Assurance and Corporate Governance

Question : Write an essay that explains and critically discusses the development of the wording of the external audit report and the IAASBs latest pronouncements on its further improvement. As a minimum your answer should encompass the following aspects: Perceptions on the purpose of the external audit report. Explanation of how and why the wording in the external audit report has evolved and why further changes have been considered necessary. Explanation and critical appraisal of the IAASBs latest pronouncements, including stakeholder reaction. Justified conclusions and final observations. Answer : Introduction Audit is defines as a going concern, including appropriateness of management and use of accounting and financial statements of the existing organisation (Lienert, 2007). Ongoing concern is referred to a set of activities which are use for the better improvement of the any activities. Auditing is a dynamic view which is changes all time, and this is for the improvement of the organisation business structure, financial statement also. Auditors are followed some rules and regulations and these rules and regulations are maintain by an organisation board. Key elements of Auditing There are two types of Auditing, external Auditing and Internal Auditing. Auditing is required for audits of financial statements of a company (Moeller Brink, 2009). The key audit matters are the judgments of auditors in relations to the companys financial and accounting report whether it is right or not. As internal audit, external audit is also very necessary for the growth of the companys existing and improvement. Internal Audit is not enough for the organisation; internal audit can be manipulated with the influence of the board of director to deceive the external users of the financial statement. On the other hand external audit is carried out to determine the fraudulent or any miss statement carried out by the organization for the given fiscal year. Behind this reason external auditing is very necessary for organisations (Monks Minow, 2011).Auditing is also a technique through which the auditors are justifies the financial statement and finds errors which are included with the existing report. Auditing is also a financial method by which the organisation can improve their current situation. Perceptions of the Purpose of External Audit Report Like as internal audit report External audit report also very important for an organisation to improvement their current position as well as in future also. Because financial statement is affected the companys position (Paquet, 2013). If the financial statements are that is balance sheet, income statements and other financial issued which are related to the organisations .Management of any organisation are responsible of preparing the fair presentations of the consolidation. Management creates some rules and regulations on behalf of the organisation. And these rules and regulations are maintained by the employees as well as the high level mangers and the accountants also. Corporate Governance also establishes some laws, rules and regulations and these are must be obeyed by the auditors. But sometimes, there are few entities that not work properly which means they take some unfair practices (Rogers, 2009). To remove these types of unfair practices, external Audit is very necessary for the organisation. On the other hand, the valuation of financial instrumental structure of whole financial instruments which are related to the organisations itself. These financial instruments are includes companies shareholders, stack holders, account payable, account receivable and also some other things which are related to organisations financial status. Revenue recognition is a concept which is related to the long-term contracts which are short term and long term. The process of revenue measures is the total volume of materials which are formulated within the company (Rolfe, 2006). This amount is called as the Group total revenue. Internal Auditors prepare a statement of group total revenue. Here they include balance sheet of a company, income statements, and cash flows, debited and credited amounts. But sometimes, the internal auditors have not prepared the statement according to the rules, which means they take some unfair practice which are not good for the corporate. For t hese reasons External audit is very necessary for the companys growth (Lienert, 2007). External auditors are following the actual terms and conditions. At first the external auditors are check the audit report which is prepared by the internal auditors whether they take some unfair policies or not (Salinger, 2005). The main motto of the external auditors is to maintain the rules and regulations with the accordance to the IFRS. The main purpose of external audit is to mention the factors which are treated unfair practices, and these activities are not good for the companys growth. Evolution of External Audit and the Reason In the recent context, there have been some numerous changes are made in the standard auditors report (SAR) in order to make some improvements. The process includes the addition of wording and related methods for adhering that in order to clarify the copes of the audit. Also, the respective responsibilities of the management and auditors are being done by considering this particular basis (Scharfman, 2009). The wording related requirements are done in order to keep the audit report right in track by maintaining its pace with the globalized economy (Lienert, 2007). Also it is done by considering the complexity if the financial reporting requirements. The need of wording used in the auditing reports done by the external auditors becomes more essential as those reports were not meeting the standard needs and requirements of the financial statement users. The explanation of the wording and its standards lie on the less use of the technical words and present those such a manner that can facilitate the process of good understanding by the readers (Scott Jacka, 2011). The previous problem raised with