Audit Completion, and Reporting Essay Example

AUDITING 5

Audit Completion and Audit Reporting

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16/05/ 2011

Introduction

Upon the onset of an audit, the auditor considers what to integrate in the Audit planning for the purposes of conducting the audit properly and efficiently. Audit completion and audit reporting are part some of the procedures that the auditor integrates in the audit planning. The auditor should assess the internal control system of the client which is critical part of both the internal and external audit. Upon completion of an audit, the auditor is required to issue an audit report where he expresses his opinion as to whether the financial statements present a true and fair view in material aspects the company’s financial position.

Summary of the Article

The article outlines issues regarding external auditors’ reliance on work of internal auditors. External auditors may rely on internal audit as a section of the client’s internal control system, tests done on internal controls, accounts and transactions and provide them with assistance in performing audit procedures. The external auditor should coordinate with the internal audit through scheduling meetings and audit work, review of internal audit and access to internal audit work papers. Consequently, reliance on internal audit work impact on audit fees by substantially lowering the fee to external auditors.

Comparison of the article and Australian Auditing Standards

ASA 315 requires that: Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement. This can be achieved through gathering adequate evidence to conduct a comprehensive internal audit. Sources of evidence include: management and from other employees, analytical procedures and through observation and inspection. Based on the evidence gathered the auditor should conduct a risk assessment. Risk assessment requires finding out on loopholes for inherent, control or detection risks which are the major audit risks. These risks are usually associated with the internal control system and an internal audit should help an external auditor in identifying this risks. The auditor should obtain an understanding of the internal auditor and the competency of the internal auditor. Accounting considerations are done in relation to the accounting procedures used by the client. These include: accounting methods, disclosure requirements and accounting estimates and assumptions.

In addition, the ASA 520: Analytical Procedures outlines procedures involved during designing analytical procedures. It provides for designing and performing analytical procedures when considering the financial report. The International Standard on Engagements (ISAE) 3400 provides internal and external auditors with guidance on engagement to examine and report on prospective financial information. Through this, an auditor should acquire relevant and ample audit evidence in relation to management information and financial statements preparation based on accounting policies, assumptions and disclosure measures. The auditor should evaluate the findings with the internal audit. Such findings are also used by an auditor as evidence in giving a report on the financial information.

According to the Australian Auditing Standards and the article, the standards are based on other guidelines provided by the International Accounting Standards (IAS) and the Generally Accepted Accounting Principles (GAAP). These guidelines provide that, upon completion of the audit process, the auditor issues a report giving his opinion about the client’s financial statements and position. Consequently, the auditor should consider the kind of policies or standards the client has chosen in financial statements presentation. The professional code of ethics applies explaining the required conduct of the auditor during the audit process.

The auditor should consider matters related to his client as confidential. Further, ASA requires an auditor to be independent and free of any interests on the client’s or its stakeholders. In achieving the goals of an audit, the auditor is involved an audit procedure which contains: data selection, reliability validation and relevance confirmation. The type of audit procedures depends on the scope, nature and time of the audit and the extent of the internal controls of the client.

References

Schneider, A 2009, The Nature, Impact and Facilitation of External Auditor on Internal

Auditing, Academy of Accounting and Financial Studies Journal,

The DreamCatchers Group.