Auditing Theory and Practice Global Population Reaching

Question: Describe about the Auditing Theory and Practice for Global Population Reaching. Answer: Introduction Due to the reason of global population reaching high, the basic quest for food is going to be obvious and to meet the requirement of the people so far food is concerned, the world should be equipped with the recyclable resources of foods, at the same time the producer should look for the proper alternative which can make the world free of pollution from the process of production. The bio sustainable products are to be prioritised for the use of manure or feeds. The fish feeds are, therefore, being highly appreciated when it is made of earthly ingredients. The people who are habituated with non-vegetarian foods normally look for fishes and other meats. Bio Sustainable Feeds Ltd is engaged in the fish feed with their experienced research and subsequent development for which they are reckoned with. This article will emphasize on different aspects of audit in the company with finding out the system through which the company maintains its financial accounting. There are different factors which are obvious for conducting an audit and the same process will be followed while the audit assignment is to be executed(Chung, 2016). This company is listed in ASX and as a mandatory compliance; the company has to get their financial accounting audited every year. For doing the audit an external audit firm is to be deployed who will verify and conclude about the overall financial accounting to infer about the accurateness of the financial accounting standard of the company. In the following discussion we will highlight the issues related to audit assignment with proper steps with the conducting of audit, assessment of audit risk, concentrate of critical areas, etc which are appended below(EWOS, 2012). Steps for auditing There are certain steps for conducting audit by a professional audit firm of any company which is listed in ASX. BSF Ltd. is such a company who are listed in the ASX. So the stakeholders are willing to know the result of the audit to be conducted. In broad spectrum there are six steps to be followed for audit purpose. They are as follows:- Required Documents The list of required documents is to be filed to the client with a proper notification for the forthcoming audit which is found by the auditor in the checklist. These documents may consist of the historical audit report, the bank statements of the company along with receipts and general ledger. Along with those, the auditor may ask for the organizational tree of the organization and the copies of board and committee minutes of the meetings and the constitutions consisting of bylaws and standing rules(Penn, 2016). Preparation of audit plan The planning of audit is done with the information found in the documents and then the plan of audit is being chalked out to identify the way of conducting the audit. The derivation of auditory risk is to be emphasized with the experts for identification of probable grey areas. After then the audit plan is finalised for conducting the same. Convening a meeting The auditor has to sit with the top management and the key personnel of the company for exploring the scope of audit which is to be projected by the auditor for the purpose of making them aware about the same. This meeting will mainly emphasize on the time limit of the completion of the audit, the objective of the audit, and the cooperation of the departmental heads are sought for to make the departmental staffs aware of the audit with some interviews to be conducted by the auditor with the respective staffs(Gupta, 2006). Fieldwork of audit After gathering the information from the meeting, the auditor will finalize the audit plan. The audit plan will be transparently communicated to the staff of the audit team as well as to the staff members of the company for making the review of process and procedure of the audit. Main emphasis will be given on the issues of compliance of the working process and subsequent procedures along with the evaluation of internal control to find them in place with adequacy. The course of audit will raise certain issues which are to be highlighted for the quest of the response from the management. Preparation of a draft audit report The head of audit will make a report which will consist of the observations of the audit. The report should include the calculation error or omission, problems related to posting, execution of authorized payments not made, and other disorders along with other concerns found in the course of audit. This draft report will lead to a final report which will schedule the findings with the basic irregularities found during the course of audit with subsequent advice for recommending solutions of the problems(Gupta, 2006). Close meeting with the management The final meeting will be between the top level management and the auditor in which the management is responsible for clarifying the noted discrepancies with the notation of agreeing or disagreeing with the issues. This will lead to probable remedial measures to be undertaken by the management in due course of time for getting rid of these discrepancies with setting up of proper time frame. This meeting is vital as this will lead to future course of action with the resolution of keeping track of the problems found in the course of audit with subsequent follow up for remedies to be placed. Audit Risk detection and judgment The activities of audit face three types of risks which are known as inherent risk, control risk and detection risk. In the following, we will discuss them with the implication of hypothetical risk allotment under three different head for BSF Ltd. to justify the acceptance of this audit assignment by the auditor(Unifr, 2016). Inherent Risk Inherent stands for some feature which is already there. In case of inherent risk in audit, it is raised from the misstatement of object which is found in the financial statements. This risk is generated from the mistakes happened due to the action of omission or errors which is basically happen due to non-practice or failure of proper control, mainly internal. The detection of inherent risk and subsequent action for the audit purpose is the field of high professionalism which is to be made by the leader of the audit team. Inherent audit risk is more in a new company with diversified activities, where the overall control is becoming weak due to unprofessional decentralized handling. On the contrary, in case of old manufacturing unit with the system and process in place reveals low level of inherent risk(Actuateip, 2015). Control Risk Control risk is defined as such risk which arises from material misstatement in the statement of the financial activities of the company this risk is due to the reason of improper practice of controlling measure taken up by the management internally. The internal control system to find out the fraud and error at every layer should