the wording was the lack of appearance of common meaning for the users who read the report. This particular problem seems to be especially present in the explanations of the respective responsibilities of management and the auditor as well as the characteristics and scope of audit. The evolution in the wordings used in the external auditing reports can be observed as necessary by considering the following issues and concerns: Lack of fair presentation and failing to establish the true and fair view The lack of materiality and the misstatement of the material Failure to provide the reasonable assurance Avoiding these consequences are considered as the relevant or useful in terms of the external auditing report and. Therefore, in order to deliver the precise understanding to the readers or users of the report is judged as important (Lienert, 2007). These are the main reasons for which the basic evolution and needed amendments have been done. Explanation and Critical Appraisal of the IAASB Procurements including Stakeholder The International Auditing Standards Board (IAASB) is known as the independent body which sets the standards for the auditing report by serving those according to the public interests and provides the assurance to maintain the standards by facilitating the coverage of the national as well as international means (Anhal, 2003). Stakeholder play a vital role in audit and thus help to maintain the overall ethic and code of conduct related to the financial statement. In order to do so, IAASB maintains the entire quality and consistency of practices throughout the overall auditing practices in the world and by the way of the process strengthening the public confidence in terms of global auditing and assurance profession. Therefore, it is quite clear that IAASB uses some guided procurement to make the overall practices consistent (Scharfman, 2009). After critically examining the standards and rules of the IAASB, the fact can be established that the entire procurements are done by considering two ways, such as, focusing on the quality and focusing on the auditors reporting. As part of the quality related concern, the fact is quite an evident that the process of global financial stability is supported by the high-quality reporting (Collings, 2014). An auditors duty is to instil the trust in the auditing report by focusing on the quality. The basic importance is given to the quality related aspect in order make it relevant to the requirements of the various stakeholders involved in the financial reporting supply chain (Lienert, 2007). Keeping in the mind about the various interests of the different stakeholders, IAASB had developed the publication of A Framework for Audit Quality: Key Elements that Create an Environment for Audit Quality in order to secure and maintain the quality facilitated by the way of describing different ele ments in a holistic manner for the different firms or organizations. Thus, the standards of the different contextual factors and relevant interactions are maintained with the accordance to the national or international standards (Scharfman, 2009). On the other hand, IAASB had developed some of the procurements in order to focus on the auditors reporting to make that enhanced and provide more value and meaning for the investors and other stakeholders (Ericson, et al., 2003). According to the belief of IAASB, the interests of investors and other stakeholders of the firm can be achieved and the process can be accelerated by the Auditor Reporting project. The above discussion suggests that the entire IAASB procurements are developed by following the inclusion of the input from the general public. Also, the member bodies of IFAC and Consultative Advisory Group that represents the preparers, regulators, users of financial statements are given the priority on the development (Frase, 2000). Conclusion and Final Observations Out if the above discussion, the several facts regarding the best practices of auditing as well as the identification of several issues are being established. According to the fact acknowledgement, the result generated from the dysfunctional governance mechanisms, different types of corporate governance processes and the ineffective risk assurance can lead to the catastrophic impacts on the entire auditing practices. Therefore in order to maintain the good practices in the overall processes of both external and internal auditing, the organization needs to implement the risk management and control various resources (Lienert, 2007). The particular need of achieving the various goals and objectives of the firm, the directors and managers of the firm should need to work on a together basis. In an addition of integrating the required auditing functions, the risk management protocols and devising the proper corporate strategies are essential in order to improve the entire governance framew ork. This particular instance can provide the faith into the corporate market by the way of meeting the interest levels of the various stakeholders (Scharfman, 2009). Therefore, the suggestion can be delivered by the way of observation that regardless of effective and efficient governance practices, the entire process of assurance and auditing function can face the risk of meeting with the failure due to the uncanny activities of the boards and the management (McCrackan, 2005). It is considered that the risk of loss resulting from the failure process or inadequate functions from the external events, people of the organization or systems can lead to lower the governance environment entangled with conformity and assurance. References Anhal, A. (2003).Engaging the board. Santa Monica, CA: RAND. Collings, S. (2014).Frequently Asked Questions in International Standards on Auditing. Hoboken: Wiley. Ericson, R., Doyle, A., Barry, D. (2003).Insurance as governance. Toronto, Ont.: University of Toronto Press. Frase, L. (2000).The curriculum management audit. Lanham, Md.: Scarecrow Press. Lienert, I. (2007).British Influence on Commonwealth Budget Systems. 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