Describe about the Auditing & Assurance for Pertinent Accounting Theory.
The current segment elucidates different pertinent accounting theory, auditing as well as the assurance services with special orientation to the functions of the corporation BSF Limited. The current section aims to present a detailed overview of different operations of the corporations BSF Limited; an Australia based Bioresearch Corporation listed in the stock exchange of Australia. This specific corporation undertakes diverse research work for exploitation of the bacteria for the production of the fish. Nevertheless, the organization BSF Limited also embarks on different research functionalities that surrounds around diverse bioresearch for the invention of groundbreaking sustainable aqua cultural feeds. In addition to this, the present study also unearths different challenges that the company BSF Limited has encountered while carrying out research on different plant based feed. The research on the plan based feed are aimed at resolving different problems concerning fish based feed together with the cost borne by the corporation owing to unsuccessful projects. Again, the ineffective research also drew disapprovals from different environmentalists and faced the accusation of diversion of the food crops of superior value into lavish fish. However, this led to the most recent research on different bacteria based investigation for the production of the feeds that finally met with immense success. Furthermore, the present study consequently elucidates the sequential steps or else the necessary actions prior to the consideration regarding the auditing and implementation of the same into different functionalities of the corporation BSF Ltd. Subsequently; the present study critically assesses the risk associated to the process of audit along with the implementation of diverse utilities. Additionally, the up to date report explicates in detail the whole audit program for the business and illustrates the overall accounting treatment of different transaction related to the research as well as development. Apart from this, the current report also elucidates in detail the applicable accounting treatment of the transactions associated to the government grant received by the business concern BSF Limited from the particular association “Commonwealth Scientific and Industrial Research Organisation (Federal Government of Australia)”. As a result, the report handles the overall process of analysis of the investigation as being publicly in addition to environmentally pleasant. Ultimately, the current task undertakes investigation of the sensibleness of the declaration as regards the valuation of the patent as an exclusive control over the superior technology utilized by the research association.
Steps to be measured before recognition of audit and implementation in the BSF Ltd
As rightly indicated by Chambers and Odar (2015), the audit procedure inevitably needs to abide by different auditing standards conditioned under the “Section 336 of the Corporations Act 2001”. Therefore, the procedure of auditing calls for the conformity with diverse auditing standards specifically, “ASA 100 (Preamble to AUASB Standards)”, “ASA 101 (Preamble To Australian Auditing Standards)”, “ASA 102
(Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements)” and many others (Auasb.gov.au 2016). Again, the course of action involved in the process of assessment of the audit includes inspection of the potential clients of different Accounting Corporation, associated actions of the business in conjunction with the business owners. However, the chronological course of action of the audit also encompasses appraisal of different disagreeable risk related to the client that consists of examination of largely consistency of the business (Christensen et al. 2014). Nevertheless, the modus operandi of the audit pursue the due diligence process and substantiate the entire ethical threats related the privacy otherwise the contradictory benefits. Besides this, the management of the corporation BSF Ltd needs to possess sufficient capability for implementing the business action, since this business concern is a bioresearch business concern. On the other hand, varied state of affairs for audit supports the practice of determination of diverse appropriate structure for the financial over and above account of the business concern (Chychyla et al. 2015). Moreover, the procedure of inspection also consists of the assessment of the authenticity of the existing information relating to the client together with the compliance with various accounting standards. Apart from this, the assessor also has the need to inspect the ethical obligations and preserve the quality of the overall activity (Cohen et al. 2013). Besides this, the administration of the corporation also has the need to be consonant with each other with regard to the process of preparation as well as presentation of diverse financial statement. As a result, the assessors require assurance regarding the financial declarations of the corporation that needs to be without any kind of material fault that might occur due to diverse deceitful activities if not unintended faults. As rightly put forward by Duncan and Whittington (2014), the evaluator can prohibit the commitment with respective client corporation provided the administration put into practices different constraints on varied audit actions. Besides this, the evaluators can turn down definite proposals of audit whilst the financial evidences are not organized in accordance with the acceptable directives. Nonetheless, the evaluators take for granted substantiation from the earlier auditor concerning the implementation of different legal and simultaneously the procedure of realization (Hegazy and Farghaly 2016). Over and above this, the auditors can also assure the option of the projected evaluator consistent with diverse statutory requirements. Eventually, the assessors have the need to propose the mandatory letter of engagement with the specific client.
