External Auditing Process and Its Stages Assignment Sample

Introduction

Money has always been the primary means of ensuring the continuation of society and the relationships between various manufacturers, and there is no use in disputing this. As the standard by which the worth of a particular good may be assessed, it assisted people in determining their pricing structure, which was crucial for the profitable trade of goods. Furthermore, it is clear that this built system evolved alongside society, gaining new characteristics and growing more complex. The establishment of banks and the growth of this industry both made significant contributions. In light of this, it is feasible to assert that the contemporary financial system appears to be both highly efficient and complex. Due to its dependence on the primary contributors, a number of financial institutions, it had to develop a particular mechanism that would shield it from numerous speculative risks (Millichamp & Taylor 2012). Because of this, a cure known as an audit was developed and introduced. The given remedy's primary objective is to keep an eye on the financial health of every business that operates in relation to a nation's financial system (Millichamp & Taylor 2012). Additionally, it ought to guard against several failure causes for this specific business. Based on these data, it is possible to acknowledge that this treatment has grown to be one of the most significant problems in the modern world.

Importance of the Issue

It is impossible to discuss the audit without bringing up how it affects how various organizations operate and how crucial it is. First of all, it is feasible to assert that frequent audits of various entities are a guarantee of the financial system of any state operating steadily (Planning the external audit n.d). Numerous possible infractions or errors that could be discovered throughout the audit process could have a major negative impact on a company's and state's revenue (Meaning And Objectives Of Periodical Audit Or Final Audit Or Complete Audit n.d.). This truth has the potential to harm all agents. Large entities should provide financial statements so that they can be examined and verified with this in mind. These remarks are typically found in a select few organizations. Owners, vendors, employees, and other parties are what are referred to as stakeholders (Millichamp & Taylor 2012). Therefore, numerous audit agents could demonstrate the veracity of these specific financial accounts. This check's primary objectives are to ensure that stakeholders receive reliable information and that the financial plan has not changed (What is the difference between internal audit and external audit? n.d.). It should be noted that one of these solutions, the external audit procedure, is employed to conduct an audit for significant organizations.

Eternal Audit

Considering these details under the auditing assignment, it is clear that external audit is crucial in the current environment. First and foremost, it should be clarified that the word "external audit" refers to a periodic or specific audit carried out by an external (external) accountant (Handling an external audit n.d). It implies that a person who is unbiased and independent of the company analyses the financial aspects of its operation. Finding out if the financial accounts are true and reflect the actual situation is the major objective of this exact method. It is evident that it is a lengthy, intricate process that calls for specific processes (Assessing the effectiveness of the external audit process 2013). Keeping this in mind, the process is always broken down into two steps. The first one, referred to as an interim audit, examines plans and financial data. The second stage, sometimes known as the final audit, focuses on the financial accounts and is typically carried out following the end of the accounting period. These two phases, which are both crucial for a thorough review of a company's operations, aid in understanding the key components of the external audit process, which calls for more research.

Interim Audit

It should be noted that the study of a company's goals is the first step in the typical interim audit procedure (Meaning and Objectives of Interim Audit n.d.). The primary objectives of a corporation should be taken into consideration by a skilled and independent agency to see if they are being met or not. Additionally, one should keep in mind that interim audits are typically conducted at the conclusion of the fiscal year. Because of this, an impartial auditor also checks a company's financial records to confirm them (Biery 2013). This procedure's primary goal is to ensure that a corporation abides by the key rules that govern transactions and financial processes and are recognized in a nation. The necessity of this process is clear because it ensures that every business or organization is operating legally and clearly. Taxes receive a lot of attention as well, and they should be recorded in a company's financial records. Unfortunately, tax dodging is a common technique that unethical businesses utilize to get additional benefits. To make a business obey the law and pay taxes, an interim audit method should identify these attempts and impose certain fines. With this in mind, the relevance of the intermediate audit procedure can be emphasized strongly.

Final Audit

However, the final audit should come next, concluding the examination of a company's operations and determining whether or not it complies with the fundamental laws. With this in mind, it is possible to declare that an independent auditor examines a company's financial statements to determine whether or not they are set up in a way that is consistent with the company's primary objectives and financial policies.

Additionally, an auditor should draw a specific conclusion about how a company is operating at this point. In other words, it is feasible to say that all the data obtained throughout the process of examining financial reports and doing an analysis of some other crucial elements of a company's operation is compiled and summarised. At this point, an auditor should determine if a business operates in line with the primary laws and whether its financial records are transparent. This judgment affects how a business will operate in the future and determines whether or not sanctions should be imposed (Audit Finalization 2015).

Conclusion

With this in mind, it is possible to draw a certain conclusion after analyzing the key components of a subject, like an external audit. It should be noted that it comprises two parts, the interim audit, and the final audit, both of which are crucial for the process as a whole. In order to determine if a company's financial sector complies with the law, an auditor reviews the company's financial records and statements (Step 8: Final Audit Report Distribution n.d). As a result, it is reasonable to draw the conclusion that the external audit process is crucial since it helps shield the financial industry from fraud and speculative activity.

Reference List

Assessing the effectiveness of the external audit process 2013, Web.

Audit Finalization 2015, Web.

Biery, M 2013, The role of external auditors in detecting financial statement fraud,

Handling an external audit n.d., Web.

Meaning And Objectives Of Interim Audit n.d., Web.

Meaning And Objectives Of Periodical Audit Or Final Audit Or Complete Audit n.d., Web.

Millichamp, A & Taylor, J 2012, Auditing, Hampshire, Cengage Learning EMEA

Planning the external audit n.d., Web.

Project Audit & Quality Assessment Models Assignment Sample

CHAPTER 1: Introduction to Project Management

A project is carried out to produce desired results within a set timeframe while effectively utilising the resources allotted (fund, equipment). As a result, the project is limited not only by time but also by budget and the calibre of the job. Therefore, projects must be managed to achieve their goals. We can therefore conclude that project management is all about accomplishing particular (predetermined) goals through resource planning, organisation, motivation, and control. Realizing all auditing assignment and project goals and objectives while adhering to the limitations on scope, quality, money, and time is the main difficulty of project management.

1.1 Various Definitions of Project Management

A project is a transient organisation established to deliver one or more commercial items in accordance with a decided Business Case.-PRINCE2.

An activity wherein human capital and financial resources are arranged in a creative method to deliver a distinctive scope of work of a given specification, frequently within the limits of cost and time to make beneficial changes defined by quantitative and qualitative goals.-Project Management Association (APM)

The planning, organising, directing, and control of corporate resources for a relatively short-term purpose that has been formed to achieve certain goals and objectives is known as project management.

Additionally, according to H. Kerzner (2009), project management makes use of the systems approach to management by assigning functional staff (the vertical hierarchy) to a particular project (the horizontal hierarchy).

1.2 Project Audit

Projects are always organised to produce the desired end result. However, it is almost never possible to complete all tasks within the allotted time span. As a result, a system of some kind must be in place throughout the project to monitor performance and ensure peak performance. "PROJECT AUDIT" is one such system that is now required because it investigates the work quality while keeping to a timetable and expedites work progress. Investigating factors that impede project progress is the primary goal of project audits. Definition "Project audit is a standards verification process of the extent to which project has been compiled with rules and principal of project management," claims the European Project Centre… Any stage of a project, including inception and closure, can be audited. Typically, the owner determines the project audit's scope. We can broadly divide the project audit into two areas. 1) Based on performance 2) based on finances, or occasionally a combination of both.

The primary goal of a financial audit is to acquire assurance regarding financial statements, therefore during this procedure, we look for any fraud or errors therein. While the most important criteria for a performance-based audit are on-time delivery, job quality, and staff (labour) audits.

Owners occasionally hire a third party (external consultant) throughout the project audit process, yet this also occurs when a team from their own internal department is given the task. Owner selects the precise concerns and inquiries to be looked into, which in turn selects the specific audit objectives. Following that, it is the owner's responsibility to produce all relevant documents on both his own behalf and on behalf of the contractor (in case construction project).

In a building project, the owner requests that the contractors keep records of labour, costs, materials, etc. The auditor may need to see all of these data. The following records, among others, may be asked to be reviewed as part of the audit.

Following stages can be used to categorise a project audit: ;

a. Audit Interview
b. Extensive Research
c. Report Creation

Stage 1: Audit Interview

In the first category, managers or sponsors are interviewed in-person to better understand their needs and goals. In these situations, a questionnaire is created prior to the interview and sent to the project's core management team. Consequently, the final interview offers a deeper understanding of the project's aims, difficulties, and ambitions. Open-ended to closed-ended questions (Business Improvement Architect) are possible. In this approach, some questions are posed in order to gain insight from project participants who are unable to participate in interviews.

These are illustrations of audit question types.

• Do you think project plans are important?
• Are you happy with how the project is organised and run? What degree?
• Will the project meet its needs, objectives, and goals?
• What steps can be taken to improve project performance?
• Have strategies been put into practise correctly?

Stage 2: In-Depth Research:

This audit interview stage is being critically analysed. At this level, a detailed study of the responses from the audit interview stage is conducted. This critical evaluation aids in evaluating current problems, issues, and difficulties as well as related documentation.
The project's goal and scope, milestones, team composition, and resource requirements are all thoroughly examined at this point.

• The project plan and vendor plan are evaluated to determine the team structure and scope (Business Improvement Architect)

• This stage is quite helpful since it identifies the lessons to be learned from previous initiatives and assesses overall performance.

Stage 3: Compilation via Report Development:

This stage involves appropriately assembling the data from stage one and having it analysed in stage two, as well as reporting and compiling it to create documents for future use. This report can be used as advice or a guide to help future initiatives perform at a higher level. Therefore, reporting has a significant influence on upcoming projects [3] [4]. This step provides performance measurement as well as a manual for avoiding mistakes and errors.

Due to the following factors, an audit is a crucial tool for project-oriented businesses.

• It aids in the identification of sufficient plans that aid in dealing with present concerns and problems that are project hindrances.

• Specify the success factors, such as the budget, resources, quality control, stakeholder expectations, and so on.

• Measuring the project's associated risk is useful.

• Project audit reports can aid in future project avoidance by identifying flaws and errors.

• The audit report is also used to determine whether present practises are keeping the project on track or off-track, and it serves as a tool for project improvement for future endeavours.

• It is also helpful, particularly for lengthy projects.

1.3. Construction Project Auditing,

The audit timetable and approach may change for the construction business. Economic and financial issues are of the biggest importance to project-oriented companies, and businesses are finding it harder and harder to facilitate capital projects and keep them on schedule and within budget. Construction management is aided by a variety of tools and procedures, including control approaches, risk management, and cost management tactics. Due to the significant financial investment made in infrastructure projects, it is crucial to validate both the standards and the project's results. There are many different types of construction project audits, and they are typically selected early on in the project based on the project's risk profile. The organisation receives confirmation through construction audits that its investment has been effectively distributed during the course of the project.

The construction sector conducts the following types of quality audits:

? Third-Party Audits for Accreditation Purposes
? Prequalification or Pre-selection Audits
? Project internal Audits
? Project Managers may conduct internal audits of projects
? Specific internal audits, or audits on behalf of clients.
? Internal "Works-Audits," "Small Audits," or "Observations":
? Different audits

1.4 Project Life Cycle

Figure 1.2 illustrates a straightforward project life cycle structure.

1.4.1 Initiation

The project's scope and objectives are determined during the first phase, and potential solutions are discussed in order to meet objectives. A feasibility study is carried out to see if each option meets the project aim, and a suggested course of action is then decided. In the end, the feasibility assessment tells us whether or not we should proceed with the project. [4] A project is started to deliver the accepted solution as soon as the suggested solution is approved. Following the appointment of the project manager and project team, the project enters the detailed planning stage.

The process of starting a project involves the steps below.

? Creating a business case
? Conducting a feasibility study
? Defining terms of reference
? Establishing a project office
? Selecting a project team
? Conducting phase reviews.

1.4.2 Planning

After the project's initiation phase, the objectives and scope have been established, and the project team has been selected, it is now time for comprehensive planning to make sure that the tasks carried out during the execution phase are appropriately sequenced, resourced, carried out, and controlled. This stage offers a very thorough approach to achieving predetermined goals and objectives. In this phase, a project plan that details the tasks to be completed while employing efficient methods is prepared. In addition to this, the following plans must be made during this phase.

The project plan - outlines the tasks, activities, and deadlines.

Resource Plan - Required materials, labour, and equipment.
Financial Plan - detailed explanation of the cost of supplies, labour, and equipment.
Quality plan - Describe the necessary and ensured levels of quality.
Communication plan - Details about stakeholders to build successful communication.
Risk management - strategies are included in the risk strategy.

After this point, the project will be ready to be carried out as it has been meticulously prepared.

1.4.3 Execution

At this stage, the written project plan is put into practise on the ground. Various personnel carry out their assigned jobs, and during meetings, progress information is discussed. Stakeholders are updated on project status and progress reports throughout the phase, which ultimately places an emphasis on metrics such as profit, cost, schedule, and quality. The final phase of a project's life cycle is the one with the greatest duration. due to the fact that in this case the deliverables are created and delivered to the clients for approval. The project manager oversees and controls the necessary tasks, materials, and costs to guarantee that the client's requests are met.

