Auditing Assurance And Risk Taylor Francis -Myassignmenthelp.Com

Question: Discuss About The Auditing Assurance And Risk Taylor Francis? Answer Introducation Accounts- This refers to the whole of the amount, which is expected to be received by the company pertaining to particular goods and services delivery by the same. The accounts receivable by a company can be calculated with the help of analysis of the credit sales with that of the average receivable time. Therefore, the account associated to that of the receivable account is the credit sales account. Evaluation- Based on the concerned cast study it can be stated that the trade receivable official takes all the necessary actions regarding that of the receivables. For example, if a consumer returns a medical instrument, then post-documentation of the reason of returning the instrument and completion of the documentation, the credit notes that are specifically drawn in the customers favor, is raised mandatorily by trade receivable clerk. Moreover, the posting in the journals are then sent to the person preparing the banks deposit slip, along with that of the receipts. Therefore, the risk, in this case can be considered to be high (Vasarhelyi et al., 2012). Auditing risk- The trade receivable official mandatorily takes all the necessary actions which are related to the same. Therefore, in this scenario, there remains a risk in the matter that the official may probably misappropriate the receivable or lesser receivable amount may also be recorded by mistake. Risk reducing steps in auditing- In order to reduce the risks in relation to the accounts receivable of that of GSPA, various actions can be sorted out which are connected to receivables and these actions can be allocated appropriately among relevant staff members. Investment: Account- The investment, in essence, can be converted to that of cash within a three months time period to a period of nearly twelve months. This is registered under that os the current assets of a company and this is considered as cash or cash equivalent. The linked accounts to this are known to be investment accounts. Evaluation- Investments are generally vulnerable to the diverse accounting systems and the treatment of the investments might also differ. Therefore, the risk level in relation to that of the current investment of a company can be considered to be at medium level (Beasley, 2015). Auditing risk- The inherent risk of assessment, which is possibly related to that of the current investment, fundamentally includes the investments, which are done without considering the different factors of risk and returns. Risk diminishing steps in auditing- To reduce the concerned risk, the return which is earned from the investment has to be regularly monitored. The previous trends in growth in investments should also be kept in observation and proper analysis has to be done before the firm undertakes any investment decisions (Vasarhelyi et al., 2012). Property assets/Property resources: Accounts- The accounts that are associated to the property assets are mandatorily those of the fixed assets and also that of the amount of depreciation. Evaluation- In this case, if there is no proper registration of the property assets or if there is no proper mentioning of the depreciation occurring, then there can be large distortions in the assertions of the financial accounts. Therefore, the risks, which are associated with that of the property resources, can be considered to be high. Auditing risk- In this case, the assessor may not differentiate the resources, which were used for over 180 days and for those which were used for less than 180 days in that specific year. This can happen if the resources are not properly recorded. Risk reducing steps in auditing- It is needed to properly assess the ledger for the particular asset in order o check the sales and purchase of any kind of property assets. In addition to that, the deleting as well as the adding up along with that of the impairing also should be correctly analyzed and monitored (Hayes, Wallage Gortemaker, 2014). Intangible Assets: Accounts- In general, patent, goodwill or copyright are the specific accounts that are basically related to that of the intangible assets. Evaluation- The analysis of the intangible assets has to be appropriately done to examine the mode of recognitions and the value of those assets. The economic life of definite or indefinite period of that of the resources has also be checked. In this context, there is high risk in relation to this account. Auditing risk- There is no physical existence of the intangible assets in general and therefore, the ascertainment process of the fair value of these types of assets is considered to be not so easy. There is also presence of variance between the acquirement cost and the fair value of the intangible assets of the firm in addition to this. Risk reducing steps in auditing- The fair value of that of the different assets of this type can be ascertained with the help of the professionals. The control of the fair value determination of the resources can also help in risk reduction in this context (William Jr, Glover Prawitt, 2016). Capitalization of the research and development of the firm: Accounts- The research activities of the GPSA were not found to be that much flourishing. Therefore, the expends can get debited to loss account as well as to the profit account. However, the development disbursement can be capitalized as there was unbeatable development in this case. Evaluation- There is a very thin difference between the successful and not successful research and development. The disbursements on these activities involving bigger amounts, non-appropriate recognitions of these numbers can lead to creation of high levels of risk. Risk in auditing- The risk which is inherently involved in the expenditures in the field of research and development is that of categorization of the research activities in successful and failed attempts. In addition, the amounts that are involved in this actions are not so easily enumerated. Risk reducing steps in auditing- The ledger which is specifically linked to that of the expenditure should be monitored and examined correctly. In addition to this, before establishing the product as a successful or a failed one, a robust market research has to be conducted. Evaluation of assessment ratio of business risk: Returns on equity-As per the analysis of the financial pronouncements asserts, the returns on that of the equity has a falling trend and the same has experienced a fall from 22.7% in 2015, to that of a striking 7.19% by 2017. This in turn shows that the profit generating capacities of the firm, out of its investments are lowering down with time. Therefore, there is risk related to the profitability on the shareholders equity. Analysis of returns on the total assets- The returns earned by the company on the total assets is also observed to be decreasing. This has fallen to 4.86% in 2017, from that of 15.52% prevailing during the year 2015. This contributes to the assertion that the firms income pre-tax as well as the interests and the capacity of generation of the gains of the firm has been decreasing. Therefore, risks can be seen on the