The paper "Sufficient and Appropriate Audit Evidence" is a great example of an assignment on finance and accounting. Ethics in auditing distinguish the principles and expectations governing the auditor’ s managerial behavior in auditing. Auditing principles transmit that the auditors are mandated to assume and sustain the cord of moral code of conduct as it provides significant study over auditor’ s sovereignty, self-directive, and circumstance of disagreement on personal interest (Stephen William Lipscomb, 2009). The moral code of conduct by auditors guarantee that the least necessities for demeanor and character prospects are congregating in auditing procedures in the perception of the detailed auditing behavior.
Auditors’ set of laws for moral values ascertain a foundation of behavioral responsibility and ethical accountability that auditors ought to accept to boost the professionalism and audit presentation during the period of auditing. John working for 20 years in the highest-ranking managerial position does not warrant his right to influence the executives of the club. John and the audit associate being an affiliate of the equivalent golf club desolate the auditor’ s moral obligation (Iain Gray, 2007). Ethics encourages well-intended auditing moral traditions where auditors self-sufficient, honesty, and purpose assurance activities are practical to advance unrestricted organization efficiency and competence advance an organization’ s operations.
This is administered under Auditing ethical standards (APB) paragraph 17 where it integrates the moral threat significant of influence due to the position in the company. Club innovations services issued to BBL Company which is perceived to have attention to John is morally unsuitable because BBL Company elevated quote was graded high by the executives. Auditing practice Board design principled performance necessary contributes towards managerial objective moral code of conduct guarantee achievement of managerial purpose by improving a methodical, strictly controlled approach that appraises and progress control of threat management effectiveness, and governance development (Leonard W, 2012).
BBL Truck saw over the John and overhaul of John’ s house describe that John's convincement of the board to assign BBL Corporation was under the significance of benefits. Though the Auditors are supposed to sketch a broad statement representing the danger connected to the act of assigning the club repair to the BBL Corporation. The superior price of the overhaul as evaluated to other repair companies implies dishonesty of the club’ s cash consequently subjecting the company to advanced danger The deliberation presented by BBL corporation to John of repairing his residence portrays the unsuitability of the club’ s finances. The audit company is indebted to examine the moral guidelines explained by the ethic principle in executing their sovereignty, consulting activity, and intention declaration to guarantee that the managerial inducements are attained (Moeller, 2008).
The audit firm must make possible the directorial achievement of its objectives by appraising on the effectiveness of the business resources i. e.
in assessing contracting of corporation actions, Thoughtful methodical regulation must be examined by the audit firm to evaluate the probable successful replica in minimizing the threat organization and make possible the control in the club. The audit associate shall establish guiding principles which are conversed, recognized, and suitable in guaranteeing that every audit appointment, business, the audit firm, and the third person should act with truthfulness, independence, and self-rule (Stephen William Lipscomb, 2009). The association between the audit junior and John and also John's situation of contracting restricts the sovereignty, honesty, and independence as a result affecting the club’ s purpose.
A principled audit associate also has a challenging duty for motivating a traditions through which the audit firm advances the moral concerns as per the Ethical safeguards (Richard Cascarino, 2007). Subsection 22 of ethics primacy mandates the auditor to assume his responsibility in the agreement of Compliance of Risk Management to guarantee that the detachment, honesty, and sovereignty responsibilities are implemented at all times during the audit period. This therefore imp[lies that, as an audit practitioner, one ought to be independent and seen to be independent since the auditing standard demands that the audited books of account must be free from material misstatement and that an auditor should have obtained his audit evidence free from undue influence. Question two Case I Sufficient and appropriate audit evidence The phrase sufficiency is used when explaining the magnitude of audit substantiation, that is, the sum quantity of substantiation exposed ought to be sufficient that it can be employed and considered by the auditor to have characterized the company’ s reasonable examination.
Appropriateness On the other hand is an appraisal of the audit substantiation excellence.
ASA 500 depicts the adequacy and correctness of the audit substantiation obtained to articulate an estimation on financial synopsis (Iain Gray, 2007). Basing on the sunshine circumstances, I consider that the audit junior has not attained adequate suitable audit substantiation to be relied upon in articulating a judgment on the company’ s position on financial affairs. Making use of balances at the end fiscal year is relevant in ascertaining the corporation, well-organized in meeting their responsibility. $ 200,000 dollars put aside as materiality range describes the dissimilarity that an auditor can found in the company’ s books of account but summarizes that the financial statement signifies a true and fair view of the company’ s state of affairs.