1.4.4 Closing

This is the project's last stage, also referred to as the completion stage. The necessity of handing over project papers to the business, terminating supplier contracts, releasing project resources, and notifying all stakeholders that the project is complete are all stressed during this phase. A project review must be done at the closeout phase. The goal is to gain knowledge from this experience that will help in future endeavours. What worked well? and "What do we want to change for the next time?" are the two questions that need to be posed.

1.5 Management Function

Many experts have categorised management functions. According to George and Jerry, the four most important management functions are planning, organising, acting, and controlling. Henry Fayol, however, defined management as "to forecast and plan, to organise, to command and to rule."

The management function is best described by the word "POSDCORB" coined by Luther Gullick. Planning is referred to as P, organising as O, staffing as S, directing as D, coordinating as Co, reporting as R, and budgeting as B.

However, the management functions provided by KOONTZ and O'DONNEL—planning, organising, staffing, directing, and controlling—are universally acknowledged.

1.5.1 Planning

Planning has been regarded as management's most fundamental task. Various future courses of action are planned and decided during this time. The best plan of action is then chosen to attain the predetermined goals. Planning, in the opinion of KOONTZ, addresses 1) what to do? 2) When should I? What should I do? Planning is primarily concerned with where we are right now and where we want to be in the future. Therefore, planning is the process of determining future courses of action with the intention of achieving preset desired goals. Planning is therefore a methodical process of considering numerous approaches to achieving a given scope of work. Planning is essential to ensuring accurate resource usage (human & non-human).

So, in a nutshell, problem-solving and decision-making are the core components of planning. Planning is an intellectual activity that helps people avoid risks, uncertainties, and other problems.

1.5.2 Organizing

It is the process of deciding how to allocate and use human and financial resources most effectively in order to achieve set objectives and scope. "To organise a firm is to supply it with everything needed for its functioning," said Henry Fayol, "including raw materials, tools, capital, and employees." The following processes are involved in organising: 1) List of critical tasks to be completed 2) Activity classification 3) Assignment of duties 4) Establishing ties of and for accountability.

1.5.3 Staffing

Choosing the correct person for the position is the key to effective staffing. Numerous types of persons with quantifiable qualifications and skills are needed for a variety of positions. The most important thing is to hire the right person because everyone is necessary to the effective completion of the project's goals and objectives. The managerial function of staffing, according to Kootz & O'Donell, entails manning the organisational structure through proper and efficient selection, appraisal, and development of employees to fill the functions intended for the structure.

Manpower planning, recruitment, placement, training, professional development, compensation, performance evaluation, promotion, and transfer are all aspects of staffing. [5] [6]

1.5.4 Directing

It is a component of managerial responsibility to activate organisational techniques so they can effectively achieve organisational goals. Because staffing, planning, and organising are merely steps in the process of getting the work done, it is thought of as the enterprise's "life-spark" that ignites employee action. The inert-personnel part of management known as direction is concerned with directly influencing, leading, monitoring, and inspiring subordinates in order to achieve organisational goals. The following are elements of direction:

? Supervision
? Motivation
? Leadership
? Communication

The term "supervision" refers to a superior's oversight of a subordinate's work. It is the process of supervising work and employees.

To motivate someone is to enliven, stimulate, or inspire them to work with zeal. The incentives can be positive, negative, monetary, or non-monetary. [5] [6]

The process by which a manager directs and influences the work of subordinates in the intended direction may be referred to as leadership.

Communication is the process of passing along knowledge, insight, opinions, etc. to others. It serves as a tool for comprehending information. [5] [6]

1.5.5 Controlling

It suggests measuring achievement against criteria and, if necessary, adjusting divergence to confirm that administrative objectives have been met. Usually, controlling actions are taken to maintain each situation's norms. A successful control system foresees deviations before they really happen. "Regulatory is the process of examination whether or not sufficient progress is being made towards the objectives and goals and acting, if necessary, to correct any deviation," claims Theo Haimann. Koontz and O'Donnell state that "controlling is the measurement and modification of subordinates' performance activities to ensure that the enterprise objectives and strategies desired to get them are being achieved." Thus, controlling involves the following steps:

1. The creation of performance benchmarks.

2. Evaluation of performance in real life.

3. Assessing actual performance against standards and identifying any deviations.

4. Remedial activity.

A specific set of guidelines and instructions must be followed in order to accomplish the desired goals and objectives. In this section, a few of the project functions are explained. [3] [4]

CHAPTER 2: Types of Project Audit

The following are the several audit types utilised in the construction industry: [9]

1. Prequalification or Pre-selection Audits: These audits look at how an organisation or a project is operating with the intention of assessing a subcontractor or supplier's (including designers') arrangement before an agreement is signed with them.

2. Third-Party Audits for Accreditation: This is the stage where an outside authorise association is welcomed (or, more accurately, "enlisted"). They will assess a development extension with the goal of awarding the Certificate (commonly required by the Client).

3. Internal audits of the project's quality management system are often carried out by the project's quality team (the Quality or QA/QC Department), and they focus on looking at the internal processes that have been established for this Project specifically. Additionally included in this class are audits of designers and subcontractors.

4. The parent organisation conducts specific internal audits; these are often carried out by the department in charge of quality (Contractor or other). They are primarily focusing on tracking how the Project is being carried out, as per the business strategies. These are also quite common in joint ventures when each partner monitors the system and performance of the project.

5. Audits by the Client or Client's agents (Project Managers): These are Audits requested by the Client or Client's delegates in order to make sure that all legally required requirements regarding the quality administration arrangement of the Project are established. The Project's Quality Department frequently contacts the Contractor during the Audit. One business where the "customer" can undertake reviews as the "thing" is being created is the development sector.

6. Internal "Small Audits," "Observations," or "Works-Audits": These are usually brief assessments conducted by the Quality Department of a Project to ensure that the approved documentation (Method Statements, Inspection and Test Plan, Procedures, and so forth) is followed on location. These are occasionally also carried out as "Quality Tours or Walks," and it is typical for the Client's delegates to participate in (or view) these as well.

7. Other Audits: These are typically impromptu assessments that the administration requests following an incident. Fundamentally, they can fit under any of the aforementioned categories.

CHAPTER 3: Overview of various project audit models

3.1 Portfolio, Program and Project Management Maturity Model (P3M3)

Axelos, a joint venture between the UK Government and Capita that took over responsibility for materials in January 2014, is currently offering P3M3. Prior to this, P3M3, which has stimulated a great deal of research in the topic of wander organisation, was claimed by the Office of Government Business (OGC), a division within the UK Government. The P3M3 largely borrows from the Carnegie Mellon College's Capability Maturity Model Integration (CMMI) and attacks a related strategy. The Software Engineering Institute (SEI) of Carnegie Mellon College initially developed a crude change to the model, around 1986 and 1991. Then, as a result of its flaws, authorities improved it as the P3M3, which is taken into account when in doubt and a quick review of headings for starting any project and its administration, portfolio organisation, and programme management.

This model holds the success of an endeavour and makes use of fundamental ranges. The P3M3 model recognises exercises that must be performed at the project and programme levels as well as inside the organisation and takes responsibility for making them happen [9]. This can be used to a variety of organisation types, including private, open, adviser, and planning, and it never focuses on a certain sector. The P3M3 model suggests that searches for fundamental project requirements have been divided into two groups, referred to as Mature and Immature. In order to keep the task on schedule and in accordance with a continuing arrangement with a high standard for developing a relationship, there are reasonable and sufficient standard systems and rules. Managers monitor and control the progress of the project against the project plan and consistently take the partners' satisfaction into account.

P3M3 focuses on the seven associated Process Perspectives, which are included in all three models and are surveyable at each of the five Maturity Levels.

3.1.1 Advantages of utilizing P3M3

In order to optimise value for money from investment, associations must understand the optimal degree of execution in their purpose and have a realistic understanding of what they are capable of. Not all associations will be able to reach the highest level, and for some, the centre levels may be adequate to fulfil their professional goals and ambitions. Although it is possible to achieve short-term execution advantages by using P3M3 to identify and fix execution flaws, execution modification should be seen as a long-term process (Figure) in order to reap the greatest benefits from using P3M3. There are a number of reasons why associations might use a maturity model to evaluate how they are currently performing, for instance,

1. Justifying interest in administration changes for portfolios, programmes, or projects.
2. Getting recognition for the effectiveness of administration in order to support suggestions.
3. Developing a deeper understanding of their strengths and weaknesses with the aim of approving change.

P3M3 has a maturity framework with five levels, and these levels are:

Level 1 – awareness of process
Level 2 – repeatable process
Level 3 – defined process
Level 4 – managed process
Level 5 – optimized process

Table 3.1.1 Five Levels P3M3 model

3.1.2. Maturity Level Explanation

Level 1 – Awareness of process

Typically, procedures are not reported. There aren't any prepare descriptions or there are only a few. They will typically be acknowledged since administrators may have some awareness of the important actions, but actual practise is governed by circumstances or personal preferences and is incredibly subjective and variable. In spite of the possibility that there will eventually be a common obligation to process advancement, procedures are in this way undeveloped.

Undeveloped or insufficient processes suggest that the crucial tasks for better practise are either not carried out at all or are only partially carried out. If there is any instruction or supporting paperwork, it will likely be little, and even terminology such as "business case," "chance," "problems," and so on may not be universally understood by all superiors and co-workers.

Although a Level 1 business may have carried out a number of successful initiatives, these frequently depend on the skills of a small group of important personnel rather than the knowledge and capability of the entire organisation. Such "accomplishments" are typically achieved through budgetary or hypothetical plan overspending, and because Level 1 associations lack tradition, they frequently overcommit themselves, abandon forms in times of crisis, and are unable to accurately recount previous successes. There is little any planning, little government funding, and little preparation acknowledgement.

Level 2 – Repeatable process

The association will be able to demonstrate that basic management has been created, such as monitoring expenditure and allocating resources, and that procedure are growing, by making reference to specific actions. There are important individuals who can demonstrate their successful reputations and the association's capacity to build on earlier successes in the future through them.

Process discipline is unlikely to be complete, but where it is present, activities are carried out and managed in accordance with their reported plans, for example, project status and conveyance will be obvious to management at defined foci, for example, on hitting major milestones. Even though the best management will lead the way in some activities, execution and involvement levels may vary.

Key staff members have probably received important general training. There is still a significant risk of going beyond budget and timing estimates. Uncertainty and irregularity in business targets, the absence of fully integrated hazard administration, limited experience in change management, deficiencies in communications strategy, and insufficient measures of accomplishment are some of the key factors that may have preconditioned the association to experience difficulties or disappointment.

Level 3 – Defined process

The management and specialised techniques required to achieve the hierarchical purpose will be disclosed, institutionalised, and to some extent incorporated with various business models. Process ownership and a built-up process group with responsibility for maintaining consistency and process improvements across the association are likely to exist. Such improvements will be planned and managed, possibly in response to assessments, with organised improvement and adequate resources being addressed to ensure that they are composed across the association.

The best management are consistently locked in and provide responsive, knowledgeable support. A system of training will likely be established to improve people's knowledge and skills so they can perform their given roles more quickly. Continuous use of partner audits of reputable products will be a significant component of value management in order to better understand how procedures can be improved and eliminate any potential weaknesses.

The extent of metrics, process descriptions, and procedures, including expressed aims, inputs, activities, roles, check steps, outputs, and acknowledgment criteria, is a crucial distinction between Level 2 and Level 3. This enables more proactive oversight of processes using an understanding of the interactions and dimensions between the process and its outputs. In accordance with the guidelines, these standard procedures can be modified to fit special circumstances.

Level 4 – Managed process

Develop behaviour and procedures that are quantitatively monitored, i.e., managed using measurements and quantitative methods, is how level 4 is defined. Quantitative targets for quality and process execution will be demonstrated, and they will be used as criteria in process management. The estimation data acquired will be essential in decomposing the portfolio and identifying the current limit and capability restrictions. It will also contribute to the association's overall execution estimation structure. The
Best management will submit themselves, engage others, and aggressively seek out creative ways to achieve goals.

Management may effectively manage forms and identify ways to change and adapt them to particular activities without sacrificing quality by using process metrics. Organizations will gain from improved process execution consistency.

Level 5 – Optimized process

The organisation will focus on simplifying its quantitatively controlled processes to take changing business requirements and external variables into account. It will anticipate upcoming request limits and skill requirements to handle conveyance challenges, such as portfolio analysis.

The necessity and opportunity for ability and performance improvement is strengthened by the way that the best managers are perceived as role models.

It will be a learning organisation that will spread the knowledge discovered from earlier audits. By choosing different ways to accelerate what's more, share understanding, the association will improve its ability to quickly respond to changes and opportunities.

The association will be able to better understand the causes of variation thanks to the information it gathers from its process and item measurements, which will enable it to improve performance. The association will be able to show how quantitative feedback from its implemented processes and approval of innovative ideas and advancements encourage consistent procedure change. A robust structure will be in place to handle organisational controls, execution administration, and governmental challenges. Through reading, sponsorship, duty, arranging, asset assignment, chance management, and benefits acknowledgment, the association will be able to demonstrate a strong arrangement of hierarchical goals with strategies for accomplishment.

