Gulf International Services - Auditing and Assurance - Case Study Example

Auditing and Assurance Gulf international services Introduction The objective of ASA 220 (Quality Control for an Audit of a Financial Report and Other Historical Financial Information) is to execute quality controls processes at the Audit Engagement level in order provide practitioner with justifiable assurance level that the Audit is in compliance with the Australian Audit standard, appropriate Ethical standards and ensures that the Audit report is relevant in the circumstance. Audit team depicts an impact on the standard as well as the manner to which the Audit engagement practice is influenced by the Auditor and Audit best management practice. For the Audit team of Gulf international, the our Audit team will be responsible for planning on the audit engagement with the gulf international services and is at present planning on the audit team members that will undertake an audit engagement, identifying the audit risk and keeping the audit files for the gulf international services. Audit team members The audit team members who will audit Gulf international service comprise of the following team expert Audit team handling Audit cycle Audit cycle is the procedure that practitioners use in reviewing the company’s financial information. The audit cycle entails the procedure of ensuring that the company’s financial information is valid and correct prior to releasing any financial report. Our Audit cycle for Gulf international service will comprise of inventory count and account receivables (Auditing Standard No. 12, 2013). In this regards, our audit teem members in their areas will have expertise in accounting for debtors and inventory in order to provide assurance eon the relevance and reliability of the closing balances for debts, inventory and cash balances. ASA 330 provides that an Auditors duty in designing as well as implementing response to the risk of materiality identified and evaluated as per the ASA 315(Audit of financial report). The aim is to ensure that Auditors provide sufficient Audit evidence concerning the relevant assessed Audit risk of material error by designing as well as implementing relevant response to the Audit risk. Audit team members responsible for Audit planning ASA 300 provides that Auditor will be responsible for planning an audit of financial report of the company. ASA 3OO requires with regards to initial audit engagement that performance processes required under ASA 220 concerning the acceptance of the customers association as well for our Audit. We will undertake an Audit planning for gulf international service at the start of the audit process to guarantee that relevant focus is devoted to significant areas, susceptible matters are immediately identified, work is finished on time and work is correctly performed during the audit. The audit team members in this field will be expert who are well conversant in audit planning, developing the general strategy as well as comprehensive methodology for the anticipated nature, timing as well as the extent of the audit. Audit team members to handle Audit strategy In Accepting an Audit engagement for Gulf international service, we will ensure that there is an Audit strategy team will recount to the entire methodology that the audit team members will undertake in auditing the gulf international series, it concludes on the scope of the audit. Audit strategy comprise of comprehension of the company, the risk facing the bushiness, the legal framework that the company operates in, financial reporting standard employed by the business. In this regards, the audit team in this field will be expert in legal framework, the risk expert as well as the expert in financial reporting (International standards on Auditing 200, 2016). Audit risk model ASA315 (Identification and Assessment of material misstatement through comprehension of an Entity and its Environment) and ASA 330 (Auditors response top assessed risk) are the auditing standards that sets out the risk based audit Approach with other Audit Standard entailing some risk linked principles as well as processes to their subject matter. The Audit risk based approach is aimed to be employed in the audit to effectively centre on the state, timing as well as the extent of Audit processes to the Audit areas that are risky to material misstatement in the financial report of a company. The audit risk is the risk that an auditor will use wrong judgment on the finance statement such as issuing unqualified audit report where a qualification is justifiable correct or failing to highlight on the important matters on the audit report. The audit risk model is as follows’ Audit Risk   = {Inherent Risk   x   Control Risk   x   Detection Risk} The Audit risk might be taken into consideration as the product of the amount of risk that might be experienced in the audit process. To ensure that the overall audit risk of engagement is below the acceptable limit, the practitioner should examine the level of risk with regards to every risk component of the audit. The three component of audit risk mod3l is explained comprehensively as follows; Inherent Risk This is the risk of material misstatement in the financial statement as a result of errors or omission due to factors other than failure of internal controls. The risk is generally deem to be high where the high extent of judgment as well as approximation is engaged or where the transaction of the business is very intricate. Control Risk This is the risk of material misstatement in the financial statement as result of the lack o operations of appropriate controls of the business. The business should ensure that there are sufficient internal controls put in place to prevent and detect situation of fraud or errors. Control risk is deeming to be high where the audit business doesn’t have sufficient internal controls to prevent and detect situation of fraud and errors in the financial statement (Jeremy, 2011). Evaluation of control risk might be high for instance where the small business in which the separation of duties is not well defines and the financial statement is prepared by one person who doesn’t have appropriate technical expertise of accounting and finance. Detection Risk This is the risk that the practitioner fails to identify material misstatement in the financial repr0ot of the company. A practitioner applies