7 Pages
1739 Words
Introduction: Importance of Audit and Control in Managing Material Misstatement Risks
Audit is being defined as them examination of the financial reports for the company which is presented within the annual report by some independent party. It is very necessary for the companies that they get there accounts audited. The audit provides the surety that all the financial statements prepared by the company are authentic and relevant. The current study will outline the evaluation of the international standards of auditing ISA 200 and ISA 315. It will outline the evaluation of the different company examples relating to the importance and relevance of ISA 315. Furthermore, it will also highlight the key elements relating to the auditing which needs to be undertaken while conducting the audit work. It is particularly necessary to evaluate the financial statement and accounts can be audited appropriately.
Main Body
Considering The International Standard On Auditing (Isa) 315 Revised And Its Importance And Key Elements
With regards to the International standard of auditing 200 it outlines that the professional judgement is very necessary for having a proper conduct relating to the audit. This includes the fact that all the decisions relating to the material statement must be taken effectively. Moreover it includes evaluation of the judgement of Management and thereafter drawing some conclusions relating to the performance of the company. This standard includes the application of some knowledge, experience and various trainings relating to the auditing, ethical working and informed decisions relating to all the accounting activities. It is very necessary for the auditor that they must effectively apply their knowledge and experience in order to audit the accounts of the companies. In order to evaluate their actual financial position and whether they have a made any wrong decisions or not (AS 2110: Identifying and Assessing Risks of Material Misstatement, 2023). This standard states that for obtaining accurate Assurance it is necessary for the auditor to obtain the audit evidence. In case the audit evidence will be less than it will result in misstatement of the financial statements. Hence, it is very necessary for the auditor that they provide for all the material statements and evidences so that the appropriate audit can be conducted. In support of this another ISA 315 which has been revised in order to responding to the challenges and issues of the current standard outlined that identification and assessing of material misstatement is very necessary. This is particularly because of the reason that when the revised standards for audit, it summaries that implementing the minimum requirement of the document is very necessary so that every transaction can be evidenced (de Ricquebourg and Maroun, 2023). In case the proper audit is not implemented and there is not any proof of working then it will impact the working efficiency of the company and the standards are not implemented effectively. Hence, compliance with the International standard of auditing ISA 315 is very necessary for the companies to be successful.
In addition to this complying with the revised International Standard on Auditing ISA 315 is very necessary for improving the working capability of the company. It is very necessary for the companies to effectively comply with this revised standard so that overall working can be improved. In addition to this, it includes the risk of material misstatement and it is highlighted within the understanding of the entity and the environment within which the auditor is analysing the working (Ecim, Maroun and Duboisee de Ricquebourg, 2023). It is the responsibility of the auditor that they must analyse the risk assessment and implement the better internal control. Within the business there are many different kind of risk which can affect the auditing process and the accounting as well. Hence, it is it responsibility of the auditor that they must effectively analyse the risk of material misstatement so that appropriate internal control can be established and the whole working can be managed effectively.
In addition to this for the effective auditing it is very necessary that proper understanding and documentation is implemented. In case statements are not provided effectively then it will be affecting the overall working of the company. Hence, it is the responsibility of the auditor that the appropriate internal control is established. Thus, it is the responsibility of the auditor that they establish good internal control with help of the ISA 315. In case this International standard of auditing will be followed then automatically the overall performance of the company and its auditing will take place in effective manner (LUBENCHENKO and SHULHA, 2023). Moreover it is very necessary for the auditor to effectively understand the importance of internal control and see financial statement as well. In case the risk will be assessed effectively then it will be improving the overall working capability of the company and auditor will be in position to audit the financial statements much effectively.