3.2 Prince2 Maturity Model (P2MM)

This concept can be thought of as P2MM and has a position in the UK Office of Government Commerce (OGC). Using the PRINCE 2 Project Management Method, which was developed by a related organisation in 1989, this approach enables associations and businesses to assess their growth. In reality, several prestigious firms have used PRINCE2 as a project management technique with the aim of improving execution. Numerous publications published by Axelos [1-4] depict the application of the technique for the related associations. GDF SUEZ E&P UK, Scheidt and Bachmann GmbH, US Federal Government IT Projects, and Konica Minolta Business Solutions Europe GmbH.

Additionally, the Portfolio, Program, and Project Management Maturity Model serves as the foundation for the PRINCE2 Maturity Model (P3M3). They share a similar structure as a result. The Prince 2 Maturity Model employs the following five growth levels, which can be delegated:

1. Process awareness
2. Continual improvement
3. Specified Procedure
4. Well-Ordered Process
5. Improved Process

The issue that arises is how to evaluate each maturity level. Axelos has disseminated a report that speaks to a respectable response to the earlier query:

Mature Level Assessment

Level 1: Has the association identified tasks and a backup plan for guiding them?

Level 2: Does the organisation adopt the PRINCE2 Method and put it to use on all projects to create a repeatable process?

Level 3: Is the PRINCE2 methodology modified to meet the requirements of different tasks?

Level 4: Is the organisation capable of directing estimates for project management execution and dealing with its quality in order to demonstrate improvements in future execution forecast?

Level 5: Does the organisation oversee continuous improvements to its processes so it can evaluate how they are being used now and in the future?

Similar to the previous model, this one focuses on seven processes that cover the essential elements of the associations extend administration strategy. Any stage of development can be used to examine these techniques. They could be shown with the following:

? Stakeholder engagement
? Risk management
? Organisational governance
? Financial management
? Benefits management
? Management control
? Resource management

To provide insight on the substance of each process, a further arrangement of previous procedures will be made. In addition, it will provide guidelines for separating children and evaluating their level of maturity.

This process ensures that the costs are evaluated and then monitored throughout the project time frame for the Financial Management. Additionally, the financial management will take into account the availability of assets to back up the wagers without ignoring the wager of various actions that may result in various benefits.
Additionally, a crucial business handle in this approach is Risk management. It mostly negotiates with the opportunities and weaknesses present in any venture. The aim is to reduce the risk of vulnerabilities occurring by improving various systems. There should be adequate evidence to show that precautions are taken against the risks.

The Resource Management is also taken care of using this methodology. In fact, the management aspects of numerous types of material and HR are covered by this technique. The process evaluates how well the association uses its resources to achieve its objectives.

Similar to that, this model explores the Stakeholder Engagement processes. In most cases, a review of the internal and external partners is conducted to determine the level of support and involvement. The communication channels address a component of the stakeholders' engagement.

When it comes to Organisational Governance, it mostly deals with the transmission of actions in connection with organisational strategies.

Additionally, it should be emphasised that the formal appraisal must be completed by a PRINCE2 Registered Consultant (P2RC), in accordance with the guidelines provided on the PRINCE2 official website. The Association for Project Management (APM) in the UK and the American Society for the Advancement of Project Management in the USA are fundamentally the organisations that grant accreditation to specialists.

This model can be used as justification for funding improvements to project management. Additionally, it serves as a barometer to reflect strengths and weaknesses so that actions can be taken to improve the process for project management. Additionally, it's a strategy for ensuring level acknowledgment for potential clients.

One step in the process of improving the execution is the appraisal itself. The P2MM structure is a powerful tool that grants associations the freedom to choose their existing situation. Additionally, it provides a broad overview of the processes that interpret the association's project management capabilities. Then, beginning with the review, preparations can be made specifically to address inefficiencies and improve the quality of execution, depending on the level that the association needs to accomplish. It is useful to clarify that not every association must achieve level 5, but that the outcome depends on the level of execution that can meet its needs.

Promote the idea that organisations with low levels of maturity expose their projects to great risks that frequently result in indirect costs.

3.3. EFQM Excellence Model

European Foundation for Quality Management is referred to as EFQM (EFQM). Regarding the involvement of the public and private sectors in each area of association, this model is extremely important in the development of any organisation. The flexibility and high level of perfection in the excellence model make it a recognised standard for project or organisation improvement on a worldwide scale. According to the European Standard report, this model has three fundamental yet crucial elements.

3.3.1 Fundamental concepts of excellence

For any organisation, excellence consists of the criteria and quality that are attained to elaborate highly exceptional work and projects. This differentiation in the work or project can announce increased proficiency to numerous stakeholders and members of the public. The principles of excellence can be used to define a variety of organisational structure characteristics. The list below includes some essential elements for excellence. These ideas are necessary to satisfy numerous requirements for greatness in project outputs.

? Creating a sustainable future
? Improving organisational capacities
? Connecting creativity and innovation
? Managing with honesty, imagination, and vision.
? Maintaining exemplary performance.

3.3.2 The Criteria

Several criteria are assigned to the EFQM's second phase. This section is crucial since it covers the fundamentals of strategic planning & organisational leadership. The European Union research states that in order to give vital results to their clients, every business or project manager must enhance its people, partnerships, and processes. To enable various improvement in one organisational task, the section offers two aspects. Along with the project's method and personnel, the two main criteria for judging the quality of the job are enablers and results.

Enablers:

Enablers are crucial tactics that an organisation must implement in order to attain specific goals. For the organization's strategic planning and development phase, enablers are crucial components. The EFQM paradigm primarily focuses on five enablers. A number of organisational development issues fall under the purview of enablers. For example, a leader is a significant component in shaping various future events and incorporating ethics and values into their work, whilst people are essential in bringing about various association goals with ethical principles. People are also accountable for contributing their great efforts to meet the demands of their organisations while upholding their Excellency standards. Strategies are crucial from the standpoint of the client because different wants of the organization's stakeholders or clients necessitate unusual work from the association. In order to implement conventional strategy, organisations must effectively manage plans, policies, objectives, and procedures. Resources, partnerships, products, and services are indisputable components of many internal and external corporate relationships.

? People
? Partnership & Resources
? Processes, Product & Service
? Leadership
? Strategy

Results Criterion:

On the right side of the model presented in figure 6.2, the result criteria are displayed. These four outcome criteria must be taken into account in order to ensure diverse organisational excellence. In this level of the model, numerous strategic goals have been attained.

? One of the most important aspects of this criterion is the setting of acceptable targets for specific outcomes groups based on the various demands and expectations of relevant customers.

? The second important aspect is the segmentation of diverse results to improve how different organisational areas operate in relation to stakeholder expectations and needs.

? A consistent and encouraging presentation of business results every three years.

? In this phase, it is crucial to comprehend the numerous causes of failure and the lack of consistency in results.

? Creating a set of important metrics and related results to monitor the organization's strategy's success.

Here, four results criteria are provided.

• Results for customers
• Group’s results
• Businesses results
• Society results

3.3.3 The RADAR

RADAR is a rational framework for dynamic assessment since it is thought of as a strong management tool that offers a way to challenge the effectiveness of an organisation. The four main components of the RADAR system are used to assess organisational performance.

Figure 3.3.3 RADAR

RADAR serves as an example of several qualities that a company should possess.

• It is suggested that goal determination be taken into consideration while developing a plan.

• Planning and development strategies are combined to provide results that meet both current and future demands.

• The methodical deployment of a range of strategies to guarantee specific implementations.

• Evaluation and improvement of implemented strategies based on examination of outcomes.
RADAR can be quite helpful for organising different levels of labour within a company as well as for assessing both present and future requirements.

3.3.4 EFQM model applications and implementation

These models can be used to study present capabilities and performance as well as potential outcomes using a variety of assessment elements. Here are few implementation phases that were acquired to model.

? Involvement of team members at all levels in the project for better execution

? The planning phase will be chosen for the full project phase taking into account each team member.

? Giving each participant the proper instruction and information.

? Creation of an action plan using multiple strategic evaluation planning techniques

? Evaluation following result attainment.

3.3.5 Potential benefits of Model

? The excellence model provides a comprehensive framework to handle a variety of quality concerns in organisations in a methodical manner while also addressing impact through result criteria.

? The method to continuous improvement could be useful for this model.

? Analysing an organization's actions can help it use the right resources to accomplish a variety of objectives.

? This model waives the need for any external validation because it can serve as a tool for internal evaluation of its own operations.

? The model's scoring system may be published as an internal standard for the model to utilise in evaluation. This rating system can be helpful for benchmarking and contrasting various outside organisations.

? It primarily concentrated on the organization's weak areas in order to give them the necessary assistance to develop the necessary strength alongside other associational areas.

3.3.6 The model's drawbacks

? The model's scoring and award recognition methods can be pricey to utilise in smaller businesses.
? Because there is no official mark on this model, it is not formally recognisable to different buyers.
? Because EFQM was first designed for a small number of commercial applications, translating it into other languages is difficult.

3.4 OHSM( Occupational Health & Safety Management) System Model

The OHSM model covers a wide range of crucial elements, including the plan, implementation, evaluation, and on-going progress. Occupational Health & Safety Management System is referred to as OHSM. This approach purposefully focuses on on-going health and safety issues as well as numerous components that are in line with needs for development in the future. The approach was initially created to address numerous technological challenges but eventually changed its focus to emphasise corporate cultural issues as well as human behavioural variables. The model includes a few crucial management systems.

• It includes all aspects of workplace safety and health, most of which pertain to members and affiliated businesses.

• Its primary purposes are:

• Increase the model's management system's efficacy.

• Adherence to current law in order to uphold the law.

• A variety of aspects are incorporated to characterise the model's many objectives, including ethical, financial, legal, and organisational aims.

• Implementing numerous elements and fostering engagement inside a company requires a holistic strategy.

• The model approach's outputs are regarded as a tool for management system evaluation.

• This model places a lot of emphasis on the numerous workplace health and safety issues. Here are some fundamental conditions that must be met for the model to be used in any project.

• Determining and analysing workplace health and safety risks.

• The need for a variety of control techniques to eliminate or lower workplace hazards.

• Written documentation should be provided that clearly outlines policy and management commitments.

• Every workplace must have worker competency, training, and inspection programmes.

• The reporting, investigation, and organisation of emergency responses.

3.4.1 Advantages of OHMS model

Applying this concept to health and safety management in enterprises has many advantages.

? A health and safety management system can increase employee knowledge and their trust in the organisation, which will enhance their engagement and performance.

? It has been suggested as a very valuable and effective model to reduce overall workplace injuries and risks.

? By using this model, employers could encourage their employees to behave amiably and provide them with polite manners.

? Since the implementation of this strategy, there have been significant cost escalation reductions related to worker illnesses and injuries.

? This model might be useful for displaying compliance with customers and suppliers.

? As a result of the model's involvement in the organization's processes, various health-related costs and downtime have decreased.

Some consequences are evident during the certification process or as a result of a lack of standards. Below is a description of several flaws in the OSH management system certification.

As an audit of the system often ensures compliance and focuses on improvement, certification is a technique to provide additional quality to the OSH management system. The traditional management system has also seen some bias in the system's ability to spot deviations and provide fixes for persistent structural problems.
Some of the model's success elements are listed below. This success factor is mostly based on the criteria and numerous organisational requirements for achieving model success.

• More thorough research and background information may be helpful in avoiding the use of the cross-sectional method, and further comparison group implementation may be possible.

• The number of control groups, cofounders' measurements, and statistics adjustment can increase the model's success rate.

• Applying rigorous sampling techniques and collecting sample data can produce excellent outcomes.

• Different cash flow considerations and the application of strict methodologies for economic evaluation can get the desired results from the model.

• Applying a wider sampling group, as opposed to employing solo workplace surveys, can increase effectiveness.

3.5 Kerzner Project Management Maturity Model (KPM3)

Since many years ago, successful projects and other phenomena have been recognised using strategic project planning. The Kerzner project management maturity model was created by Harold Kerzner and is widely used in project management. To create the greatest strategic management plans for any firm, this model is fully equipped. Additionally, this model is a great way to improve any organization's project management system. According to Kerzner, every business can benefit greatly from using this paradigm for strategic and multilevel planning.

Harold Kerzner's maturity model can serve as an illustration of the basis for obtaining supremacy level in various strategic aims. To help with a better grasp of its functioning and project management proficiency, this model has five fundamental levels. Regarding fig. 6.5.1 These stages are also referred to as the benchmarking, continuous improvement, level of common language, common process, and solitary approach.

Process Improvement

Level 2: Common Processes

Level 1: Common Language

Fig.3.4.1 Five Levels of Project maturity model.

Level 1: Common Language

This phase of the model includes several definitions of terms related to project management techniques. This level of the model takes into account a variety of tactical factors and previous knowledge of potential future developments.

Level 2: Common Processes

This level has several processes that have been modified from earlier successful projects. This level describes several management ideas and approaches for adaptation in organisational planning. These common processes essentially rely on project application, planning, and tactics to meet organisational needs.

