The Business School BUACC3741: Auditing Semester 1-2013 ASSIGNMENT This assignment is to be completed in groups of three and comprises twenty per-cent of the marks for this course. Assessment...

audit
2013
University of Ballarat
R830
[AUDIT]
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PART A
The fundamental cause which is behind some of the additional frequent and
considerable deficiencies in audit is identifiable during the process of peer reviews in present
and coming years. The utilization of third- party practice assistance and programs on audit
has become very vital as an economical and very effectual way of keeping the materials of
audit advanced and wide-ranging. Conversely, various auditors tend to become checklist
oriented and often driven in parts by various unvarying materials of audit. The usage of these
kind of audit materials tend to create risk, which the auditor might lose while the conclusion
of checklist as well as misplace the sight of what they should be actually doing, that is, assess
and respond to the menace of audit.
Further there is an insight that a lot of these intermediary audit program tends to
overload for audits which are small in nature and in addition they fail to lend themselves to
well-organized downsize. “In response to these factors, some auditors have elected not to use
any, or only use selective portions, of the audit-planning components of these third-party
products”. (http:
www.accountingtoday.com/news/Significant-Pervasive-Audit-Deficiencies-
Accounting-Firms-59341-1.html). Further there stands no reason of being inherently wrong
with the approach until the auditor develop some alternative process and better
documentation. In addition the auditor needs to identify that while at present there is
considerable deviation from the design and use of practice aid, the auditor might fail to rely
on top of the peer appraisal of that creation as it is failing to be utilized in a widespread
manner.
Insufficient Assessment of Internal Control
The understanding of internal control includes the evaluation of the design of control
and proper determination of whether these controls have been implemented. Common
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deficiency is not inclusive of evaluation of imperative controls and limiting the procedures of
evaluation to inquires from single source. It is not compulsory to analyse entire controls of
the organization, but it is important to determine the controls which is essential to the audit
program and whether these controls results in reducing the risk of material misstatement. The
process of inquiry is itself insufficient to evaluate the control and for the determination of
whether it has been executed.
Failing to classify or execute new standards
In many situations, the issuance of latest standards are rather not timely recognized or
executed by organizations. This results to deficiency in performance, disclosure and reporting
of the financial statement.
In addition “Even where a firm does have policies and procedures to monitor new
pronouncements, the firm faces the risk that it has not developed an adequate strategy for
olling out new pronouncements to ensure that they are co
ectly implemented on all
engagements”. (http:
www.accountingtoday.com/news/Significant-Pervasive-Audit-
Deficiencies-Accounting-Firms-59341-1.html).
Failure to link Assessments of Risk to Procedures of Audit.
This is considered as a common deficiency in respect to nature, timing and extent of
further procedures on audit which is performed in response to the risk. There also arises
anticipation within the risk assessment of audit standards which are informal generic
programs on audit and will not be appropriate for most of the audit engagements due to the
vary in risk from organization to organization. However, in various situations, the auditors
fail to tailor audit programs in respect to the risk which is identifiable, or have randomly
ecognized all the risks as modest and evasion to a fundamental approach of audit. “Neither
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http:
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of these approaches is consistent with the requirements of the standards”
(http:
www.accountingtoday.com/news/Significant-Pervasive-Audit-Deficiencies-
Accounting-Firms-59341-1.html).
The result of Noncompliance
It is very difficult to ethically design and implement a policy and procedure on control
of audit which can help in removing the deficiency in practice of audit, but effective steps
should be taken by the auditor in order to improve the compliance and maintain professional
standards in important areas of audit and further reduce the happening of audit failure.
The risk which is due to noncompliance in substantive matter of audit is generally
exposed to the organization to a number of business risks, any of which can have an adverse
affect on its practice. The risk of business includes, “the risk of litigation settlement and
defence costs arising from a malpractice claim, the risk of sanctions being imposed by federal
or state regulators that could limit or restrict a firm‟s acceptance of new clients or practice
areas , the risk of failing its peer review and potentially exposing itself to licensing and state
oard actions, and the risk of adverse publicity and the impairment of professional reputation
that could result in a loss of clients and a negative impact on employee retention, recruitment
and morale”. (http:
www.accountingtoday.com/news/Significant-Pervasive-Audit-
Deficiencies-Accounting-Firms-59341-1.html).
Failing to understand specialized industry and situations of reporting
When an auditor takes up the responsibility of auditing an organization in an economy
which has specialized requirement on reporting, there are additional risk which is associated
with that engagement. In these types of engagement, the acceptance policy and procedure of
clients are very important, as the firm is required to assess the competence in that industry
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prior to acceptance of engagement. Hence this stands true when there is noteworthy public
interest in the audit entity. Federal single audits, audits performed under Government
Auditing Standards, and audits of employee benefit plans are examples of these types of
audits. (http:
www.accountingtoday.com/news/Significant-Pervasive-Audit-Deficiencies-
Accounting-Firms-59341-1.html). In...