Risk estimation of the audit of BSF Ltd
As rightly indicated by Munteanu and Berechet (2014), the method of assessment of the overall audit risk have the need to abide by different accounting standards stipulated under the Australian Auditing Standards. This accounting notion or else the standards establish diverse obligations and all together offer the procedure of operation of the principles. As such, the evaluators can follow the regulations for example the “AUASB ED 7/08 (Proposed Auditing Standard ASA 315)” that aids the procedure of recognition and at the same time evaluation of the materiality risk (Auasb.gov.au 2016). Besides this, several other principles are put forward as a directive for executing the overall audit. Nonetheless, the central purpose of the appraiser is to recognize and to lessen the entire risk to an extensively low level simultaneously (Needles et al. 2013). Moreover, the evaluation of the current case study divulges the matter that the inherent risk associated to the operations of the corporation BSF Ltd is roughly around 90%. Again, conversely the control risk is currently at 5%. However, as per the case study, the risk of detection is said to be around 80%. In addition to this, the risk of audit as per the current case can be analyzed by deployment of the “Audit Risk Model”. As per the “Audit Risk Model”, the auditor can take into account both control in addition to inherent risk (Porter et al. 2014). Consequently, the audit risk can as a result, enumerated by execution of the rule that states that the audit risk is essentially the multiplication of the recorded inherent risk, detection risk in addition to risk associated to control. As a result, the formula for computation of the audit risk can be essentially expressed as “(Audit Risk = Inherent Risk*Detection Risk*Control Risk)”. As stated in the case study, the risk associated to audit is as a result equal to “0.36=0.8*0.9*0.05”. Therefore, the audit risk is computed to be equal to 36%. The audit risk needs to be within 10% and this replicates the matter that the auditors need to implement the role of audit for the corporation BSF Limited.
Audit program for the BSF Ltd
The assessors can formulate audit program to ensure that a particular business functions properly. An appropriate audit program can also ensure proper control of the business and evaluation of the same for improvement (Reimers 2014). The assessors can acquire enough information and mandatory validation by undertaking an effective audit programs that entails a list of varied tasks related to the assessment as well as audit. As such, the audit procedures are mainly created with the objective of the improvement of methods of accounting and diverse accounting strategies (Reimers 2014). However, the process of audit involves different investigations and process of validation in addition to various processes of control. In a bid to validate different audit opinions, the auditors need to conform with different “performance obligations” stipulated under the Auditing Standards. Based on the directives of the audit the auditor needs to develop the requisite working papers. The auditor also needs to register different facets that can assist the entire mechanism of substantiation of the assessment. The auditors also have the need to prepare and present the working papers and record different functionalities in both the existing as well as the permanent audit register (Warren et al. 2013). As suggested by Weil et al. (2013), the permanent audit paper essentially comprises of different elements that can unceasingly influence the overall presentation of the “Document of the Copy of Memorandum of Association” of the organization BSF Limited. The permanent audit paper necessarily includes legal articles, vital minutes along with other important documents of contracts of the corporation BSF Limited. Besides this, the audit papers of the corporation BSF limited also needs to contain certain vital information as regards the internal control mechanism as well as the procedure of accounting followed by the corporation BSF Limited. Furthermore, the important audit documents of the firm BSF Limited also needs to include information concerning the overall structure and framework of the company, vital suggestions offered by different legal advisor and also bankers and necessary information regarding the accounts of balance, demonstration of the procedures of preparation, presentation as well as evaluation of financial accounts of the company BSF Limited (Chychyla et al. 2015). The auditor also needs to present principled accounting procedures, financial statements of superior quality and different performance indicators along with significant financial ratio that can help in recognition of the actual business trends.
Set of the journal entries for diverse business transactions for research and development
Journal entries for the research and development (R&D) expenses are the following:
Journal entries for recording specific transactions during the year 2013
“Dr. R&D exp 260,000,000
Cr. Cash or A/P 260,000,000
Dr. Cash or A/P $500,000,000
Cr. R&D exp. $100,000,000
Cr. Unearned grant revenue $400,000,000”
Journal entries for recording specific transactions during the year 2014
“Dr. R&D exp. 100,000,000
Cr. Cash or A/p $ 100,000,000
Dr. Unearned grant revenue 100,000,000
Cr. Research grant revenue 100,000,000”
Journal entries for recording specific transactions during the year 2015
“R&D expenses $ 100,000,000
Cr. Cash or A/p $100,000,000
Dr. Unearned grant revenue 100,000,000
Cr. Research grant revenue 100,000,000”
Journal entries for recording specific transactions during the year 2016
“R&D expenses $ 60,000,000
Cr. Cash or A/p $60,000,000
Dr. Unearned grant revenue 60,000,000
Cr. Research grant revenue 60,000,000”
Accounting treatment of the grant
Consistent with the accounting guidelines conditioned under the accounting standard “AASB 120”, the conditions predetermined under the standard “IAS 20”, the accounting treatment for establishment of the government grants can be undertaken appropriately (Graham 2015). The regulations conditioned under pertinent accounting principles mentions that the government grants can be recorded as profit otherwise loss in an organized system all through the process by which the business concern recognizes and records the specific disbursements as mostly related costs. Besides this, the entire procedure involved in the recognition and at the same time documentation of specific government grants received by organizations close to profit or else loss is not as per different suppositions under the accrual accounting as shown under the specific accounting criterion of “AASB 101 Presentation of Financial Statements” (Graham 2015). Nonetheless, the means of recording government grants does not appropriately convince the entire practice of accounting. However, the government grant can be considered as a “receivable” and can be regarded as specific type of reimbursement. This in turn can provide the immediate financial defence to the complete business division with no plausible associated costs documented as profit or else loss during the particular course of time (Chambers and Odar 2015).