Level 3: Singular methodology

At this level, the organisation incorporates all internal approaches while taking into account how they work together to create a single methodology. This procedure provides organisations with a specific way to move forward with the project. Combining all approaches from diverse corporate groups will have a synergistic effect that will benefit the organisation in many ways.

Level 4: Benchmarking

The goal of benchmarking is to provide organisations a competitive advantage so they can continuously develop. This level outlines several benchmarks and the justifications for choosing particular benchmarks.

Level 5: Continuous Improvement

To help the project continue to improve, this level condensed the information from the benchmarking level. This level additionally calibrates numerous methodology data for project decision-making regarding ongoing improvement.

With numerous investigations, the maturity model can give a risk factor to each stage. This risk factor is categorised into three levels: low, medium, and high. The risk level increases as the business culture is influenced (or altered). The following are some possible risks:

Low risk: The company culture is unaffected by this level of risk. Low risk levels are accepted culturally because they are dynamically less harmful.

Medium risk is defined as the presence of a variety of change-related elements and other factors that could result in a significant yet unfavourable change in an organisation.

High risk: Risks that have the potential to significantly affect the corporate level's ultimate structure are categorised as high level risks.

Benefits of the Maturity Model:

? This model contains deliberate and well-organized processes to develop varied management.

? Planning, making it versatile and comprehensive enough to be implemented in any sort of organisational structure.

? This paradigm is incredibly simple to use, comprehend, and use in practical settings.
Limitations of Maturity model:

? Since maturity level planning is significantly lacking in the model, it cannot effectively direct an organisation in a number of crucial dimensions.

? It is a generic model, which poses a challenge for intricate projects and is ineffective in intricate strategic planning.

? The project maturity model is not effective in directing and overall organisation policy planning, but it is very beneficial in basic strategic policy planning.

3.6 People Capability Maturity Model (P-CMM)

In any firm, the capacity to ensure the effective utilisation of the current personnel is a key duty. In essence, an organization's ability to grow its employees is a fundamental requirement. It is often discussed how to raise the quality of the workforce in order to assure greater organisational development. The many stages of ensuring workforce growth in businesses are shown in the people capability maturity model, together with quality management of the workforce, credibility planning, and future growth analysis. To assure workforce growth, this model primarily discusses five phases.

This model aids in the organization's strategic planning, which is primarily concerned with workforce development.

The five levels of the people maturity model are very useful in describing its applicability, efficacy, and excellence. This strategy has received widespread recognition in numerous computer system businesses due to the remarkable changes it has made to the effectiveness and quality of their personnel. Here, there are five levels.

Figure 3.6.1 Levels of people capability maturity model

Below are five levels for people capability maturity models. The brief descriptions of each level are shown in Fig. 6.6.1.

Level 1: Initial

This level is intentionally left undesignated because it serves as the model's initial or starting point. For the people capability maturity model, the initial level is the previous level.

Level 2: Managed

The second level of the model is the most crucial but initial stage of the organization's human resource management. This level is divided into a number of conjugates to accommodate workforce management. This level includes a number of components, including hiring, coordination, communication, the workplace environment, performance management, and training and development. The different level configurations for the people capability maturity model are shown in Fig. 6.6.2.

Figure 3.6.2 Levels Descriptions for People capability model

Level 3: Defined

Define level is a secondary phase that includes numerous workforce development models and analyses. In addition to the development of the workplace environment, this level includes subsidiary planning for a number of departments, including competency-based practises, career development, and participatory culture. [19] [20]

Level 4: Predictable

The phases of this model's predictable level include workgroup empowerment, mentorship, and organising capability models. The transition to level three and calibrated planning from level one have a beneficial effect on predictable phase work.

Level 5: Optimizing

The model's final phase is clearly defined for the optimization of every step before it. This level includes a variety of optimization and improvement strategies as well as ongoing workforce and capability innovation. This level of the model is crucial because it establishes the preparation and goals for future innovation.

Benefits of the maturity model for people capacity:

• These models follow sound planning technique across all phases. The success of this model is greatly influenced by this methodology.

• Several other model standards were taken into account when developing this model, which has a number of advantages over the deficiencies and inconsistencies found in other models.

• This model is also very adaptable and suitable for all sectors.

Model limitations:

• This model's complexity poses minimal obstacles to comprehension of its overall process. This model is tedious because of its drawn-out, difficult processes.
• Several model components have been flagged as high risk and have also shown to be weak in several pressing circumstances.

3.7 Organizational Project Management Maturity Model

Under the supervision, The Organizational Project Management Maturity Model (OPM3) was released as a standard by the Project Management Institute (PMI). The major goal of the OPM3 standard for organisations is to present a strategy to explain organisational project management and to evaluate the project's maturity in comparison to a wide range of organisational project management best practises.

3.7.1 Definition: Organizational Project Management

The utilisation of projects to accomplish or complete organisational goals is known as organisational project management. The application of knowledge, skills, tools, and strategies to projects and organisational activities is known as organisational project management. The term "Organization" in OPM3 refers to any organisation that intends to use its content in the OPM3 standard rather than just an agency, business, or society. It provides legislation, high-level perspectives on resources, and examples of business strategies that, when properly used, directly affect an organization's financial results. OPM is a strategic asset overall in a market that is cutthroat.

3.7.2 Organizational Maturity

The "maturity model" in organisational project management is a conceptual network that includes elements that define maturity in the target region. The maturity model also provides a procedure that can build a set of best practises and capabilities when OPM3 is used. This process results in a more mature organisation through maturing the organisational state. The integration of best practises within the programme, project, and portfolio domains shows organisational project management maturity.

The maturity model of OPM describes the cumulative efficacy that led to best practises, which are also necessary for effective organisational project management. The OPM3 can be used to evaluate a variety of factors, including the organization's maturity and its progress toward becoming more mature. Looking at best practises in relation to their cooperation with the various stages of process development is one of these dimensions. This process improvement involves standardisation, control, and measurement, and it results in the ongoing improvement of an organization's projects. The organisational project management maturity is increasing along a continuum, as depicted in Figure 1. Another factor includes the development of the best practises related to each of the domains. Project management, programme management, and portfolio management are the first three areas this dimension handles.

Figure 3.7.1 Organizational Project Management Maturity

Figure 3.7.2 Dimensions of the OPM3

A system of overall maturity levels has not been included in the development of the organisational project management maturity model. The creation of the individual maturity levels is simple if the maturity progression is one-dimensional. OPM3 is multi-dimensional, though. Additionally, it classifies the competencies in relation to the five project management process groups. These process groups—initiating, planning, carrying out, overseeing, and closing—allow for the identification of the fourth maturity dimension.
3.7.3 Elements of the OPM3

The organisational project management maturity model has three interconnected components: Knowledge, Assessment, and Improvement. The user or an organisation develops standards-based knowledge capability. To be comfortable with the corpus of best practises, it covers the organisational project management maturity concept, the idea of OPM, and OPM3 methodologies and concepts. In an evaluation model, the present position on the OPM maturity continuum is determined by comparison with the standards. Finally, the Improvement element's decision to move forward with some modified initiatives leads in improved maturity, which can be used to plan and carry out this plan using the assessment's conclusions. Figure 3 depicts how the OPM3's interlocking components fit together, along with the concepts that underpin each component.

Figure 3.7.3 Interlocking Nature of the OPM3 Standard

3.7.4 OPM3 Steps

The following steps are related with the Knowledge, Assessments and Improvement Concepts.

3.7.4.1Knowledge

Step 1: Prepare for Assessment

The first stage for an organisation is to get ready for the process of determining the organization's maturity in reference to the model. This preparation entails a full comprehension of the model's contents, familiarity with how the organisational project management maturity model works, and knowledge of organisational project management.

3.7.4.2 Assessment

Step 2: Perform Assessment

Finding the organization's organisational project management maturity is the second stage. Comparison of the model's current maturity state's attributes to those in the OPM3's description of those qualities This stage involves examining the best practises that the organisation uses and does not use in order to determine where it falls on the continuum. Organizations have the option of creating their own assessment instrument or using the OPM3 tool. Following that, a more thorough examination of the organization's capabilities is conducted to identify any shortcomings, which then allows for the creation of an improvement plan, the repetition of the assessment, or the termination of the process, as seen in figure 4.

Figure 3.7.4 The OPM3 Cycle with Steps[21]
3.7.4.3 Improvement [22]

Step 3: Plan for Improvement

The outcomes of step two will result in the improvement strategy for an organization's maturity. This stage will rank the necessary capabilities and outcomes according to their importance, which can help with the development of a clear plan to enhance and attain the outcomes associated to the best practises' capabilities.

Step 4: Implement Improvement

This stage will see the adjustment or change. Once the plan has been formed in the preceding step, the Organization will put it into action by carrying out development activities to build the necessary capabilities and raise the Organization's overall maturity.
Step 5: Repeat the process

The organisation will go back to step two to revaluate its place on the continuum of OPM maturity after completing the improvement activity. Otherwise, it will go back to the improvement step and handle any additional best practises that were discovered throughout the assessment.

3.8 Roland Gareis Model

Companies with a project orientation have specific techniques, organisational structures, and cultures for managing projects, project portfolios, and programmes. The administration of the projects and programmes helps the social systems compete better. As a result, organisations across all sectors—nations, regions, and industries—are shifting toward a project-oriented approach. The project's project oriented systems' outputs and their maturity status are related to one another. Different maturity models are capable of assessing the maturities of a project or an organisation. The maturity model created by the ROLAND GAREIS Management of the project-oriented Company® has been reviewed in this portion of the learning module.

Austria's Vienna University of Economics and Business Administration is home to Dr. Roland, a professor there. Different dimensions of project maturity models relate to one another. There are eight dimensions in the ROLAND GAREIS model. Below is a discussion of these dimensions.

Project Management: A project is a provisional organisation for the effectiveness of a process with a medium or big scope that is relatively short-medium in duration, distinctive in nature, and strategically important. The sub-processes of this Important process include project coordination, project controlling, project initiation, handling project discontinuity, and project closedown.

Program Management: The achievement of the distinctive business process with a sizable scope is the role of the programme management. Program coordination, programme start, programme regulating, programme close-down, and programme discontinuity resolution are sub-sections of this.
Confirmation from the Management Project quality: Management audits and management consultancy are necessary to ensure project quality.

Project assignment: In this dimension, it will be decided if a project should be completed or not.
Project portfolio management involves making decisions about whether to start or stop a project, confirming project priorities, and planning how to allocate both internal and external resources.

Personnel management: This process includes the placement, hiring, and ongoing development of project personnel, including the owner, project manager, project team members, and project contributors.

Organizational Design: The creation or establishment of a project management office, a project portfolio group, the development of project procedures, and well specified project plans are all parts of organisational design.
Business process management in a company focused on projects: This dimension's procedure consists of a predetermined series of actions. Different organisational roles are involved in this dimension. Roland's model has 35 sub-criteria and 74 questions. The main criteria are given varied weights based on their importance, while these sub-criteria are given the same weight. Each dimension has points between 0-100, as seen in Figure 5.

Figure 3.8.1 ROLAND GAREIS Model

3.8.1 Capacity for Project Management

The classic maturity models employ five steps to define and assess the maturity of a project or an organisation. The capacity to professionally carry out the project management process is known as project management competence (PM-competence). Project management expertise requires both project management knowledge and experience. The scales employed are initial, repeatable, specified, controlled, and optimised, as illustrated in Table 1, in accordance with the SEI Capability maturity model. The spider web presentation is a multi-dimensional display of project management expertise that enables visualisation of the various stages of development of the project management sub process. The spider web portrayal of the organisational PM competence is shown in Figure 6.

Table 3.8.1 The SEI model's maturity level

Figure 3.8.2 Web presentation of the project oriented organization

3.8.3 Advantages of Roland Gareis Model

A multi-dimensional maturity model that emphasises the various facets of an organisation is the Roland Gareis model.

• It makes use of a spider web presentation, which gives a project or organisation a visual display. The evaluation of the sub-models is also shown here.
• A set of questions known as a questionnaire is used to assess the project management competency.
• The spider web's graphical representation will also show which problems need to be solved for the organisation to become more mature.

3.8.4 Disadvantages of Roland Gareis Model.

• The project life cycle encompasses all processes from the beginning to the end of the project, hence the Roland Gareis model is incompatible with this procedure.
• Its scope is constrained, and it cannot be used at all project stages.
• Projects become separated; while the project team can work well together, there is a lack of coordination across the various teams.

3.9 Lynn Crawford Maturity Model

After Professor Lynn Crawford, this model was developed and presented by Human Systems Company in 2005. Her concept focuses on three assessment techniques for project evaluation, two of which are based on the project's work scope and one on organisational structure. "Measuring Project Performance Tool (MPP)" and "Project Health Check Tool (PHT)." Project- and organization-specific, it includes the "Practice Questionnaire Corporate" (PQC). The improvement cycle, sub-criteria, and evaluation questionnaires are all topics that the PHT does not conclude with much information on. The model merely states that it assesses the maturity of the project using 25 primary criteria, which are shown in the table below, but it provides no information about maturity levels, the number of questions, or the scoring system.

Maturity standard

The working or application approach for this concept is likewise quite difficult to put into effect. A precise picture cannot be drawn based on the way this model is set up.