Relevance of ISA 315 By Using Real Examples
With the evaluation it is evident that ISA 315 is very relevant to be used by the various companies. For example, Vodafone is a company which is complying with the ISA 315 in order to manage the risk and control framework for auditing. Within this, the company is focusing on a Framework called cyber security baseline which is mandatory for the whole company to use. This is particularly an International standard relating to the auditing which assist in controlling all the activities of the business and try to reduce the cyber security (Logvinova et al, 2021). It is very necessary for the company that they effectively comply with cyber security. Thus, it is the responsibility of the auditor that they must effectively have the proper base for improving the cyber security. In the current highly competitive market the compliance with the effective ISA that is risk of material misstatement is very necessary. It will help Vodafone in evaluating all the possible risk in the near future and will assist the auditor in managing this risk effectively.
Also this ISA, assist the company in managing all the working capability effectively. Furthermore, it also has the international standards relating to the occupational health and safety. Within the auditing it is also stated that it is the responsibility of the company that the maintain the occupational health and safety. In case the health and safety practices are not implemented effectively then it will be affecting the whole working of the company. Hence, it is the responsibility of the auditor that the ensure proper health and safety practices and policies are also followed by the company. Thus, Vodafone is complying with it and their providing better health and safety Strategies and facilities to the Employees working within the company.
On the other hand, another company that is Unilever is also complying with the material misstatement and the International standard of auditing 315 revised version. It is particularly used by the company because it provides the guidance relating to the material level of the audit. In case the whole study or the audit will be materially effective then it will result in fulfilment of the objectives of the audit. Thus, as a result of this it can be stated that when the auditing is done effectively then it automatically results in a completion of the objectives of the business (Esmail and Haque, 2022). It is necessary that the material misstatement is evaluated. With the evaluation it is evident that within both the years the material misstatement level has been considered effectively. In addition to this Unilever has performed the group level analysis for evaluating the risk of material misstatement and this as assistant them in evaluating the components which are not coming under the plant ordered.
Conclusion
In the end it is concluded that auditing is defined as the activity which assist the company in hiring the third party for evaluating that whether the financial statements are prepared effectively or not. For the success of the company and its evaluation it is necessary that the appropriate auditing standards are used. In case the auditing standards are not implemented appropriately then the study will not be effective. Hence, the above study highlighted that compliance with the ISA 315 revised version is very necessary for effective auditing of the company and its statements. The study highlighted that complying with ISA 315 helps in effectively evaluating the risk of material misstatement. Moreover it evaluated the examples of companies like Vodafone and Unilever who are complying with the effective International standard of auditing. The compliance with this standard of auditing is very necessary for making the different companies successful.
References
Books and Journals
- de Ricquebourg, A.D. and Maroun, W., 2023. How do auditor rotations affect key audit matters? Archival evidence from South African audits. The British Accounting Review, 55(2), p.101099.
- Ecim, D., Maroun, W. and Duboisee de Ricquebourg, A., 2023. An analysis of key audit matter disclosures in South African audit reports from 2017 to 2020. South African Journal of Business Management, 54(1), p.3669.
- Esmail, Z.M. and Haque, S.I., 2022. The Influence of the Business Risk-Based Auditing Application on the Audit Process: An Empirical Investigation in the Yemeni Context. Journal of Business Strategy Finance and Management, 4(2), p.214.
- Logvinova, T.I., Dyachenko, E.Y., Gorlova, N.A., Tatarinova, M.N. and Fedulova, L.I., 2021. Auditing the Settlements of Loan Liabilities in Accordance with International Standards: Methodological Approach. In The Challenge of Sustainability in Agricultural Systems: Volume 2 (pp. 351-360). Cham: Springer International Publishing.
- LUBENCHENKO, ?. and SHULHA, S., 2023. Audit of non-financial reporting: what standard should be used?. Scientific Bulletin of the National Academy of Statistics, Accounting and Audit, (1-2), pp.29-42.
Online
- AS 2110: Identifying and Assessing Risks of Material Misstatement. 2023. Online. Available through: <https://pcaobus.org/oversight/standards/auditing-standards/details/AS2110>