be on higher range to mitigate control risk. It is found in the financial statement of the company that the instances of frauds and errors happen due to lack of proper internal control in place. And these elements are responsible for raising the control risk so far audit is concerned(Aicpa, 2006). Detection Risk Detection risk is such risk which cant be tracked by the auditor from material misstatement in the financial statement. This is due to improper assessment of the assignment with improper emphasis is given in improper issues, or not prioritizing the issues with proper statement. In case of given hypothesis, the inherent risk is at 90%, control risk is at 5% and detection risk is at 80%(Unifr, 2016). To calculate the audit risk:- Audit Risk= inherent risk x control risk x detection risk In this case audit risk is derived as ---- 90% x 5% x 80% = 0.036 This derived audit risk seems to be good as it is in lower range. If the auditor is fixing any parameter for the audit risk, they should follow that, otherwise this audit risk should be felt comfortable by the auditors for conducting the audit(Unifr, 2016). Audit Program Following audit program is to be followed by the firm for auditing BSF ltd:- The auditor, after assuming the audit risk at comfortable level, should give the notice to the management of BSF stating the acceptance of the assignment with proposed time limit and the list of documents required. Next step is to make the schedule of the audit which should detail the events with period of audit, details of assigned person as leader and the required variety of resources and documents needed from the company. The plan of audit is next part which is to be made as per the objective and scope of the audit process which is being fixed in the joint meeting between the auditor and management leaving the statutory fields which are to be audited mandatorily by the auditor. The most vital part is the managing of the audit process which is the sole responsibility of the leader. He will find the compliance of the plan and accordingly change the schedule if necessary. It is his prime duty to keep the management posted about the development of the audit process. The submission of the audit report to the process owner and the stakeholders of the company is the ultimate part which closes the audit process. The company management should be aware of the irregularities found and accordingly ensure proper action to get rid of those in future(Mediacongo, 2015). Accounting Journal of BSF related to R D and CSIRO grant: Date Particulars Debit ( in AUD) Credit( in AUD) 10.07.2013 Bank A/c debit 500 million CSIRO grant a/c Credit 500 million grant from CSIRO 14.09.2014 Research a/c debit 170 million Bank A/c Credit 170 million expenses incurred in research 12.10.2014 Fixed Assets a/c debit 40 million Research a/c debit 40 million fixed assets procured for research 25.09.2015 Research a/c debit 160 million Bank A/c Credit 160 million expenses incurred in research 02.02.2016 Research a/c debit 170 million Bank A/c Credit 170 million expenses incurred in research 15.04.2016 Development a/c debit 100 million Bank A/c debit 100 million expenses incurred in development Observation of journal entries related to CSIRO grant and R D expenses are ok with proper following of the conditions. TBL addendum of BSF GPFS The claim of Triple Bottom Line by BSF for ensuring social economical and environmental sustainability is adjudged as positive as they are contributing to the society by their research work for the community and the people, the economic sustainability with the profit generation for the company and the environmental sustainability by using the earthly ingredients in their research to find the eco friendly fish feed which will be treated as the biggest success of the company. Hence this claim may be endorsed by the auditor in favor of the company(Chung, 2016). Exclusive control over patent right of BSF It is normal practice of the patent Act of Australia to confirm two types of patents- standard patent and innovation patent. This patent of BSF falls under the standard patent which covers any product. The claim of BSF to the exclusive patent of the bacteria based feed technology is not justified as they have acquired the patent of the product only with its nomenclature and composition, but not the said technology, as a whole. Hence their claim will not endorsed by the auditor(Sarker et al., 2016). References: Accounting-simplified, 2010. Audit Risk Model Inherent Risk, Control Risk Detection Risk. [Online] Available at: https://accounting-simplified.com/audit/risk-assessment/audit-risk.html [Accessed 20 September 2016]. Actuateip, 2015. Patent Disputes. [Online] Available at: https://actuateip.com.au/patent-disputes/ [Accessed 20 September 2016]. Aicpa, 2006. Audit Risk and Materiality in Conducting an Audit. Effective for audits of financial statements for periods beginning on or after December 15, 2006. Earlier application is permitted; https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00312.pdf, 47(107), pp.1647-62. Asic, 2016. Are you a large or small proprietary company. [Online] Available at: https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-reports/are-you-a-large-or-small-proprietary-company/ [Accessed 17 September 2016]. Chung, E., 2016. Shift to plant-based fish feed could hurt health, environment. [Online] Available at: https://www.cbc.ca/news/technology/aquaculture-feed-1.3262922 [Accessed 14 September 2016]. EWOS, 2012. Fish Foreever. [Online] Available at: https://www.ewos.com/wps/wcm/connect/6e703148-9c92-437a-9ac5-1046fd27d3c0/Spotlight+5.pdf?MOD=AJPERESCONVERT_TO=url [Accessed 13 September 2016]. Gupta, A., 2006. Best Practices in Auditing. [Online] Available at: https://asq.org/quality-progress/2006/05/problem-solving/best-practices-in-auditing.html [Accessed 20 September 2016]. Ipaustralia, 2016. Patent basics. [Online] Available at: https://www.ipaustralia.gov.au/patents/understanding-patents/patent-basics [Accessed 20 September 2016]. Mediacongo, 2015. ToR Audit BSF-IA Final. [Online] Available at: www.mediacongo.net/docs/jobaof/2015/wv_tdr_anglais_20150418.docx [Accessed 17 September 2016]. Penn, S., 2016. Six-Step Audit Process. [Online] Available at: https://smallbusiness.chron.com/sixstep-audit-process-17816.html [Accessed 17 September 2016]. Reimers, C.I., 2010. Sustainability through Profitability: The Triple Bottom Line. DigitalCommons@University of Nebraska, 01 January. pp.1-3. Sarker, P.K., Kapuscinski, A.R., Lanois, A.J. Livesey, E.D., 2016. Towards Sustainable Aquafeeds: Complete Substitution of Fish Oil with Marine Microalga Schizochytrium sp. Improves Growth and Fatty Acid Deposition in Juvenile Nile Tilapia (Oreochromis niloticus); https://journals.plos.org/plosone/article?id=10.1371/journ. PLOS Journal. Unifr, 2016. Risks (Audit Risk Formula). [Online] Available at: https://www.unifr.ch/controlling/assets/files/Noesberger2016/3-audit-risk-formula.pdf [Accessed 20 September 2016].