The assessment methodology developed by Lynn Crawford has two sets of questions;

1) The project's output
2) Process of the project
The following six project products are plausible responses to this:
1) Certainly not;
2) Devoted;
3) Active;
4) Exercising;
5) Measuring
6) Verifying, with "not at all" standing for the worst case scenario and "verifying" for the best.
There are four viable responses to questions about the project's process:
1) None;
2) Slightly;
3) Generally;
4) Fully, where "fully" denotes the best case scenario and "none" denotes the worst.

CHAPTER 4

4.0 Ranking Criteria for Project Audit and Improvement Models in Construction Project

After reviewing the literature and examining the benefits and drawbacks of various models, the rating criteria were developed. The following are the criteria:

? Independent of Industry
? Implementing Audit Workflow
? Availability of questionnaires
? Phases of the Project
? Project Activities
? Processes for projects
? Project Results
? Relevant to Every Project Stage
? Comprehensive Analysis Report
? Different Reports
? Need for Evidence
? Development Levels
? Access to best practises
? Applicability

On the basis of the literature review that is now available, previous empirical investigations, fieldwork evaluation findings, and previous research work of these models, these parameters have been set. The pros and disadvantages analysis has also been applied to these models' ranking evaluation to give a more precise result. Only by giving each criterion a matching score in comparison to Audit Models would it be possible to assess whether the results of applying these criteria will be realistic and responsible. This score can be easily determined by looking at previous practical evaluations of construction projects conducted by managers or by the management team of the projects. [20] [21]

In this particular case, the model that achieves more scoring trends, complies with more setup requirements, counts more benefits, and complies with more relevance to the Construction Projects parameters can be ranked at the top of the list of Project Audit and Improvement Models:

4.1 Ranking of the reviewed models

Only a specific industry in which these models can be easily applied without experiencing any application faults can be used to rank project management methods. We used "Construction Industry" as our criterion for ranking the models since civil engineers. The exact application of these models to actual building projects must be determined, but our ranking reviews will be based on the findings of other research studies' observations, analyses, and conclusions regarding these projects. The opinions of the project managers and management team of the construction projects, as well as the credit they offered for these models, are one of the most trustworthy variables in ranking analysis. For the ranking of the project models to be completed, it is essential to take into account both their advantages and disadvantages.

Construction audits include not only a cost recovery assessment but also cost prevention, the detection of defects in the construction process, and solutions for them. It involves auditors who serve as an intermediary between the owner and the general contractor (GC) prior to contract execution and who also support disputes and litigation.

It does not follow that all expenditures were reasonable just because a project was on a budget or was finished within it. The same is true of the technological features. Completion of a project or a certain phase does not imply that all necessary technical requirements have been met. Principal criticisms that can be levelled

• Was the estimate figure accurate?

• The project's scheduling and planning were successful.

• Make technical projections and estimates.

• The project went as smoothly as was expected.

• Use of high-quality materials that adhere to standards

• Work performed complies with basic requirements

The inference that follows from the foregoing, Financial auditing and quality auditing are the two auditing components that make up construction auditing. It entails auditing each and every project-related action, procedure, and material. The confluence of these two elements is essentially the best auditing strategy.

4.1.1 The financial auditing involves the evaluating following aspects of projects

• Planning and estimating
• Planning
• Adherence to rules and regulations
• Transaction process
• Bid competition
• Approvals for projects
• Process for change orders
• Type of reporting system
• Financial statements
• Reports that correspond to the actual costs paid
• The cost of change orders.
• General circumstances
• Material expenses
• Labour expenses
• Equipment prices
• Payment to subcontractors
• Standard payment procedure

4.1.2 The Quality auditing involves the following checklist

• Following through on good intentions
• Implementation of specification
• Safety organization
• Working conditions
• Materials used
• Materials of high quality
• Amount of resources
• The level of work
• Minimum Materials and Work Standards

4.3 Identifying the Advantages and Disadvantages of the reviewed models

From the project audit and improvement models, a number of benefits and drawbacks for each model have been determined. The proposed approach will include the benefits while leaving out the drawbacks. The benefits and drawbacks of the models under examination are presented in the table below.

Table 4.3.1 Advantage comparison for Audit Model

Table 4.3.2. Disadvantage comparison for Audit Model

4.4 Summary

Using particular criteria including the availability of the questionnaire, maturity models, project performance, processes, and the availability of best practises, this chapter analysed numerous project audit improvement methods. The benefits and drawbacks of the models were determined by these criteria. Additionally, rankings have been assigned to these models based on evaluation and grading utilising the criteria. In order to choose the right models that are more useful and relevant to the construction sector, the evaluation is conducted utilising a check list system. Based on how many benefits a model has over competing models, the rankings of the models have been determined. In comparison to other models, the Organizational Project Management Maturity Model (OPM3), Krezner's Project Management Maturity Model (KPM3), and Project Excellence Model (PEM) are better suitable models, according to the evaluation of the improvement models in the preceding section.

First off, because the primary goal of this project is to concentrate on a model that can be utilised in the construction industry, Krezner's Project Management Maturity Model (KPM3) is more appropriate for projects in the construction sector and is also appropriate for all project stages. This concept is quite simple to comprehend and apply to actual applications.

In addition, KPM3 has five distinct maturity levels, making it a good model for defining the project's maturity level. KPM3 also has several drawbacks that may prevent it from becoming the optimal model for every project, such as the fact that a skilled auditor is necessary and that workflow is absent.

The second benefit is that the Organizational Project Management Maturity Model (OPM3) is relevant to all industries, compatible with project life cycles, simple to deploy, and covers all project activities and procedures. There are numerous OPM3 and Project Excellence Model best practises accessible (PEM). As opposed to KPM3, OPM3 is more sophisticated, requires decision-making, and requires the results to be interpreted. As a result, it is not appropriate for the majority of construction projects. For some sectors, other audit models can be advantageous since they can be more effective for the specific project functions and process.

REFERENCES

The Effectiveness of Internal Audit and Internal Control Systems in Greek Bank Assignment Sample

CHAPTER 1 - Conceptual Framework of Internal Audit

Introduction

This chapter of Auditing assignment outlines the documented historical evolution of internal audit and provides a conceptual distinction between internal audit and internal control systems. A distinction between Internal and External Auditors will be offered in order to aid the reader in comprehending the concept's meaning.

Historical Development of Internal Control

Even though Audit Control originated in recent years, the need for it arose many decades before, and it has always been related to accounting processes. The audit control originally existed in prehistoric times with the trade of products, according to historical records. These interactions between the primitive societies demonstrated the need of accounting and auditing controls for trustworthy transactions.

In 3000 B.C., the ancient Babylonian inhabitants of Nineveh performed accounting reporting to assess the transparency of their daily financial operations, according to written evidence (Ramamoorti, 2003; Sawyer, 1996). In ancient Athens, approximately 300 B.C., the Congress established the "Accountants" as a financial organisation for the city-state. In addition, the "Responsible" and the Accountants managed the finances of prominent individuals who had been removed from public service. They also regulated the interest-free public loans provided by bankers to cities. Similarly, across the remainder of ancient Greece, the "Examiner" was responsible for numerous control tasks. Italy revived accounting in the late Middle Ages, and the city of Pisa has its own licenced auditor (Ramamoorti, 2003). In 1581, the first formal "Coliegio dei Raxonati (Union of Professional Auditors)" was established in Venice, Italy. It was a governmental institution that governed state regulatory obligations and rapidly impacted a large number of individuals (Filios, 1984).

Audit Controls were also identified at England's Ministry of Finance, where three individuals maintained three distinct ledgers: The Secretary of the Chancellery, the treasurer, and the representative of the Auditor General.

Kingdom, the consistency of the pages was a type of internal control. In 1525, the word "auditor" appears for the first time in England.

The financial crises of 1825 and 1836, the expansion of the crafts, and the strengthening of industry all led to the multiplication and systematization of audits in the United Kingdom, making it the birthplace of the contemporary Audit function.

Today, internal audit is an established and mature profession. Prior to ten years ago, a person involved in an internal audit service would have encountered an unfamiliar scenario in terms of the monitoring role, services, and methodology. If we trace the growth of internal control, we can see that before 1941, when the Institute of Internal Auditors was founded1, recordkeeping was done manually and auditors were only required to verify for problems in the accounting data after it had been completed. Internal auditors are connected with a feeling of security, yet their principal function is to discover fraud (Pickett, 2003).

The audit role originally arose as part of a stewardship process as a subsidiary and supplementary function. In 1941, emphasis was placed on the establishment of the Institute of Internal Auditors (IIA) and professional standards. Alongside these advancements, the Board of Directors, the Audit Committee, and the external auditors all contributed to the expansion of the Internal Auditor's responsibilities. In conclusion, the viewpoint of internal auditors was modified. On the one hand, they obtained a full form and were augmented with extra activities and duties, but on the other hand, they altered their relationships with auditees.

In Greece, the College of Auditors was established in 1931 by legislation 5076/1931, and "Chartered Accountants" were established in 1955 by law 3329/55. The introduction of Certified Auditors with the aid of IAASB (International Assurance and Auditing Norms Board) standards and the IFAC (International Federation of Accountants) Code of Professional Ethics strives to maintain the integrity of auditing the impartiality and openness of certified auditors as well as their professional independence.

Conceptual Delimitation

To facilitate comprehension of the notion of internal control, a comparison will be drawn between Internal and External Auditors. At this phase, the audit's primary purpose is to accurately evaluate the operations and business data by providing an impartial opinion on their efficacy. Moreover, the sooner the firm management is notified of the risks, the quicker and more successfully the internal audit will take steps to combat them, with the goal of enhancing the enterprise's productivity and competitiveness in the Greek Bank industry.

Internal Audit

Internal audit is an impartial and objective process that examines the effectiveness of an enterprise's or organization's System of Internal Controls and makes recommendations for achieving goals at the lowest cost. Simultaneously, it contributes to the enhancement of its operations and employs its controls to reduce the company's exposure to risk2. The Internal Audit is conducted on every aspect of an organization's activities, including management, financial statements, and, of course, the security of the organization's assets. Internal audit may execute any operation except those that do not provide an audit function interest. Thus, internal audit oversees all aspects of a company and assures that there are no weaknesses. However, it is very difficult to resolve all the problems a bank has, which is why we employ internal audit to drastically decrease them. The business should consider the security of its assets, as well as the dependability and precision of its financial records.

According to the Professional Association of Internal Auditors in the United States, the Internal Audit Service3 encompasses administrative planning, organisation, and direction. These acts give confidence that the following goals will be attained: a) economical and sufficient use of resources; b) protection of its assets; c) dependability and information integrity; and d) adherence to policies, processes, laws, and regulations.

In addition, the internal audit function is a component of corporate governance and a crucial aspect of the process of regulating a company while evaluating and enhancing certain assets:

1) It sets the aims and values process,

2) It monitors the accomplishment of goals,

3) It promotes responsibility and

4) It safeguards value.

In order to absolve them of duty, the Internal Audit must advise all departments and individuals of an organisation that control methods are consistent with administrative decisions. Also, as stated by the Corporate Governance principles, Internal Audit safeguards the interests of shareholders and workers while evaluating4:

- The Internal Control System and its subsidiary systems,

- Risk evaluation and effective management

- The organization's existence and the efficiency of its internal procedures

- The education and compliance contracts associated with employee management choices,

- Comparing operational expenses,

- The accuracy of financial accounts

- The assessment of employee collaboration and communication, the use of production resources, o The avoidance of fraud, damage, and loss.

The goal of the audit is an accurate assessment of the enterprise's accounting books and financial statements. During the auditing process, the report is verified based on the accounting system's organisational unit, enabling the first measurement and reporting of any company-related issues.
The audit done by an auditor who adheres to specified norms - professional behaviour standards. These regulations are referred to as audit work standards (Standards of Fieldwork), and their goal is to accomplish the audit processes. In addition, the auditing standards are categorised into four groups:

- The fundamental criteria address the objective of audits and the prerequisites for becoming an auditor.

- The execution of labour norms including technological control principles.

- The reporting criteria, which the auditor alluded to in a draught report, and

- Professional qualification criteria, referring to the controller's professional behavior.

Financial Control, verifies the accuracy and effectiveness of the enterprise's accounting system, as well as measuring and presenting the financial statistics of the enterprise's results, which are performed by auditors.

Operational Control, often undertaken by internal auditors, checks and monitors whether a business operates in line with the operational and administrative regulations of its industry.

Internal Auditors, who are interested in the business's operations and processes and who contribute to the company's smooth operation are involved in efficiency control.

Compliance Audit, the aim is to determine compliance with previously agreed upon conditions, such as an invoice payment check.

Special Control, is a control that does not fall under the aforementioned categories, but can be done if the controller can handle judicial review of the instance.

Internal Audit - Code of Ethics

The primary objective of the Code of Ethics is to establish an ethical culture within the Internal Auditing profession. Internal auditors must implement and defend the following principles5 to comply with Article 48, Paragraph 2, Subparagraph 2 of the Law on Internal Audit in the Public Sector:

• Integrity: instills confidence in the judgment of the internal auditor. Internal Auditors should execute their duties with integrity, vigour, and professionalism. In addition, they should check and submit the mandatory notices. They should not participate in actions and relationships with third parties that denigrate their profession.

