Governance Assurance and Consulting

It is important for the auditor to follow the generally accepted standards of auditing while performing audit function for their client (William Jr, Glover and Prawitt 2016). Here, auditor independence means independence that is provided to either internal auditor or external auditor from parties who have the essential financial interests in business enterprise that are being audited by using fair means of information.

In case of first situation, it is required to identify the threat of independence of the auditor. It is necessary for the auditors for delivering services to their potential clients from the scope of auditing that is defined as non-audit services. These non-audit services can be in form of tax-related services, client business promotion as well as management service in the most appropriate way (Soh and Martinov-Bennie 2015). Furthermore, rendering non-auditor services actually leads to loss of auditor independence in great ways that is one of the major concerns that needs to be taken into consideration. In this given case, advocacy threat had been identified that is treated as one of the major threat to the independence of auditor. The situation takes place when an auditor involves in the business promotional activities of the client or provides audit opinion at that time. It is that time when individuals may perceive that there is compromise identified in objectivity. Therefore, auditor who offers advocacy services actually breaches the code of ethics that actually greatly influences the auditor independence that should be reduced in the near future (Simnett, Carson and Vanstraelen 2016).

In case of second situation, it can be seen that auditor’s independence can be treated as threat when a person obtains monetary or non-monetary benefits in addition to the prescribed fee for audit services. After evaluating the situation, it is noted that members of the audit firm are offered with a holiday package (Marques, Santos and Santos 2016). If the auditor accepts the offer, then the question arises regarding auditor independency for a stipulated time period. There occurs threat of independency that actually increases their benefits as well.

In case of third situation, it is noted that spouse, parent, dependent, non-dependent child and siblings of an auditor are considered as close members of the family. In that case, financial interests comprises of debt ownership that guarantees securities of the person that relates with other person or intermediary (Louwers et al. 2013). The involved person actually undertakes the decision-making process on investment activities. Here, the financial controller is the business of the client and the father of the proposed accountant. Therefore, in case the auditor accepts the offer, then it will directly lead to loss of independence of the auditor.

In case of forth situation, it can be viewed that it is necessary for developing close relationship with individuals such as clients, directors as well as officers and staff members. This person gets influenced by the risk that is inherent with the business environment of the client.  From the case, it can be understood that auditor might face sympathetic as well as person can be directly associated with the client (Knechel and Salterio 2016). Further, it is noted that client can get influenced by the opinion as suggested by the auditor who uses the useful information of the client as the auditor had worked for the client on previous assignments such as LTH a month ago. Therefore, the auditor had provided services to the potential client where they compute the tax by passing the accounting entries as they cannot conduct self-audit services in an effective way.

There are various measures that need to be implemented that can strengthen the level of auditor independence and are mentioned below with proper justification.

• Audit Partner rotation is one of the measure that is applicable for enhancing the level of independence of an auditor. Addition to that, rotating system of audit partner majorly aims at eliminating the danger over knowledge (Junior, Best and Cotter 2014). It mainly concerns with promoting the aspect of objectivity without any relevant cost.
• The auditor should ensure level of transparency through Audit Committee. They should have adequate resources and it is essential for the business for appointing qualified as well as independent audit members. Therefore, the audit team should be evaluating the objectivity as well as independence that are made available to the stakeholders.
• It is necessary to understand the oversight of an independent auditor where they take into consideration audit profession as well as political interference at the same time. The auditor should be providing fair and true audit opinion through sharing as well as maintaining the confidentiality of private data of the client (Hayes, Wallage and Gortemaker 2014).
• Other measure is maintaining consistency with the independent need of an auditor where they should use robust as well as effective standards of ethics. Auditor should be using International set of high quality independence and ethical standards for reducing the complexity in accordance with auditing procedures.

Involvement of risks with the spare-parts inventory

It is important to consider the fact that managing risk is important criteria where it is essential for managing the spare-parts inventory. In other words, there is even downtime risk that needs to be reduced and leads to financial loss. In this, business enterprise mostly could not implement technologies that align with the risk management of spare parts (Eilifsen et al. 2013).

