Auditing for Interactive Learning Approach - myassignmenthelp

Question: Discuss about theAuditing for Interactive Learning Approach. Answer: Introduction Auditing can be considered as the systematic along with independent procedure of inspection of diverse financial accounts of corporations that in turn can help in ascertainment of the fact that they are developed and registered both in a true and fair way. During the process of carrying out audit, Internal Control of the corporation can be regarded as a vital part/section. In itself, from the perspective of auditing and system of accounting, internal control indicates towards the system that can ensure that all the accounting objectives of the business concern are properly attained. Therefore, it can be hereby mentioned that internal control is liable for maintaining functional effectiveness along with level of efficiency of the business concern. For that reason it can be clearly mentioned herein that effective execution of the internal control mechanism has utmost significance in the corporations. However, the primary aim of the current study is to analytically evaluate the differen t aspects of the internal control in a specific business corporation. Again, moving further, the current study also highlights diverse key limitations of firms internal control within a specific corporation in a bid to make certain the development of effective remedial stratagems. Literature Review Five Important elements of Internal Control As rightly put forward by William Jr et al., (2016), the internal control has key significances within a specific business concern. Particularly, it can be hereby specified in this context that there are mainly five important elements of internal control that have influence of the external audit of the business concerns. Control Environment: As rightly mentioned by William Jr et al., (2016), the control environment can be referred to as the approach of management along with attitude of members of the staff to institute internal control. In addition to this, two major elements of the control environment include governance as well as management function. In essence, it is the liability of the management to institute effectual environment of control founded on the principles of corporation, accounting standards as well as policies (Knechel Salterio, 2016). Execution of the effectual internal control also aids the external assessors in comprehending the specific philosophy along with the nature of the company management since it is highly useful in audit functions. Procedure of risk assessment: In itself, assessment of risk can be considered to be an important aspect of internal control that can help in recognition of major material misstatements in the financial assertions of the corporations. In particular, management of the business concern is said to play an effective role since they are said have the liability to determine the risks with the assistance of the internal control (Knechel Salterio, 2016). Recognition of key material risks by the firms management assists external assessors as the main risks are already recognized. Process of management of information and communication: This particular element entails the financial information as regards organizational control necessarily needs to be communicated with the management in an effectual manner (Acito et al., 2015). It is necessary for the external assessors to acquire comprehensive understanding as regards information and process of communication in the business concern. Again, effective information and communication system also extensively assists external assessors. Activities of control: The control actions indicate towards the utilization of effectual accounting system, effective information technology as well as other systems in a bid to enhance the overall effectiveness of the system of internal control within business concerns (Acito et al., 2015). Essentially, with the assistance of these types of activities, the external assessors of the corporation can comprehend the nature of endorsement of the firms management. Besides this, all these actions also play a vital role in the process of shielding and at the same time securing secret financial information for the external assessors (Power Gendron, 2015). Monitoring: The system of monitoring can be regarded as a vital component of internal control since this assists in the process of the evaluation of the overall effectiveness of the entire process of internal control. In itself, this can be hereby specified in this case that report presented by the management of the corporation on the monitoring procedure is crucial for the external assessors of the firm. In essence, this report essentially aids all the external assessors to detect loopholes/gaps in the system of internal control. Thus, this can be considered to be a crucial part of the system of internal control (Beasley, 2015). Advantages of effective internal control The external assessors of a corporation can avail key opportunities by the successful execution of the system of appropriate and effective internal control. Some of the important advantages of the same are hereby mentioned below: Reliability of financial reporting- Essentially one of the important advantages of internal control is that it assists in the process of development of reliable financial assertions for undertaking diverse actions of external assessment. However, with the assistance of effectual system of internal control, finance managers of business concerns can acquire both true as well as fair presentation of pecuniary information. This can aid in the process of development of the error free financial pronouncements for the corporation. In essence, the external assessors can undertake the audit functions by taking into consideration financial declarations (Glover et al., 2016). Maintenance of compliance- It is the accountability of the internal control of the corporations to determine the fact that accounting as well as financial operations are carried out as per appropriate principles and accounting standards. During the period of registering financial pronouncements, diverse financial managers