• Objectivity: Internal auditors must exercise unbiased, objective judgement in all pertinent situations, unaffected by their personal or other interests. In addition, they will not "welcome" anything that undermines their professional evaluation.

• Confidentiality: The Internal Auditor is deemed to employ confidentiality since they do not divulge any material without sufficient authorisation, unless required by law. Additionally, they must exercise caution while using the gathered knowledge, since they cannot utilise it for their own gain.

• Sufficiency: Internal Auditors conduct Internal Audit Services by using their discretion and expertise. According to IAS for the Professional Implementation of Internal Control, they should supply it.

Internal Control Mechanisms

The internal control systems balance the interests of shareholders and management. The following are the primary factors that influence how well a company's management reflects the interests of its shareholders:

- The Directors' Board

- Compensation for the Board

- Institutional Ownership of Stock

- The market for takeovers.

Internal Controls Systems

An integrated control system's ordered pattern of functions and processes is shown by the internal control system, which also emphasises how well the organisation is managed (Cheung, T. Chi. and Qiang, Chen. 1997).

The risk assessment is a crucial component in the design of an internal control system (ICS). Internal audit is a tool for approaching and evaluating risk factors. The internal control system operates all procedures that are used by management to ensure the best possible collaboration with the company's board of directors, to ensure capital, to detect fraud and identify errors, to ensure the accuracy and completion of accounting records, and to promptly prepare all pertinent economic data6. The term "internal control system" refers to a well-organized and structured system that is closely related to the regulations that control corporate management and strives to protect the many interests that a corporation may have. The following subsystems are part of an internal audit system:

- The business's organisational structure,

- Written guides

- The evaluation of both long- and short-term planning,

- The company's personnel, procurement, and market policies;

- The management of the assets and portfolio

- Generating goods and services via cycles.

In conclusion, the internal control system is essential to guarantee the success of the company. The internal control systems, however, differ based on the business's size, operations, and organisational structure, which is notable. The organisation plan, adequate training of human resources, and accounting management in the company all play crucial roles in the development of an internal control system.

Therefore, it would seem that the development of a reliable internal control system should adhere to the following guidelines:

- Adequate accounting practices,

- To protect books from untrustworthy people,

- Divide up the work,

- Edit numbered and verified data, and divide up the duties.

- Regular asset verification of the business, coverage of all business operations.

- Operation standardisation (quicker and easier control of work).

- Management of inventory.

- Current electronic communication and information systems.

- Sufficient systems for identifying, analysing, and managing risks early on.

Every internal control system includes control mechanisms and safety valves that are intended to guarantee an entity's correct operation and quickly handle hazards. The study of internal operating procedures for things like personnel rules or quality assurance is a key component of organisational safety valves, which are connected to the fundamental organisational operations. The goal of preventive safety valves is to draw attention to mistakes that are impairing the smooth running of the entity's activities. restrictive security when barriers to the correct operation of the entity's activities are found, valves are operating to take action to remedy the inconsistencies.

Clear and detailed descriptions that are simple for all personnel to understand and accept are a need for the safety valves of internal control systems to function as intended. Specialized Safety Valves work to safeguard assets in an efficient manner while obtaining the required authorisation for access. General Safety Valves concentrate on the configuration, enactment of policies, and adherence to all the members that make up the organisational structure of a corporation. Related to other concerns as well, including hiring practises and the division of tasks and responsibilities.

The Purpose Of The Internal Control System

The following might be listed as an internal control system's goal7:

i. It ought to serve as an administrative instrument for putting chosen strategic objectives into practice and for facilitating evaluation by assessing the outcome and contrasting it with the initial goals.

ii. In order to fulfill essential demands, it should move and behave in an organised and businesslike manner. Additionally, it must be adaptable, versatile, and effective. It must ensure the unit's survival in a cutthroat environment.

iii. It should make it possible to use and manage resources effectively, utilise production, use human resources, and protect assets. It also attempts to provide better service to the operators.

iv. It should be governed by operational and business conduct guidelines that offer the assurances and conditions necessary for the organisation to take the risks necessary to achieve its highest objectives by ensuring the strength and viability of the institution.

v. It should include internal control structures for assessing the system's operational effectiveness.

vi. It should meticulously distribute duties and tasks across the many corporate divisions and staff members. Additionally, for them to properly participate, there has to be control in their relationships.

vii. It should be aware of whether any decisions or authorizations are understood by all strains and can be applied across the hierarchy pyramid when done so in accordance with the carrier's rules.

viii. It should not impose any limitations on the carrier's development and should offer free development initiatives for creative work.

ix. In order to support the coordination and peaceful coexistence of its functions, it should aim to establish specific safeguards.

Best Principle of Internal Control System

The internal control systems must adhere to specific guidelines in order to be effective and provide the auditors with a comprehensive overview of all material factors.

a. Adequate staffing:

Adequate staffing should be carefully considered in a modern enterprise, especially in light of the current internationalised market trends. The proper assessment and utilisation of the labour potential of all groups of workers, from highly skilled ones to simple unskilled ones, requires the same level of attention. As a result, one of the crucial success factors for any state or private institution is the evaluation and exploitation of the workforce. The company should be made up of qualified and productive individuals. The entire pyramid of workers needs to be properly organised in terms of both quality and quantity.

b. Decentralization Of Management:

To guarantee the division of duties. To clearly and appropriately define each employee's duties, the distinction should be made. The administration and any area of the business should, in accordance with the level of organisation and relevant staff, make sure that they assign as many competent people to all hierarchical levels and that they are solely accountable for the outcome of the activities. Finally, in accordance with the steps that have been taken, it is important to ensure that the operations of administrative bodies and the pertinent departments are evaluated and their effects are measured.

c. Separation of duties and responsibilities

Each level of the hierarchy pyramid should have a distinct separation of duties and responsibilities. Tasks and responsibilities must be clearly defined, especially in situations involving the enterprise's vitality, such as those involving assets, cash, portfolios, and production departments of paramount importance.

d. Provision of Authorization

This step is used to carry out transactions and represent the Company before third parties. The board must give its approval. The transactions assume proper authorizations from those who are subject to the operational policies and practises in the situation.

e. Ensuring the transactions

Each transaction should be conducted in accordance with the business's current policies, procedures, and guidelines, which are as follows:

- To precisely specify who is responsible for approvals.

- To spell out precisely how each transaction's screening will be done.

- To provide instructions on how to accurately record and account for each accounting event.

- To display all transactions in a proper and organised manner so that the necessary information can be provided whenever needed.

- To make any activity less likely to make a mistake

- To give the management the information it needs to make decisions.

f. Monitoring And Inspection Work:

A systematic monitoring and inspection of the employees should be conducted in order to ensure compliance and to guarantee the quality of services and products. The surveillance work is used to deliver more effective services, which in turn ensures the smooth operation of the company.

g. Timely and regular updating Documentation:

Regular and timely updating Reports submitted to the administration serve as documentation for the information. These reports need to be handled.
At all tiers of the pyramidal structure, the information must be delivered accurately, timely, and organizedly in order for corrective action to be taken. These reports must be timely submitted and, to the greatest extent possible, feature a simplified design and comparison.

h. Control Area Depending On the Risk:

Depending on the risk, the control area is: The control area should be organised according to the risk that it faces in each division of the business, and its design should take into account the size and nature of the entity.

i. Establishment of Internal Audit:

Because it monitors and assesses the effectiveness of the internal control system as a whole, the entity must have an internal audit department. Internal audit offers the opportunity for more unbiased and independent evaluation functions, which are necessary so that administration could have this information and use it as a tool to manage business risk more effectively.

Internal And External Auditors

When we use the term "internal auditors," we refer to people who are employed by an organisation or a business and who only disclose significant information to the audit committee and board of directors of the business. Additionally, internal auditors serve as advisors by ensuring that the company's organizational structures and risk management guidelines are being followed correctly. In addition, internal auditors are professionals who have received training in the discipline and are not independent because they are employed by the organisation.

On the other hand, when we refer to "external auditors," we mean the impartial people who audit a business or an organisation, but who only divulge pertinent information to the business's shareholders. External Auditors are licenced accountants who provide yearly reports. The results of the external audit reveal whether the accounts reflect true and fair value. The accounts, balance sheet, and annual financial reports are the focus of their work.

The Effectiveness Of Internal Audit

The Efficiency of Internal Audit Every company has a unique management style and size. The implementation of a successful internal control system is extremely difficult because each needs of business are unique. However, there are a few characteristics that must exist for an internal control system to be effective.
An internal control system's effectiveness requires independence because it enables auditors to act impartially and without hindrance.

The reports must be delivered to the Board of Directors by the Director of Internal Control. The work of the internal auditors is elevated by this close connection. Additionally, each company needs an organisational strategy in order to accomplish its own goals. This strategy will guarantee the Internal Auditors' smooth operation by dividing up their duties among them. Internal Audit fills in this gap with its advisory and repressive role because the current management of an organisation lacks its own direct and reliable information to establish the safeguards for managing the business risks.

Similar to this, internal audit aims to put corporate governance principles into practise as a transparency calibration method, giving it value while protecting the interests of employees, customers, and shareholders within the company. Disclosure and control are crucial company-related information that are fundamental to ensuring transparency, investor protection, and ultimately the efficient operation of the capital.

Additionally, the firm's transactions should be guaranteed by the design of an effective internal control system. In order to control the registration of transactions, which must be preceded by authorization of principles and rules of accounting, it is especially important that the procedure of transactions be examined and carried out in accordance with the administration's principles and policies. The necessary documents must be used in order to gain access to the company's financial information. There are four steps to be taken for better transaction control:

- Authorization

- Approval

- Implementation

- Inventory

The labour inspection is also a significant element that increases the effectiveness of internal audit. In order to improve and guarantee quality, it is essential to control all the procedures and methods and to offer suggestions when appropriate.

In order to improve the efficiency of the financial unit's operation, all information from reports, councils, and conferences should be collected and distributed throughout the administration. Each internal control system should also be appropriate for the needs and size of the respective enterprise.

Audit Committee

Senior executives make up the Audit Committee, an independent advisory board with increased responsibilities that follows the Board's directives. Similar to internal controls, the audit committee is a division of management. In order to interpret the potential impact on the financial statements, the audit committee reviews important accounting issues and reports them to management. At least four times a year, the Audit Committee convenes at the President of the Audit Committee's invitation. The audit committee reviews the audit report's findings along with management and external auditors. Additionally, the Audit Committee reviews the effectiveness of internal controls and provides management with some observations and other significant findings. The following are some of the duties held by the Audit Committee:

• To examine the processes followed in preparing the financial statements and the information presented in the company shareholders.

• To monitor and periodically assess the sufficiency of the organizational structure of the company and the internal control system.

• It is a factor in the appointment of auditors and in determining the amount of their compensation.

• It supports the work of the external auditors by making it easier for them to access the information they need to finish their work.

• It is in charge of establishing the organization's Rules of Operation and Procedures and carrying out the decision-making process.

• Oversees the Internal Audit Unit and helps it do its work.

• Works together with it to set up the annual control program.

• It bears ultimate responsibility for internal control outcomes.

Additionally, the committee oversees and controls the auditors who work for the company or organization and is in charge of their compensation. Additionally, they designate pertinent protocols for issues relating to internal control and financial reporting. The procedures, also known as a "whistle-blower policy," enable people to raise concerns without worrying about repercussions10. In order to discuss pertinent issues that the committee or auditors believe should be discussed privately, the audit committee meets separately with the external auditors

CHAPTER 2 - Literature Review on Internal Audit

Introduction

Here, some internal control-related surveys that can help export some conclusions should be succinctly presented. The subject matter of each survey, the methodology that was used, the principal researcher for each survey, and the conclusions drawn by each survey are all covered in the paragraphs that follow.

Literature Review

Literature Review 1

First off, Willie Hackett and Sybil C. Mobley's 1976 paper summarizes the conclusions of accounting historians who have examined the historical evolution of internal management. The early businesspeople devised new strategies to regulate and preserve earnings as quickly as they improvised a strategy for generating them. The fact that they realized total trust was the crucial component and the most lucrative strategy by introducing new kinds of control was also stated in their survey. The following are some other contributing reasons to the ongoing expansion of internal control that are highlighted by the authors:

A) the impossibility of developing an audit owing to the huge number of transactions;.

B) The need to lower the cost of the external audit.

C) The use of advanced control mechanisms to maintain internal administrative controls and to offer timely feedback on mistakes and fraud.

D) The necessity to validate transactions and profit reports, as well as the consistency of the applications and the accounting processes, E) Since the external audit technique has changed from a review of previous operations to a review of the system of internal control, the reliance on it has grown.

From a viewpoint that highlights the pluralistic aspect of life's organizational structure, Gareth examined the function of the internal auditor and the disputes between the auditor and the audited in his M.A. thesis from 1980. He employed internal auditor surveys from several sectors, including police stations (40 replies), educational institutions (172 responses), and social services, for his study (138 responses). His survey's findings revealed that the audit function initially emerged as a stewardship process when the Institute of Internal Auditors and professional standards were established, with a focus on this as an Administration Management service. This study came to the conclusion that internal auditors simply conduct audit tasks and provide advice services, but the author claims that many issues come from the natural tensions between internal auditors and auditees and that their relationships need to be reshaped.

