In accounting term, an audit engagement tends to be the arrangements that a finance manager has with their client to perform any specific audit of the accounting records as well as financial statements. It happens to be initial stage of an audit process where the party is notified by the auditors while working with regards to the scope and objective of the audit. It intends to be a written agreement that consists of the business relationship of client as well as organization. This particular agreement includes detail information regarding the agreement, term, and costs incurred during the time. Similarly, Assurance means an engagement under which a auditors expresses a solution framework to increase the degree of their confidence level of the intended clients other than the liable party regarding the results of evaluation. Generally, the assurance engagement consists of two types such as external audit and review engagements. Apart from this, it is also having various core elements that provide specific right the party to deal with their accounting implications such as: (Lu, Simnett, & Zhou, 2019).
· Three-party relationship
a) Audit responsibility
In an accounting term, it has been determined that the auditor need to play an important role by expressing their own opinion on whether an organization has accurately recorded the information into the respective financial records books. In the process to do so, the auditors generally used to collect specific evidence to collect a reasonable assurance that an accounts are using free of material misleading. In context with the ethical practices, an auditors is liable to operate an independent role while preparing any audit report. However, certain other factors that might impact the auditors as well as the presence of these factors are serious challenges to the independence auditors while formulating the accounting statements. As per the accounting standards 1001, the liability of the auditor towards their accounting transactions must be clear and accurate. It is important to determine the responsibility should be followed effectively without any kind of addition burden so that future complication while preparing financial statements could not be occurred. Apart from this, the auditor is also liable for the task he tends to be performed on the basis of their documents provided by the company. It has been determined that auditors are not having to prepare the financial reports, but only have to check the accuracy of the reports effectively. Henceforth, auditors just has to provide accurate information that can represent the current financial position of the company.
a) Auditors independence
In an accounting term, auditor independence generally refers to the independence of both internal and external audit from the outside party that might have a financial value in their business. It needs to be integrity as well as objective methods to the audit processes. An auditors intend to be expected to exercise the individual role while reporting the financial data into the accounting books. Henceforth, different factors as well as activities that might influence the independence of the auditors are needed to be analyzed effectively (SchmidtWood, & Grabski, 2016).
Challenges of independence of Auditors
Generally, it has been analyzed that an independence auditors have to deal with various challenges while reporting the financial statements. Some of them are mentioned-below:
Self-interest threat: It happens to be utmost important threat for the auditors because it generally occurs at the time when an auditor has the later on profit any financial terms in the business (Mock, Ragothaman, & Srivastava, 2018).
Self-review threat: In the case of carrying out any decision regarding the current financial position by the similar person that was earlier liable for the decision-making are taken into account.
Advocacy: It generally occur at the time when an auditors tries to promote its own customers to such as level that might impact the audit objectivity of an individual.
There are several types of the audit risks are involved in the process.
By evaluating the Case of the Samson Company, there are following observations have been made.
1.The treasure appointment helps in sharing the workload of the undertaken financial controller who gives the control risk program. It provides the quite interesting in foreign exchange profit.
2.There is inherent risk associated with the dealing of the foreign exchange which could not be controlled by company (Sheppard, 2018).
3.The financial controller would set the internal control system to curb the business issues. These shows the chances of the provisions which are not kept in process.
4.The introduction of the bonuses for the undertaken sales staff is accomplished with the budget sales and requires control system to manage the costing. The control risk is done with a view to manage the internal control program.
5. The new general ledge software would require training of staff member over its application.
6.Giving all the responsibilities to one person would lower down the accuracy and increase the recording issues.
There are several ratios have been computed and by using these ratios following audit and assurance program could be identified by the auditors.
By using these ratio, auditor could determine the efficiency of the company and how transparent company has managed its financial data to its stakeholders.
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