Investigating The Financial Statements Of A Company

The media article indicated that Coles was facing more than $4 million fines, as ACCC argued its behaviour of lying about bread freshness could constitute breach of consumer law (SMH 2015). As the total amount of fines could be considerable, along with a negative impact on reputation, Coles could have entered into financial distress. The reason I chose this article was that most Australian people shop in Coles every week, thus the case is closely related to our life which is worth talking about. Besides, the article covered issue of sales and non-compliance of law which often attract auditors’ attention. The event mentioned in the article posed a risk to auditors in terms of inherent risk. Inherent risk means an auditor fails to identify or correctly understand the business risks that could result in material misstatement (Clubb 2015b). It is apparent that Coles’ behaviour is a non-compliance of law, which is included in business risk (Clubb 2015b). Therefore, auditors need to better understand the event highlighted in the article to increase the possibility of uncovering material misstatement. Auditors are held accountable for the problem because the problem may relate to potential misstatement in financial statements. If an auditor fails to uncover the misstatement, it is likely that he or she will issue a false opinion. However, auditor should express a true and fair view to increase the confidence of the external

With respect to ISA 315, the auditor shall identify and assess the risks of material misstatement shall be identified and assessed by the auditor due to fraud at the financial statement level, and at the assertion level for classes of transaction, account balances, and disclosures. When the auditors identify and assess the risks they should evaluate which types of revenue transactions give arise to such risks.

The auditor must remember that all information collected during the audit needs to be sufficient enough to further the audit process. The information must not only possess the two qualities, relevance and reliability, but it should also test various assertions. For instance, in the audit of Walmart, the auditor should make an attempt to acquire information such as financial statements from the company’s bank, as opposed to acquiring the statements from Walmart’s management. Taking such crucial information from Walmart’s management will put the reliability of that information into question. It is possible that management may manipulate the financial statements, so that they are more appealing to the public and investors. Management may do things

17) The risk that the auditor will NOT detect a material misstatement that exists in an assertion is

Two traditional approaches to fund programs are grants and donations. Grant funding is typically the largest revenue source for a human service organization. Vast arrays of different grants are available for funding purposes. The XYZ Corporation can utilize these funds from government private foundations. The second traditional fundraising method to fund programs is donations. Building a relationship with the community and having a confident CEO that will reach out for donations can impact the amount of donations your organization receives annually. The XYZ Corporation has a large clientele and therefore should be able to gain recognition within the community and gain donations.

The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the FS whether due to error or fraud and to

Section 404 of the act requires that the auditor attest to and issue a report on management’s assessment of internal control over financial reporting. To express an opinion on internal controls, the auditor obtains an understanding of and performs tests of controls related to all significant account balances, classes of transactions, and disclosures and related assertions in the financial statements (Arens, 2010).

It clearly states the responsibilities a company and its executives have when it comes to all financial reports. Furthermore it gives the company clearly stated consequences if they choose to falsify reports or mislead investors or the public of their financial conditions. It is necessary for a company to maintain effective internal controls over their financial reporting so that they can produce financial reports that are reliable and prevent financial fraud. If a company is unable to maintain effective internal controls, confidence and trust of investors will be affected. As a consequence, companies would begin to see a drop in their stock prices. If good internal controls are in place, companies will safeguard from unethical behavior and mistakes which are not allowed in financial statement reporting. A company’s financial reports are looked over very carefully inside and out before an investor will even consider buying stock. The stock prices of companies that disclosed material weakness in ICOFR experienced declines of 5% to 10%.

It is easy to forget that pouring money into a problem will not fix it unless revenue flows continue or are increased and expenses are controlled. Some of the easiest computations can be made with information retrieved from balance sheets and income statements provided by accountants. Ratios such as the current ratio, long-term solvency ratio, contribution ratio, programs and expense ratio, general and management expense ratio, fund-raising and expense ratio, and revenue and expense ratio can provide a picture of where a company stands now compared to where it was in past years and what may need to be done in the future.

The auditor must obtain an understanding of the entity and its environment, including internal controls, so that they can identify and assess the risks of material misstatement on financial statements due to fraud or error and design and perform further audit procedures.

We are required to evaluate the design of the internal controls over risks, which could lead to a material misstatement in the financial statements, and determine whether they have been implemented effectively. Our emphasis will be on identifying and obtaining an understanding of control activities that address the areas where we

The presence of an external auditor allows creditors, investors or bankers to use financial statements that have been prepared with confidence. Although it does not guarantee the accuracy of a financial statement, it provides users with some reassurance that a company’s financial statements give a true and fair view of its financial position and its business operations. It also provides credibility, where in business, is a major asset. With credibility, the willingness of investors, bankers and others to relate and undertake business projects with a company increases. Credibility is also important to build positive reputations.

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide

The role of internal audit is to provide independent declaration that an organization’s threatadministration, governance and internal control processes are functioning effectively. Internal auditors deal with concerns that are essentially important to the existence and success of any organization. Unlike external auditors, they aspect beyond financial possibilities and statements to reflect wider problems such as the organization’s reputation, development, its power on the location and the approach it treats its organizations.In summary, internal accountantssupport organizations to thrive.

A company prepares financial statement to provide information about its financial position and performance. This information is in turn used by a wide range of stakeholders (such as investors, banks, customers, suppliers etc) in making economic decisions with respect to respective economic interest in the company. Typically, in terms of ownership by investment in shares of the company, shareholders though own the company but do not manage it. Therefore, the shareholder and other such stakeholders to get comfort in taking sound decision need independent assurance from the auditors that the financial statements reflect true and fair view of the company affairs in all material respects. Hence, in order to enhance the level of