Additionally, Celal M.'s research from 1989 evaluated the internal audit role in Turkish banks. He employed 25 questionnaires addressed to internal auditors in various banks around Turkey as part of his approach. 14 of the surveys received responses. Additionally, he submitted 90 queries to the auditors, of which 50 received responses. According to the responses to the Celal surveys, the use of technology (computers) and the globalization of banking institutions have both increased the importance of internal audit in the banking industry.

Additionally, the findings of his poll revealed a direct correlation between the internal auditors and the size of the bank institution.

In order to evaluate the role that professional associations, governmental organizations, and worldwide accounting and audit organizations play in promoting the requirements for the local and global election of independent auditors, R. V. Rocco devised a research in 1996. The American Institute of Certified Public Accountants, the Institute of Internal Auditors, the Commission Capital Markets, and the Treasury of the US government are the specific subjects of this research. Rocco did a historical analysis and literature study to corroborate the findings of his survey, which led to the discovery that independence is regarded as the cornerstone of the audit and accounting professions.

Additionally, Loukis, E. and Spinellis, D. performed another poll in 2001 that emphasised the significance of system security IT. They sent a sample of 90 surveys to Greek public institutions, and 59% of them received a response. They come to the conclusion that the public sector in Greece is at least somewhat cognizant of information system security. However, they were also worried about the privacy of digital data since so few companies have created integrated, systematic approaches for safety information systems that include internal control processes.

In a survey performed in 1994 by Ali, N. A., 262 responses—representing a response rate of more than 41%—were received from a sample of 638 internal auditors who were members of the Institute of Internal Auditors. The survey's findings showed that internal auditors were acting dysfunctionally while working with a limited budget and time, and he explained the reasons why as well as some potential solutions. Particularly, operational control was less susceptible to the dysfunctional conduct than compliance and financial control. The four primary factors that contribute to internal auditors acting inefficiently with regard to time are flat control measures, insufficient supervision, an excessive reliance on operational staff representation and presentations, and time budget restrictions.

Burnaby, P. and Hass, S. (2009) employed research questionnaires in their survey to attain their goals. They emphasized the use of efficient internal control, especially adherence to the Institute of Internal Auditors' Standards.

They accomplished this via surveys that were sent to 99,000 Institute of Internal Auditors members across 91 nations. 9.5% of the total 9,366 responses were considered which represents the rate. As far as their responsibilities, a lack of sufficient people, and personal time are concerned, the findings demonstrate the necessary conformity between internal auditors and the International Standards Interior. The internal auditors serve as the basis for external auditors, according to a 2004 research study by Haron H. (especially on the financial statements of the companies). A questionnaire created by Haron and sent to several South Malaysian auditing firms (most of them were managers and B.o.D members).

The survey's findings demonstrated that the functionality and technological competitiveness of the internal auditors were essential qualities that the external auditors need in order to depend on them.

The connection between the external and internal auditors should have been defined in a number of ways to be in compliance with the Statement on Auditing Standards (SAS-65) released in 1991. In an SAS 65-compliant survey Alan R. did in 1994, he documented the historical evolution of the elements and traits that make up the interaction between internal and external auditors. A survey was distributed by Alan to a sample of 130 businesses. His findings revealed that most organizations had internal and external auditors that worked together in a collaborative manner, and that SAS had minimal effect on these relationships.

CHAPTER 3 - Banking Sector

Introduction

Each Bank must be proportionate to the size, complexity, and dangers currently associated with its operations. Since markets were deregulated and capital flows were liberalised, there have been a significant number of new commercial banks. The Greek financial sector is now going through a time of transformation and has seen a marked rise in Greek bank development in the Balkans, as well as partnerships with other foreign banks and mergers and acquisitions.

Particularly in the US, where it was a significant area of policy at the turn of the century, banking supervision has a lengthy history. The Great Depression and the high number of bankruptcies in general were the major drivers of economic theory's interest in banking sector oversight. While not limited to the United States alone, the goal was to regain public trust in financial institutions.

After 1930, the bankruptcy issue significantly diminished. In the United States and continental Europe, the level of supervisory oversight declined. Therefore, one of the most recent developments in economic history is the supervision of international banking. 41 commercial banks were active in the Greek financial sector at the end of 1997. This chapter examines certain important Basel Accord Committee components using theoretical data. It also discusses the internal control organisational structure in Greek banks.

A significant portion of the Basel Committee's initiative has been accepted by the supervisory authorities of many nations, despite the fact that the regulations approved by the Basel Commission do not have a compulsory legal character.

Commercial Bank

The most significant financial institutions are commercial banks, which also dominate each nation's financial system. The function of commercial banks in the economy is crucial. Since they have the capacity to influence the general public's buying power, they belong at the core of the monetary systems. Commercial banks provide a broad variety of financial services, such as granting credit, issuing bank checks, and issuing money orders, government securities, and money orders.
Commercial banks regulate deposit accounts and provide loans to both people and businesses. Additionally, various government agencies, like the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), keep an eye on C. B's. Value creation is the primary goal of commercial banks. By raising the share capital, the value of the bank may be created. The bank's economic earnings improve as it extends more loans to both people and companies, increasing the interest rate in the process. Additionally, Commercial Banks maintain capital on their balance sheets that they borrow and lend.

Best Accord Committee

In the United States, where many banks failed at the turn of the century, the banking oversight has a long and distinguished history. That was the motivation for financial authorities' interest in banking supervision, which was not limited to the United States.

A set of rules for the banking sector are included in the Basel Accords. Members of the Group of Ten nations' central banks and regulatory agencies, plus Luxembourg and Spain11, make up the Basel Accord Committee. Additionally, the major goal of banking supervision is to ensure that banks run responsibly and safely12.

In 1992, the Group of 10 nations passed the Basel Accord I, which established minimum capital requirements for banks in an effort to reduce risk.
The Basel Committee's first paper was intended to establish an international minimum level of capital that banks should possess.

The banks' capital adequacy ratio is the main subject of Basel Accord I. The chance of an unanticipated loss is broken down into five categories: 0%, 10%, 20%, 50%, and 100%. It specifically specifies the elements and quality of the capital held by banks and groups them into significant inside- and outside-the-balance-sheet figures in accordance with the indicated risks connected to them. The Basel Accord mandated a single, 8% minimum capital adequacy ratio.

Basel Accord II

Basel Accord II, the second international financial regulation, was established in 200413. improved the supervisory and economic capital balance as well. Basel II disavowed the notion that all supervision regulations must be the same in order to proclaim that the evaluation and management of the undertaking constitute the most sophisticated and effective pillar, reducing the need for interstate capital in a given activity. The Basel Accord is centred on three pillars:

? Calculating the necessary minimum capital to cover credit risk (Pillar I)

? Enhancing market discipline by adopting rules that include qualitative and quantitative information (Pillar II) and

? Market supervisory review procedure and formulation of principles and criteria relevant to this supervisory review process(Pillar III).

Following an early response to the needs of the market and the financial system, the Basel Accord II quickly gained acceptance as a benchmark for banking regulation.

Basel Accord III

Basel Accord III is a regulatory norm on bank capital adequacy, stress testing, and market liquidity risk, according to the Basel Accord Committee. The Basel Committee on Banking Supervision approved it in 2010–2011, and it was supposed to be implemented between 2013 and 2015; but, revisions made on April 1, 2013, prolonged implementation until March 31, 201815. In response to the flaws in financial regulation exposed by the financial crisis of the late 2000s, the third iteration of the Basel Accords was created. By raising bank liquidity and reducing bank leverage, Basel III was intended to increase capital requirements for banks.
On December 16, 2010, the Basel Committee released two significant reports with the following titles:

1. Basel III: a worldwide regulatory framework for stronger banks and financial systems16, was implemented in 2016.

2. Basel III: An International Framework for the Measurement, Standardization, and Monitoring17 of Liquidity Risk.

Internal Controls in the Organizational Structure of Banks

Management uses the internal control system, which is made up of a number of procedures and safeguards, to accomplish its operational and strategic goals18. According to Bank of Greece decision 2438 / 08.06.1998, each institution must have a sufficient and effective Internal Control System (ICS), which shares responsibility for carrying out the goals set by the Bank's Board of Directors.

Depending on the size and scope of the bank, of course, the internal audit department plays a significant role in managing banks. Internal control systems also provide advisory services to the Bank's many divisions and services. Additionally, internal control is a separate, advisory role that reports to management or the audit committee and finds flaws and offers countermeasures to address them19. Internal control's authority is based on where it sits in the organizational structure. Internal Control Service should directly report to the CEO, who is in turn given permission by the Board of Directors, in order to act and accomplish the objectives of the firm.

According to Law 3371/2005, Internal Audit is appointed by the Board and is accountable to it. It is also under the control of a three-member "Audit Committee" that the Board elects. The Audit Committee is in charge of reviewing the department's final reports and findings. This in turn informs the Bank's Board of Directors via regular and special reports.

CHAPTER 4 - RESEARCH METHODOLOGY APPROACH

Introduction

This chapter specifies the population that serves as the study's "target group" and the sample from that population that is required to carry out the study's objectives and reach its results. It also details the sampling method that was selected.

Sample and Population

The efficiency of the internal audit and internal control systems in the Greek banking industry is investigated in this study. As a consequence, a survey was performed and sent to fifty bank workers (executives and non-executives) at four of Greece's biggest banks. Men and women of various ages with at least five years of experience in the banking industry were asked to complete a questionnaire that asked about their understanding of internal audit and internal control systems. The first idea was to send the questionnaire directly to the internal auditors of the banks since it was assumed that because this was the focus of their job, they would have a more accurate and detailed understanding of the processes and systems. However, the research's initial hypothesis was rejected since it was intended to demonstrate the efficiency of internal control and its mechanisms in the banking industry. The first hypothesis had a high likelihood that the conclusions would include an excessive amount of subjectivity since it is very acceptable for individuals to adore their line of work. For this reason, it was decided that the research would only include male and female bank workers who had at least five years of banking industry experience.

It is necessary to know the precise size of the population in order to choose the sample (Cohen et al, 2000). The banking industry in Greece employs 44.3 thousand people. In 2015, the number of workers in the Greek banking industry was much lower than it was in 2010, when there were 59,967 employees overall. 42 banks are active in Greece; 13 of them are Greek, 21 are foreign bank subsidiaries, 10 are cooperative banks, and one is a financial institution. Only four Greek banks—Alpha Bank, Eurobank Ergasias EFG Bank, National Bank of Greece S.A., and Piraeus Bank—were included in the survey's sample.

The word "Sample" refers to a representative sample of the population that is chosen for study in order to make generalizations about the population as a whole. The sample size should match the size of the population utilized in this study. The workers of the financial institutions were chosen at random for this study's sample, and as a consequence, 50 questionnaires were delivered to them; 68% of them received a response. However, it must be emphasized that the accuracy of the results increases with the size of the sample.

Sample Technique

The basic random approach is used in this investigation. Employees at the bank received the surveys both in paper form and electronically (through email). Because the questionnaires were delivered directly to the chosen banks, which also provided the greatest access because friends, family, and coworkers are employed there, the sample was practical as a result.

Research Questionnaire

Only "Closed-end" questions, where respondents must choose from predetermined responses, are included on this questionnaire. All of the questionnaire's questions were created using a five-point Likert scale that assesses whether respondents agree or disagree with the following statements:

1. Vehemently disagree

2. Disagree

3. I'm undecided on this one.

4. Agree

5. Totally concur

The Likert scale was employed so that respondents could rate how much they agreed or disagreed with the topic of internal auditing. There are equally as many positive and negative responses on the scale of the questions included in the questionnaire.

It was decided that it was not required to give explanations when filling out the questionnaire in order to gather the data. The inquiries were simple for participants will comprehend without needing any in-depth explanations for the answers. The questionnaires were gathered, and then their validity and completeness were examined. The questionnaires and the survey were properly filled out.

The goal of this study, which used a questionnaire to collect data, was to determine if each Internal Control component and its supporting systems was essential to the efficiency of internal audit in ensuring the survival and development of the banking industry.

The questionnaire has two sections since it was created in a manner that makes it easy to complete it quickly. The five COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework mechanisms are discussed in the first section of the questionnaire. It assesses internal controls and measures the efficiency of internal control systems, and it is a widely used and acknowledged framework for internal audit functions (Candreva, 2006). The following are the five COSO framework elements that are examined in the questionnaire:

The internal control mechanisms are discussed in the second section of the questionnaire. It is worried with problems relating to the traits of an efficient internal control system. Each firm has unique requirements, structures, and sizes. Consequently, the following characteristics of a suitable internal control system are:

• Independence

• Organizational Strategy

• Reliable authority structures, authority delegation, and accountability

• Appropriate internal audit personnel

Independence refers to the auditors' unrestricted access to all the operations, records, and procedures of the economic unit as well as their ability to conduct their audits without being subject to any restrictions due to Management's support.