audit procedures to identify material errors in the financial statement of the business whether as result of detecting fraud or errors. Omissions of vital audit processes might lead to material misstatement of the remaining hidden by the practitioner. Some detection risk is normal as a result of inherent limitation of the audit like the use of sampling for the selection of the transaction. The detection risk might be minimized by practitioners by growing the number of sampled transaction for the comprehensive examination. Application The Audit risk model is employed by practitioners to control the entire risk of audit engagement whilst gaining a comprehension of the business and its environment. The detection risk is the residual risk prior to taking into account the inherent risk and control risk with regards to audit engagement and the entire audit risk that practitioners are willing to accept (Robert, 2009). Where the practitioner’s evaluation of inherent risk and control risk is high, the detection risk is set a low level to ensure that the audit risk is at acceptable level. The low detection risk might be attained by growing the sample size for the audit test. Equally, where the auditor is of the opinion that the inherent risk and the control risk of audit engagement are to below, the detection risks is permitted to be set at a high level Benefits to be obtained by keeping and maintaining the audit file ASA 230 sets Audit documentation standards for practitioners on then Audit files as well as the evidence. The standards provides that an auditor must document the nature, timing as well as the extent of the Audit procedure undertaken, the practitioner must document the identifying traits of some items or matters that is under examinations. An auditor must record discussion of important matters within the business as well as other master on a timely basis. Audit file are the document that record every audit evidence gathered at the time of financial statement audit, internal management audit, information system audit as well as investigation. The audit files are employed to provide support on the audit work competed so as to provide assertion that the Audit was undertaken as per the appropriate audit standards (Singleton, 2007). The audit files shows that the audit was correctly performed, there was enough control and relevant review was performed and also, the evidence was sufficient to provide support for the audit opinion. The benefit of keeping the audits is that; Facilitate sufficient planning The record keeping of audit files will ensure that the planning is finished on time, the audit planning verdict are followed at the time of field work and the relevant reference pint is existing for review at the time of finishing the audit plan. The audit project is frequently repetitive, extends to cover extra areas or employed as a foundation for planning other audit duties. Provided the typical restrictions on personnel continuity, good audit files contribution to the standard of subsequent audit by ensuring that there is provision of good starting point for successful audit process in the company. Ensuring that there is organized approach A consistent layout for the audit files to provide an important framework for the planning of the audit work. Consistency in the layout ensures that many personnel or different office to work on diverse division of a single task in a well planned approach. A well panned files impact the manner in which complex system are reviewed, aiding to make sure that the one are is not overlook as well as ensure sufficient coverage is provided. Facilitate sufficient control of field work A consistent file layout as well as approach of preparing the audit files provided framework to audit members on the duties, minimize the likelihood of omission or wrong application of procedures and so, contributes to the control of field work. At the time of audit process, substantial information is collected and analyzed. It is important that official documentation must be upheld instead of committing information to memory, in which certainly some of it might be lost (ASA 300, 2005). Furthermore, an audit documentation serve a vital foundation for the practitioner’s comprehension of the audit program, aims as well as activities and this might be employed as support for the methodological discussion with operating team members. Audit files provide consistency to the many individual process entailing any given audit. Facilitate analysis and reporting to superiors Consistent audit files format ensure an effective approach for the audit team t communicate the outcome of their audit work to the examiners. well planned audit papers facilitates a review by providing support to the examiners in identifying an omission or misrepresentation from the normal process and unusual issues that is encountered during the audit process, deviation from the normal audit process that was experienced during the audit (Whittington, 2012). Good audit files provides for important communication of important outcome and conclusion by way of summary on individual information. Conclusion Auditors avoid the audit risk by ascertaining the audit risk for the business before accepting the audit engagement and hence, the auditors of gulf international services must ascertain the audit risk tolerance level before accepting the audit engagement letter. There is need to ensure that the audit team members are identified and duties segregated and ensure that the audit files is kept for future reference while the audit team provide reliable information for eh audit for duties assigned in order to save on time and cost as well as provide assurance on the reliability of the audited report. Bibliography ASA 300 (2005) Auditing and Assurance Standards Board, London. Auditing Standard No. 12 (2013) Identifying and Assessing Risks, London. International standards on Auditing 200 (2016) Auditor Independence: Auditing, Corporate Governance and Market (ASA 200), New York: London. Jeremy, L. (2011) Performance Auditing: Contributing to Accountability, Sydney : Springer. Robert, M. (2009) Brink's Modern Internal Auditing: A Common Body of Knowledge, New York: Cingage Learning. Singleton, T. (2007) Fraud Auditing and Forensic Accounting - Page 75, Sydney: Springer. Whittington, R. (2012) Principles of Auditing and Other Assurance Services, London : Cingage learning. Read More