), pp.679-703.

Kend, M., Houghton, K.A. and Jubb, C., 2014. Competition issues in the market for audit and assurance services: are the concerns justified?. Australian Accounting Review, 4(24), pp.313-320.

Knechel, W.R. and Salterio, S.E., 2016. Auditing: assurance and risk. Routledge.

Kolk, A. and Perego, P., 2014. Determinants of the adoption of sustainability assurance statements: An international investigation. Business Strategy and the Environment, 19(3), pp.182-198.

O'Donnell, E., Arnold, V. and Sutton, S.G., 2013. An analysis of the group dynamics surrounding internal control assessment in information systems audit and assurance domains. Journal of Information Systems, 14(s-1), pp.97-116.

Waldron, M., 2016. The Future of Audit. CFA Institute Magazine, 27(3), pp.55-55.

William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and assurance services: A systematic approach. McGraw-Hill Education.

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2022). Threats To Independence Of Auditors And Risk Management: An Essay Analysis.. Retrieved from https://myassignmenthelp.com/free-samples/acfi3005-auditing-and-assurance/advocacy-services-file-C879D4.html.

"Threats To Independence Of Auditors And Risk Management: An Essay Analysis.." My Assignment Help, 2022, https://myassignmenthelp.com/free-samples/acfi3005-auditing-and-assurance/advocacy-services-file-C879D4.html.

My Assignment Help (2022) Threats To Independence Of Auditors And Risk Management: An Essay Analysis. [Online]. Available from: https://myassignmenthelp.com/free-samples/acfi3005-auditing-and-assurance/advocacy-services-file-C879D4.html
[Accessed 21 July 2024].

My Assignment Help. 'Threats To Independence Of Auditors And Risk Management: An Essay Analysis.' (My Assignment Help, 2022) <https://myassignmenthelp.com/free-samples/acfi3005-auditing-and-assurance/advocacy-services-file-C879D4.html> accessed 21 July 2024.

My Assignment Help. Threats To Independence Of Auditors And Risk Management: An Essay Analysis. [Internet]. My Assignment Help. 2022 [cited 21 July 2024]. Available from: https://myassignmenthelp.com/free-samples/acfi3005-auditing-and-assurance/advocacy-services-file-C879D4.html.

Get instant help from 5000+ experts for
question

Writing: Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing: Proofread your work by experts and improve grade at Lowest cost

loader
250 words
Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

Attach file

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

Plagiarism checker
Verify originality of an essay
essay
Generate unique essays in a jiffy
Plagiarism checker
Cite sources with ease
support
Whatsapp
callback
sales
sales chat
Whatsapp
callback
sales chat
close