The auditors ought to incorporate the disclaimer of opinion to condense its legal responsibility in the materiality deference (Richard Cascarino, 2007). The difference in 2012 and 2011 borrowings replicate a material entry. Nevertheless the audit subordinate must perform an audit trail in the financial deal to guarantee that substantiation on the company’ s borrowing is got hold of. An assortment of the major borrowing as a taster of the sunshine borrowing is deemed not the accurate model to be used in making estimation on the borrowings.
The audit subordinate is supposed to enlarge the magnitude of audit substantiation. since the appraisal risk of materiality for Sunshine ltd is significantly elevated. Audit procedures to congregate sufficient suitable audit substantiation Cut-off test The cut-off test is the progression of guaranteeing that the financial contract is in the right place in the equivalent existing financial year. The auditor should ensure that borrowing transaction belong to the financial year to which it was earned. B) Substantive testing This is an audit measure intended to make certain that the entirety and correctness of the financial statements are upheld in the company (Moeller, 2008).
This practice engages a detailed appraisal of the financial dealings to guarantee their entirety and accurateness. c) In-depth auditing Audit in depth is a methodical process where an auditor inspects each document through the business time (Puttick Sandy van Esch, 2008). Audit subordinates must acquire all the documents with consideration to the borrowing and perform an audit trail within the financial years. D) Substantive testing Substantive testing is an audit procedure intended to guarantee the entirety and correctness of the financial statements (Moeller, 2008).
These processes engage in-depth appraisal of the financial dealings to guarantee their wholeness and truthfulness. Case II Stocktaking progression is relevant for the adequacy and correctness of audit substantiation. The audit subordinate is supposed to be present at the stocktake at Sunshine ltd to acquire first-hand audit substantiation because placing reliance on the manager's records as proof of audit substantiation will despair with suitability and adequacy of the confirmation (Stephen William Lipscomb, 2009).
The audit subordinate merely placed reliance on the information acknowledged by the store administrator at Sunshine ltd. Audit procedures to collect adequate appropriate audit substantiation A). Questionnaires An auditor will use the questionnaire to assess the adequacy of the internal control system put in place and to ascertain whether they are actually practiced in-store department. This is deemed as a vital tool in which a practitioner would employ to get first-Hand information on the relevance of the internal control and consequently whether he will perform an audit trail of goods in-store or simply perform audit sampling (Stephen William Lipscomb, 2009).
This is due to the fact, in minimizing auditor’ s liability, substantiative audit evidence needs to be obtained and thus an auditor must perform an audit on a test basis to obtain relevant and sufficient audit evidence in which to base his an opinion on the company statement of financial performance. B). having a prior visit to the warehouse In order to fully place reliance on the data collected from stores, an audit needs to perform a visit prior to the exact day of the stock take.
This will help an audit in ascertaining the effectiveness of inter control system instituted in the store as well as observing whether it is performing as expected (Leonard W, 2012). The auditor will thus have a brief understanding of the manner in which stocks are issued and documented in the store. This will make an auditor conclude whether an in-depth audit test will be done or just having a sample on the goods to be tested for adequacy. C) Performing the test of Control The audit is thought to inspect the control system instituted in the business to guarantee that they are pretentious to inhibit the material misstatement in the company’ s inventory-taking progression (Leonard W, 2012).
Control makes sure that organization inducement is recognized and complied with consequently ensuring that dealings reflected are free from the risk of material misstatement. This is due to the fact, misstatement of audit evidence would lead to an un-reliance on audit reports since the report will be giving a picture of what the company is not. This will lead to the incurrence of loss by the shareholders and auditors will be sued for negligence B) Watching the stocktake process The auditor must in-person watch the progression and method of categorizing the inventory in the shelves (Iain Gray, 2007).
This will allow the auditor to acquire first-hand audit substantiation from the close watch. Thus the information gathered will be fully relied upon in forming an opinion as to the company state of internal control.
Iain Gray, S.M., 2007. The Audit Process: Principles, Practice and Cases. Cengage Learning EMEA. p.248.
Leonard W, V., 2012. Fraud Risk Assessment: Building a Fraud Audit Program. John Wiley & Sons.
Moeller, R.R., 2008. Sarbanes-Oxley Internal Controls: Effective Auditing with AS5, CobiT, and ITIL. John Wiley & Sons.
Puttick Sandy van Esch, G., 2008. The Principles and Practice of Auditing. Juta and Company Ltd. pp.289-301.
Richard Cascarino, S., 2007. Internal Auditing - an Integrated Approach. Juta and Company Ltd. pp.189-204.
Stephen William Lipscomb, ., n.d. Audit Guide: Auditing and Investigating the Internal Control of Government Purchase Card Programs. DIANE Publishing. p.45.