corporations profitability scenarios. Net profit margin analysis- The net profit of that of the concerned company shows a trend which is declining as the same decreased to 1.90 times from that of 3.51 times (2016) and 4.10 times (2015). Therefore, it can be concluded that there are high risks additionally associated to the savings as the concerned company is unable to generate adequate savings from interest earnings creations. Analysis of accounts receivables days- The day in that of the accounts receivable has increased from 53.24 days (2015) to that of 83.07 (2017). This indicates towards the presence of bad debt risk from the receivables mandatorily. Current ratio analysis- The current ratio of the concerned company is showing an upward trend with the ratio being 1.80 during 2016. This mandatorily indicates that the risk of non-utilization of the working capital in an effective manner by the management of the concerned company. Debt to equity ratio analysis- A debt to equity ratio, which is high and greater than one, indicates that the concerned company is highly leveraged and the company through debt financing has gathered more funds than that of the equities. This has the potential to increase the level of risk, which is associated to the payments that have to be made to the financers and creditors as a high debt amount implies greater interest amount (Knechel Salterio, 2016). Internal control system: Bonus Disbursement- The bonus which the management official receives can be measured by the shareholders of the concerned company. However, if there are variances in the case of the prepared budget (which is monthly prepared), the accountable person can be asked for the reasons behind the concerned differences Password protection- There were strict protection mechanisms by usage of passwords for the application programs which helped in restriction of free admittance. The IT system implementation on part of the company had successful implications for the concerned firm (Jia, 2016). Permitting discount- The permitted discount to the customers who are valuable, is done specifically by the director of sales before up gradation of the permissible discounts. Trade receivables- the receivables from that of the trade are merged to the debtors control during each months closing. Aging evaluation- At the end of a month, the aging evaluations for the receivables are shown after accounting the invoices which are processed in the concerned system. The aged evaluation is obviously assessed further by the controller of the finance. The receivables over 890 days are mandatorily kept in separation and the clerk with the responsibility for trade receivables is asked for the reasons of delay in the payments. Doubtful Debt- The preparation process of the strategy to follow up the debtors who are doubtful has the balance above the limit which is prescribed. However, the further shipment of products to particular customers is withheld mandatorily in the cases where the minimum amount which is prescribed is not accepted (Titera, 2013). Mitigated Risk: Admittance to database- Though there is implementation of strict password in the admittance control on the particular programs which is related to the functions of the IT, the same for the database does not have protection of password. This poses the risk of exposing the system to unlawful access and activities (Sookhak et al., 2017). Notes on Physical Delivery- the shipping tiles generate manual notes which has risen with time. This in turn exposes the system to unintentional as well as intentional mistakes which are related to the delivery amount. Single person involvement for different activities- The commercial trade receivable related activities of the firm can be done by the firms clerk. For example, the customers return on medical equipments, earned after the ascertaining of the reason of document completion and the clerk can form the credit notes. The posting of the journals with receipts from the debtors are sent to the accountable official for the banks deposit slip. If the same individual takes the different actions then it can lead to the risk of frauds, faults and misappropriation, which can be intentional or unintentional (Knechel Salterio, 2016). Text of control: This process of audit can be utilized to examine the internal procedures efficiency, which the company uses for detecting and prevention of wrong statements of material. The assessor, based on the test results can take decisions regarding the level of control of the internal system. The test can be categorized as follows: Inspection- The related documents can be assessed in this system using authorization, stamps and also signatures of the examination of the controls. Observation- The process that is in action and the system which is linked internally can be assessed. Effective controls are as follows: Bonus disbursements- For this tactic of observation of control can be undertaken Password protection- For this inspection tactic can be used Discount allowance- Re-performance tactic can be implemented Trade receivables- The same tactic can be used Analysis of Aging- Observation tactic and inspection tactic can be utilized Doubtful Debt- For this Re-performance tactic can be used Internal control weaknesses (Specifically in sales and trade receivables): The bonuses are disbursed by the firm to the officials in the management based on the volume of sales. But this can also misleadingly increase. The declaration of the manual notes for sale can be faulty, fraudulent or there can be wrong assessment The journals of sales are presented monthly, which creates avenues of manual documents misplacements. Trade Receivables: The official accountable for this is also accountable for the business receivables which are related to the activities which intentionally or unintentionally can lead to fraudulent activities or material misstatement The trade receivables are also merged to the banks receipts at the month ending, which is a big time for the settlements of items like that of the receivables (William Jr, Glover Prawitt, 2016) References Beasley, M. S. (2015).Auditing cases: An interactive learning approach. Prentice Hall. Hayes, R., Wallage, P., Gortemaker, H. (2014).Principles of auditing: an introduction to international standards on auditing. Pearson Higher Ed. Jia, X. (2016).Auditing the auditor: secure delegation of auditing operation over cloud storage. IACR Cryptology ePrint Archive, https://eprint. iacr. org/2011/304. pdf. Accessed 10 Aug. Knechel, W. R., Salterio, S. E. (2016).Auditing: Assurance and risk. Taylor Francis. Sookhak, M., Gani, A., Khan, M. K., Buyya, R. (2017). Dynamic remote data auditing for securing big data storage in cloud computing.Information Sciences,380, 101-116. Titera, W. R. (2013). Updating audit standardEnabling audit data analysis.Journal of Information Systems,27(1), 325-331. Vasarhelyi, M. A., Alles, M., Kuenkaikaew, S., Littley, J. (2012). The acceptance and adoption of continuous auditing by internal auditors: A micro analysis.International Journal of Accounting Information Systems,13(3), 267-281. William Jr, M., Glover, S., Prawitt, D. (2016).Auditing and assurance services: A systematic approach. McGraw-Hill Education.