Socially responsible as well as environmentally friendly account of the research
The process of research and development undertaken by the corporation BSF Ltd needs to be socially responsible and all at once environmental friendly for maintenance of sustainability of operations. As per the case study on BSF Limited, the research work carried out on development of plant based feed by the corporation BSF Limited encountered criticisms from different quarters especially from environmentalists that suspected that the procedure of diversion of different food crops that are of human quality into the spendthrift fish can be compared to the procedure of diversion of different low valued fish into production. For that reason, this particular way of business can adversely affect the underprivileged people and sequentially shoot up the risk linked to malnutrition. As a result, there is a serious need for the development of a sociable and all at once environment friendly process of undertaking research. As such, this business practice also divulges the matter that the company BSF Limited needs to abide by diverse directives and regulations that are in essence specified standards. This can turn can help in the process of social and environmental assessments in the course of running business operations on a daily basis (Chambers and Odar 2015). Yet again, the corporation BSF Limited also has an obligation as regards the appropriate functioning of the customary system of tracking of varied environmental challenges in the business entity on the whole. Apart from this, there is a pressing need on the part of the management of the company BSF Limited to conform to a variety of strict guidelines concerning the functioning policies that in turn can even out the entire procedure of deliverance of the business function (Duncan and Whittington 2014). Furthermore, the human resource section of the corporation BSF Limited also needs to maintain just plus clear view that can evade biases to a definite party and uphold social liability (Hegazy and Farghaly 2016).
Evaluation of the rationality of the exclusive control over bacteria-based feeds technology
The implementation of appropriate control mechanism of fundamentally an intangible asset can facilitate the initiation of imminent economic growth and development (Chambers and Odar 2015). However, the potential of a specific business to manage the impending economic reimbursement from a particular intangible asset can take place out of a variety of legal alliances that can well be regarded as mandatory under provisions of applicable law. Conversely, company’s control over particular intangible assets can sustain the overall route of development of general technical features (Needles et al. 2013). However, this can also assist the course of acquirement benefits in the upcoming stage (Needles et al. 2013).As per the provisions under the accounting standard “AASB138 paragraph 13 -16”, BSF Limited need to be acclimatized to and maintain certain level of proficiency and capability of the employees, shield the patents that consecutively can create economic benefits in the approaching period (Australian Accounting Standards Board AASB - Home 2016). Nonetheless, on account of deficiency of different lawful planning, the company BSF Limited can plan to shield the upcoming rewards through different substitute acts or else assessments.
Auasb.gov.au. 2016. Auditing and Assurance Standards Board AUASB - Home. [online] Available at: https://www.auasb.gov.au [Accessed 22 Sep. 2016].
Australian Accounting Standards Board AASB - Home. 2016. Aasb.gov.au. Retrieved 14 September 2016, from https://www.aasb.gov.au
Chambers, A. D., and Odar, M. 2015. A new vision for internal audit.Managerial Auditing Journal, 301, 34-55.
Christensen, T.E., Baker, R.E. and Cottrell, D.M., 2014. Advanced Financial Accounting. The McGraw-Hill Companies, Inc.
Chychyla, R., Leone, A.J. and Minutti-Meza, M., 2015. Financial Reporting Complexity and Accounting Expertise.
Chychyla, R., Leone, A.J. and Minutti-Meza, M., 2015. Financial Reporting Complexity and Accounting Expertise.
Cohen, J.R., Krishnamoorthy, G., Peytcheva, M. and Wright, A.M., 2013. How does the strength of the financial regulatory regime influence auditors' judgments to constrain aggressive reporting in a principles-based versus rules-based accounting environment?. Accounting Horizons, 273, pp.579-601.
Duncan, B., and Whittington, M. 2014, September. Compliance with standards, assurance and audit: does this equal security?. In Proceedings of the 7th International Conference on Security of Information and Networks p. 77. ACM.
Graham, L. 2015. Internal Control Audit and Compliance: Documentation and Testing Under the New COSO Framework. John Wiley & Sons.
Hegazy, M. A., and Farghaly, M. 2016, August. Internal audit practices and standards: external and internal auditors' perceptions on Compliance in an Emerging Economy. In American Accounting Association Annual Meeting.
Munteanu, V. and Berechet, M., 2014. Paradigms of the Concepts and Principles Substantiating the Elaboration and Presentation of the Financial Reporting Situations. International Journal of Academic Research in Accounting, Finance and Management Sciences, 44, pp.72-78.
Needles, B.E., Powers, M. and Crosson, S.V., 2013. Principles of accounting. Cengage Learning.
Porter, B., Simon, J. and Hatherly, D., 2014. Principles of external auditing. John Wiley & Sons.
Reimers, J.L., 2014. Financial Accounting: Business Process Approach. Pearson Higher Ed.
Warren, C.S., Reeve, J.M. and Duchac, J., 2013. Financial & managerial accounting. Cengage Learning.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.