have the need to conform to the directives as well as notions of appropriate accounting standard. As such, this specific aspect can help in lessening the overall work stress from the external assessors, since they do not have the necessity to examine the conformation (Louwers et al., 2015). Reliability-Yet another major benefit of internal control is that it assists in the process of enhancement of reliability of accounting system and the accounting information presented in the reports. Basically, external assessors have the need to acquire enough confidence on the financial as well as accounting information by the company management. Operational effectiveness- Execution of the effectual internal control, can assist in the process of enhancing overall level of effectiveness of business functionalities of the business concern. It is for this purpose, the external assessors do not the necessity to encounter difficulties whilst undertaking audit functionalities (Knechel Salterio, 2016). Augmentation of the performance of external auditors As rightly put forward by DeFond Zhang (2014), assessment of risk can be considered to be a significant part of internal control and assessment of risk is said to play an important part in the process of augmentation of performance of external assessors. These days, it has become very important on the part of the external assessors to acquire comprehensive understanding regarding diverse aspects of both management as well as accounting. In addition to this, this effectual process can also aid the auditors in identification as well as assessment of risk associated to material misstatement in a more effectual manner. Arens et al., (2016) asserts that data analysis can be regarded as an integral part of internal control of a corporation. Basically, based on the analysis of amassed data, external assessors can gain deep insight and comprehensive understanding as regards specific threats of auditing firm by carrying out tests of huge target population for the study. Case Studies Particularly, the instance of Department for work and pension in United Kingdom can be specified. As per Mark Repley who happens to be the head of the department of internal audit of the firm DWP, the process of internal audit can be related to the life cycle of the program of different projects of particularly DWP. The management also mentioned the fact that the internal audit of the firm DWP delivers consistent pronouncements of periodic audit engagement actions together with other internal audit functions. Therefore, in the present instance presented on DWP, it can be hereby mentioned that internal control mainly plays a very significant role in process of development (Wang et al., 2013). Limitations of system of internal control There are certain limitations of internal control that are hereby mentioned below: Collusion: The system of collusion can be observed at the time when more number of individuals is accountable for monitoring different systems of internal control. Human Fault: There are several examples of human error that occurs at the time when individuals accountable for internal control commit mistakes. As such, this can be regarded as a major restraint of internal control (William Jr et al., 2016). Management Override: This can occur at the time when management of a firm accountable for firms internal control necessarily overrides important facets of internal control. Omitted segregation of responsibilities: Under appropriate system of internal control, it is obligatory to separate out liabilities among different members of the administration. Lack of support of the management: It can be hereby observed that management does not deliver adequate support to the firms system of internal control (Hayes et al., 2014). Conclusion In conclusion, it can be hereby mentioned that the current study helps in understanding the fact that internal control is a significant factor in the procedure of audit. Based on the findings presented in the current study, it can be hereby stated that there are mainly five different elements of internal control that has an impact on external business control. Essentially, the five components include control environment, assessment of risk, technology as well as communication, activities of control and system of monitoring. Essentially, all these facets have immense impact on different operations of external audit. Additionally, it can be hereby witnessed that effectual execution of internal control delivers proper assistance to diverse external assessors such as ensuring delivery of dependable financial information, presenting effectual pecuniary reports and many others. According to ASA 315, proper execution of effective internal control can assist in enhancement of performance of external assessors. References Acito, A., Hogan, C., Imdieke, A. (2015).Integrated Auditing Standards and Financial Reporting Quality. Working paper, Michigan State University. Arens, A. A., Elder, R. J., Beasley, M. S., Hogan, C. E. (2016).Auditing and assurance services. Pearson. Beasley, M. S. (2015).Auditing cases: An interactive learning approach. Prentice Hall. DeFond, M., Zhang, J. (2014). A review of archival auditing research.Journal of Accounting and Economics,58(2), 275-326. Glover, S. M., Prawitt, D. F., Messier, W. F. (2016). Auditing and Assurance Services: A Systematic Approach 10th. Hayes, R., Wallage, P., Gortemaker, H. (2014).Principles of auditing: an introduction to international standards on auditing. Pearson Higher Ed. Knechel, W. R., Salterio, S. E. (2016).Auditing: Assurance and risk. Taylor Francis. Louwers, T. J., Ramsay, R. J., Sinason, D. H., Strawser, J. R., Thibodeau, J. C. (2015).Auditing assurance services. McGraw-Hill Education. Power, M. K., Gendron, Y. (2015). Qualitative research in auditing: A methodological roadmap.Auditing: A Journal of Practice Theory,34(2), 147-165. Wang, C., Chow, S. S., Wang, Q., Ren, K., Lou, W. (2013). Privacy-preserving public auditing for secure cloud storage.IEEE transactions on computers,62(2), 362-375. William Jr, M., Glover, S., Prawitt, D. (2016).Auditing and assurance services: A systematic approach. McGraw-Hill Education.