Auditing and Assurance Services Systematic Approach

Question: Discuss about the Auditing and Assurance Services for Systematic Approach. Answer: Introduction: There are some issues in the given case which indicates the need for audit planning. Audit planning refers to the process to the audit operations. In this stage, the necessary information is gathered and the problems are identified. In the given case, there is a massive downturn in the commercial property sector and an abundance of the city office space. Thus, the audit planning issue is to find out the reasons behind this downtown in the commercial sector. Another issues is to find out the reasons the city office space has been abandoned. After that, the necessary information needs to be collected (Smetanko 2014). There are some major auditing issues in this case. The software has been purchased by WebLtd. for the purpose of financial analysis and for the improvement in the management reporting. Here, the first job of the auditor will be to run the system to know whether the system is appropriately made or not. On the other hand, the reliability of the information provided by the software needs to be examined. It needs to be made sure that whether the information provided by the system can be used for various purpose of the organization. There are the main auditing issues that need to be addressed (Mohamed 2015). In this case study, the first audit issue is to find out the reasons for the establishment of an overseas branch as a sales outlet. This is needed as a lot of expense are involved in this process. After that, the next issue is to find out whether it is justified for Beauty Pvt. Ltd. to distribute the samples of the products in order to increase the marketing effort of the company. The third issue is to collect every possible data and information about the inventory of the company that has been transferred to the oversea branch (Getz and Davis 2014). There are some issues that decided whether to use the control approach or the substantive approach. Control approach is used by the auditors to prevent or detect the material misstatement in the audit report. On the other hand, substantive approach is used to prevent or detect the material misstatement as well as the frauds in the assertion level of the audit report. This the main issue behind the selection of different kind of approaches. However, there are other issues like the adopted control system of the client, various auditing activities and others (Glover, Prawitt and Messier 2014). The choice of audit approach vastly depends on the risk assessment procedure of the company. There are three kinds of risk assessment criteria and they are inherent risk, medium risk and detection risk. Inherent risks are errors or omissions in the financial statement due to failure in the control process of the company. Control risks are the material misstatement due to the error of various fraudulent and others. Detection risks are the risks which has a chance to occur in the near future. There is a relation among these three kinds of risks and the choice of audit approach. In case of inherent risk, control approach needs to be adopted. In case of the control risk, substantive approach needs to be adopted. Lastly, in case of the detection risk, control approach needs to be selected (William Jr, Glover and Prawitt 2016). For the purpose of measuring the accuracy and completeness of the depreciation expense, substantive approach needs to be adopted. There are reasons behind this statement. As discussed earlier, substantive approach is selected in order to detect or prevent the material misstatement as well as the frauds in various accounts. Depreciation is the kind of expense where both material misstatement as well as frauds can be happened. This is the reason for selecting substantive approach for the calculation of depreciation (Diamond 2013). Accounting is the process to collect, record, process various kind of data and information so that they can be used in making the financial report of the company. On the other hand, auditing is the process of verifying and checking those accounts so that the annual report of the company can reflect the true financial position of the company. Thus, it can be clearly understood that there is a deep connection between accounting and auditing (Dumitrescu 2012). In this regard, it can be said that auditing and accounting are the two sides of the same coin. At the time of auditing, it is desired that the internal as well as the external auditors of the company are provided with the necessary accounting information. In this regard, the proper communication of all necessary accounting information is utmost important. This is why there should be an effective accounting information system that will keep track of all the accounting as well as financial information of the organization. This acco unting information system collects all accounting data and information from various financial and accounting activities of the company, processes them so that they can be useful to the auditors at the time of audit and stores them for further references. These operations of accounting information system help the auditors in a large way. At the time of auditing, the internal as well as external auditors needs various kind of accounting and financial information like information related inventories, sales, purchases, production and many others. The accounting information system helps to communicate all these necessary relevant information to the auditors so in order to smooth the task of the auditors. In the presence of all true accounting information, the financial report of the company reflects the true image of the financial position of the company. On the other hand, the miscommunication of accounting information to the auditors contributes in preparing a financial report that doe s not reflect the true financial position of the organization. Thus, from the above discussion, it can be concluded that there is deep connection between auditing and the proper communication of accounting information (De Vlaminck and Sarens 2015). References De Vlaminck, N. and Sarens, G., 2015. The relationship between audit committee characteristics and financial statement quality: evidence from Belgium.Journal of Management Governance,19(1), pp.145-166. Diamond, J., 2013. Internal Control and Internal Audit. InThe International Handbook of Public Financial Management(pp. 374-395). Palgrave Macmillan UK. Dumitrescu, A., 2012. Improving public sector performance by strenghtening the relationship between audit and accounting.Theoretical and Applied Economics,11(11), p.85. Getz, B. and Davis, S., 2014. Are you prepared? How one internal audit department identified problems and provided recommendations to strengthen the company's response to business disruptions.Internal Auditor,71(3), pp.69-73. Glover, S.M., Prawitt, D.F. and Messier, W.F., 2014.Auditing assurance services: a systematic approach. McGraw-Hill Education. Mohamed, A.A.M., 2015. Operations Research Applications in Audit Planning and Scheduling.Operations Research,1, p.30968. Smetanko, O., 2014. Improvement of Internal Audit Planning Method through Application of Risk Card by the Indices of Value-Based Management System of Joint-Stock Company.Accounting and Finance, (2), pp.144-154. William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and Assurance Services: A Systematic Approach.Auditing and Assurance Services: A Systematic Approach.