There are two types of business risks that are involved at the time of purchasing the spare parts as well as equipments that are discussed below with proper justification:

The first identified risk is strategic risk that does not get associated with the trade approaches as well as selecting of the business for getting access to relevant products and market. In other words, strategic risk takes into consideration managing stock such as spare parts. In some case, it happen that business organization mat opt for ad-hoc as it represents spending items on purchase through use of formal policies as well as appointing experienced managers who aims at providing judgment on strategic issues (Cohen and Simnett 2014). It may even happen that business organization should be selecting the standardizing the managerial aspects for the spare parts in given form such as using the financial management procedures. Therefore, some of the approaches are used when organization becomes reliant for involving in financial investment as well as risk within the possible loss.

The other risk that is involved in business process is operational risks that is relates with the execution of the selected approach. It may happen when organization plans for start a policy through stocking ways where they undertake financial decisions in relation to standardization process in the most appropriate way. It is also a known fact that the policy is not alone sufficient for solving any undergoing business concern. Furthermore, there are various feasible attributes that need to be taken into consideration by the business organization on matters relating to inventory management of spare parts as well as risk management procedures (Arens et al. 2013). It is really essential for business organization for managing the risk as far as possible as it is not impossible to avoid the risk completely. Efforts and strategies can only be made to minimize the risks and that leads to smooth functioning of business enterprise.

Audit risks and impact on account balance

There are various risks that are involved at the time of strategic decisions that is known as inherent risk. In other words, there is occurrence of risk because of error in the financial statement or omission instead of any other contributory factor of control failure. Inherent risk is identified in case when there is complex nature of operations or transactions that involves judgment for making the financial estimations in the most appropriate way. Inherent risk had great influence on the amount of account receivables as well as balance of inventory (Arens, Elder and Beasley 2014). There are various transactions that are related to account and responsive to inherent risk that has influence over accounting balance depending on the loss on transactions.

There are various risks that are involved within the operations and this is termed as detection risk. In other words, this risk takes place when an auditor cannot detect the material misstated financial figures that are presented in the financial statement of business organization. It relates with the procedures that are used for testing the substantive tests as well as evaluation at the same time. Hence, detection risks can be identified when an auditor could not implement adequate process in given format. There is serious impact that is noted from the accounting balances and evaluation is made by an accountant. Some of the accounts are highly prone to risk that takes into consideration accounts relating to sales, revenue, purchase as well as inventory.

Reference List

Arens, A., Elder, R. and Beasley, M., 2014. Auditing and assurance services-An integrated approach; includes coverage of international standards and global auditing issues, in addition to coverage of. Boston: Aufl.

Arens, A.A., Elder, R.J., Beasley, M.S. and Jones, J., 2015. Auditing: The Art and Science of Assurance Engagements. Pearson Canada.

Cohen, J.R. and Simnett, R., 2014. CSR and assurance services: A research agenda. Auditing: A Journal of Practice & Theory, 34(1), pp.59-74.

Eilifsen, A., Messier, W.F., Glover, S.M. and Prawitt, D.F., 2013. Auditing and assurance services. McGraw-Hill.

Hayes, R., Wallage, P. and Gortemaker, H., 2014. Principles of auditing: an introduction to international standards on auditing. Pearson Higher Ed.

Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: a historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.

Knechel, W.R. and Salterio, S.E., 2016. Auditing: assurance and risk. Routledge.

Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2013. Auditing and assurance services. New York, NY: McGraw-Hill/Irwin.

Marques, R.P., Santos, H. and Santos, C., 2016. Evaluating Information Systems with Continuous Assurance Services. International Journal of Information Systems in the Service Sector (IJISSS), 8(3), pp.1-15.

Simnett, R., Carson, E. and Vanstraelen, A., 2016. International Archival Auditing and Assurance Research: Trends, Methodological Issues, and Opportunities. Auditing: A Journal of Practice & Theory, 35(3), pp.1-32.

Soh, D.S. and Martinov-Bennie, N., 2015. Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting. Managerial Auditing Journal, 30(1), pp.80-111.

William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and assurance services: A systematic approach. McGraw-Hill Education.

MyAssignmenthelp.co.uk is a name in assignment writing services that students trust. We offer our assignment writing services for a wide variety of assignments including essays, dissertations, case studies and more. Students can place their order with us anytime as we function 24x7, and get their copies at unbeatable prices. We guarantee that all of our solutions are plagiarism-free.