Every bank must have an organizational structure that details the duties and responsibilities of each department. Every time there are adjustments that make a review required, this organizational plan should be evaluated. Each internal control department should be made up of knowledgeable and skilled employees who have expertise and are acquainted with all transactions. The finest auditors are those who have spent a long time working in diverse industries as workers and executives since they have a wealth of experience and expertise, as is proved in practice. The auditor should be able to see mistakes and suspicious activity, as well as "read between the lines" and have the insight to spot mistakes and omissions that might significantly affect the results. Since the processes are always evolving and the auditors need to be updated on new control techniques, it necessitates ongoing training and involvement with each item.

CHAPTER 5 - Presentation of the Questionnaires’ Results

Introduction

A questionnaire was used to gather the data, as was described in the preceding chapter, from a sample of fifty bank workers from four Greek banks. Data was subjected to statistical analysis, and Microsoft Office Excel 2016 was used to create the graphs. The survey's results help us reach conclusions on how to strengthen internal control and boost its efficacy in Greek banks. Additionally, there are some suggestions made for additional study. The questionnaire's questions are based on a five-point Likert scale analysis that classifies statements based on whether respondents agree or disagree with them.

Likert Scale Rating 1

A frequency table, percent rate, and cumulative frequency are shown for each question that was subjected to statistical analysis of the variables. Additionally, each question has a related bar graph that shows the proportion of replies that support it for simpler understanding and perception. We will provide the findings of our inquiries after receiving all the survey replies. The Control Environment of a Bank is discussed in the first section of the questionnaire.

Analysis of the Questionnaire

As we can see, the majority of Bank workers (80% on the "Agree" scale and 100% on the "Strongly Agree" scale) agreed that internal control significantly protects the company's assets and employees. The descriptive statistical analysis findings, which are shown in the table below, lead us to the same conclusion.

According to the aforementioned graph, we can see that 80% of the workers think internal control helps the firm maximize its effectiveness since after each control, risks are recognized and dealt with to assist the bank maximize its effectiveness. The percentages on the "Agree" and "Strongly Agree" scales are the same, and the same outcomes were also shown in the statistical analysis that we utilised. However, 20% of respondents do not agree or agree with this, maybe because they do not have a comprehensive understanding of internal control.

The Internal Audit assists in comprehending and addressing any threat discovered during checking, according to the 76% of Bank personnel (38). However, 12% of the workforce expresses neither agreement nor disagreement, despite the fact that Internal Audit is responsible for monitoring and identifying potential hazards inside the Bank. The statistical analysis that led to these findings is shown in the table below.

The presence of organizational plans for each sector and Department, which are evaluated in light of recent developments and demands, is referenced in the fourth question. Figure 4 shows that there is an organizational plan for each sector and Department, with 62% of respondents agreeing with this statement (32% "Agree" and 40% "Strongly Agree"). However, 14 respondents were "Agree and Disagree," therefore we may infer that the organizational plan might need a little upgrade. The job description may be based on a plan, and each employee is aware of all of his or her duties inside the bank.

At least the second bigger scale seems to be the "strongly Agree" scale. We may infer that some workers may not have established the rule of integrity and the Code of Ethics from the tiny size of responses provided by 19 employees.

Does Internal Control occur in both regular and irregular circumstances? This is a question that is relevant to risk assessment. Because 28% of respondents may not be aware of the regularity or irregularity of internal controls, they chose "Neither Agree nor Disagree" as their response. On the other hand, the majority of the 50% of workers believe that internal control goals are updated periodically.

46% of respondents to the aforementioned question strongly agree that the management's aims are reasonable and doable. However, 44% of the workers who responded "Neither agree nor disagree" feel that not all objectives can be readily attained.

As we can see, in question 8, the bank personnel concur that the control system successfully thwarts and safeguards unlawful activities. None of the staff respond negatively. The similar thing occurs when we apply statistical analysis to identify the variables.

Since they feel that there are rules and procedures that govern how the different duties in the Bank are regulated, 76% of the workers respond "Agree" to question 9 of the questionnaire. 38 workers are in agreement, and 12 employees are neither in agreement nor disagreement, as shown by the statistical study.

The second section of the questionnaire, which examines the efficiency of internal control systems, starts with Question 10. As we can see, almost all of the employees—100%—agree that internal controls ensure that the computer system is operating properly and that the data belonging to the bank is fully protected. The statistical analysis that is shown in the table below also shows that this is the same.

The majority of workers agree that internal controls foresee improper behaviour and errors that might endanger not just the bank's reputation and interests but also those of the shareholders. Only 2% of people are split between agreeing and disagreeing with this assertion.

As noted in the graph above, 18 (36% of the total number of workers) feel that it is occasionally possible to determine if a transaction was conducted by the appropriate clerk. However, 64% of respondents said they thought internal audit "monitored" all of the transactions that relevant workers made.

The internal auditor, according to 100% of respondents, has complete access to all data and information required for internal control.

An overwhelming majority of the workers 94% (32 out of a total of 50) agree that internal control functions impartially and independently, indicating that it is a crucial component of the bank's operations. However, there is a negative percentage (3 workers) who are undecided.

In response to question 15, 84% of respondents agreed that the auditors for the bank's inspection should sometimes vary in order to raise the standard and openness of the banking system.

A lot of the employees believe that there is no intrapersonal relation between the auditors and the employees, and only a minus percent of 2% strongly agree. So, we can assume that there no changes to be done in order to improve this because its already improved.

Again, the majority of banking employees' responses are favorable, although 36% of them feel that not all of their tasks and obligations are clearly stated for them.

The majority of the 50 workers (100%) firmly feel that computers and informatics help to regulate or even enhance bank supervision. No changes are required at this time. The statistical analysis's table below has the same information.

The operations on the ATM and other bank equipment are closely supervised by a number of individuals, according to 72 of the workers, in order to prevent money misuse. Because of the size and the nature of the transactions, there is transparency and the intersection of control.

Finally, as we can observe the 90% of total employees believe that the results of the audit reports are shown to all the personnel, in order to improve the productivity and their competitive nature.

CHAPTER 6 - CONCLUSIONS AND RECOMMENDATIONS FOR FUTURE RESEARCH

Introduction

The results of the dissertation study are compiled in this chapter and come from both the literature research and the analysis of questionnaire answers. Additionally, it makes recommendations for additional research that may be conducted in the future to advance the internal control role in banking organizations.

Conclusions Of The Questionnaire

First, we utilised the model (framework) created by the COSO Committee, one of the greatest instruments for evaluating the efficacy of internal control systems, to capture the effectiveness of internal control. Five components make up internal control, which is based on the COSO Framework and estimates how successful internal audit is. Each component included two questions in the questionnaire.

In this study, our research technique included delivering questionnaires to four Greek commercial banks. Some conclusions were drawn from the questionnaire's statistical analysis findings and the replies' classification on the Likert Scale neither (“Strongly Disagree, ““Disagree,”“ Neither Agree nor Disagree, ““Agree,”“ Strongly Agree.

We may infer from the whole questionnaire that workers are subject to internal control since they are aware of their responsibilities and tasks, but they also need to better such responsibilities because they sometimes generate confusion while doing their job and during the audit.
Similar to how there is collaboration between the many Bank divisions and internal control, the transactions are regulated by audit processes, and the internal auditors are appropriately educated and seamlessly integrate the control.

In order to address various challenges that develop in their surroundings, the Banks should also consider the findings of the study questionnaire. Moreover, In order to have an efficient internal control system, banks should choose one that considers the risk that lurks in each bank department and should adjust it in accordance with Basel Committee criteria and IAS training. Additionally, internal auditors benefit from working independently since, on occasion, time constraints might hinder the gathering of relevant and adequate evidence. Finally, since complaints regarding defects are often genuine and not made up, internal auditors should consider them. Surprisingly, the contribution of the internal audit function is quite prevalent in all of the aforementioned areas.

In a word, a strong and successful economy depends on the banks' efficient operation and stability.

Recommendations Future Research

It is possible to do more research for each industry independently and draw comparable conclusions on the presence and effectiveness of internal control, but this would take a lot more time and the cooperation of the firms being surveyed.

To have a better understanding of their duties, study might also be done on the efficacy of internal auditors.

REFERENCES

Auditing Coursework Assignment Sample

Assignment Structure

1. Result of an analytical procedure

2. Risk of Material Misstatement (Inherent Risk) at the Financial Report

a. The integrity of management
b. Management experience, knowledge, and changes during the period
c. Unusual pressure on management
d. Nature of the entity’s business
e. Factors affecting the industry in which the entity operates

3. Risk of Material Misstatement (Inherent Risk) at the Assertion Level

a. Explain why the account balance is at significant risk of material misstatement

c) Detail one (1) relevant substantive audit procedures to address the assertion at risk as identified in b) above

d) Detail one (1) relevant practical internal controls that would mitigate the risk in relation to the assertion at risk

Introduction

One of their best quality-based evaluations has been made possible by the fantastic inquiry into the organization's crucial importance. It has been thought that the review-based evaluation in a clear direction through their capability appraisal may be helpful in keeping gotten to capability related to the upcoming part. According to the surveyed hugeness, the storm cellar associated with the administration and dangers account has been valued. Therefore, the offered evaluation and its size would be important for the thorough procedures.

Through its prior and earlier annual reports, the higher number of techniques and this level of value-based fulfillment have been recognized. The unmistakable, as well as unstoppable materials, have been provided, and most of the working criteria have been published as a result. Through the appraisal, better strategies and it's level best places have been understood. Through the approach of top supervisors to be overseen, greater quality and higher competency have been evaluated.

1. Result of The Analytical Procedure

Fortescue Metals Ltd has been successful in maintaining an optimum level of yearly company performance. As a result, the company's financial performance may be accurately calculated in the market with the help of important ratios like the gross profit margin, net profit margin, operating profit margin, current and quick ratio, and others.

Table 1: Fortescue's main ratios calculated (Source: Fmgl, 2019)

In light of the discussion above, it is evident that the company was able to maintain a suitable level of business performance in 2019. Despite the company's financial performance declining in 2018, the potential for business performance stabilized in 2019. Additionally, the organization's cash assets have been found to have increased as a result of the strong sales revenue in the year 2019. (Fmgl, 2019). Therefore, it could assist the company in acquiring a competitive edge and sustaining suitable performance year after year.

Regarding gross profit margin, it can be noted that the company's management effectiveness remained flat in 2018, which reduced the prospective profitability rate. Nevertheless, the potential for profitability has grown quickly as a result of the senior executives accurate evaluation of the financial statement. The operating profit and net profit margins have risen along with the expected gross profit margin in 2019. In recent years, it has assisted the company organization in preventing further financial loss. Additionally, the business may steer clear of unneeded market obligations in the years to come. Fortescue Metals Ltd. was unable to boost the liquidity of its assets in 2018, as evidenced by the liquidity ratios such as quick ratio and current ratio. The potential problem has grown steadily as the assets' size has shrunk in comparison to market obligations. But Fortescue Metals Ltd.'s senior management has assessed the existing circumstance and taken the necessary steps to address them. In 2018, it contributed to a rise in the current ratio rate.

In light of the aforementioned debate on auditing assignments, it can be concluded that the organization's market position has stabilized this year. However, the firm was compelled to adopt effective management practices as a result of the avoidable losses in 2018. The senior executives of Fortescue Metals Ltd. appointed a panel of outside auditors to assess the company's operational efficiency. As a result, the organization's future potential for business performance has increased. Additionally, 2019 will see an increase in the efficiency of audit management as both internal and external auditors examine the financial statements. The quality of audit evaluation has been improved as a result of both internal and external auditor reviews. As a result, the company's potential crisis can be effectively mitigated. Additionally, the corporation may be able to deliver appropriate annual business performance.

2. Risk of Material Misstatement (Inherent Risk) in the Financial Report

a. Integrity of management:

One of the outstanding businesses in the mining and iron ore industries is FORTESCUE METALS LTD. The company has become one of the fastest growing in the nation because of the iron ore extraction and its point-based evaluation. One of the areas of strong growth has been the evaluation based on the internal and external hazards assessment. The internal and external evaluation of the company's fundamentals has been used to manage the managers and the director. One of the remarkable directors whose eligibility has been continually raised is the DirectorMR, Andrew Forrest (Dai & Vasarhelyi, 2015).

The duty and portion of management must be understood through the portion of professionalism, which is dependent on having many activities that could be maintained in accordance with the high standard that has been used. The recent future has been entangled with the healthy and strong link, which has been extremely quality-based work. The management has adopted the right essence in the satisfied key. The high degree of team management and its level-based thoroughness have been successfully managed through appropriate comprehension.

b. Management experience, knowledge, and changes during the period

One of the best chances that would be significant through the direct and indirect examination in perspective has been guaranteed for the company's management. The extremely thorough and significant analysis has been broken down by step-by-step procedures to show off its level of apprehension through the appropriate significance. The ASX Governance Council has been guiding participants via the better way to take its perspective on higher quality. This approach is of the highest quality, and it's level best assessment in the right and enhanced procedure. The openness, including the direct client-based approach and its use at a higher level in its Lela-based component. The more ambitious sections have been more accurately used to gauge management effectiveness and vice versa. The cost-saving strategy has been considered, and it could be applied if they were honest and empowered. The high quality of management that will be applied has allowed the high performance-based work and its evolution to be understood. Both the theory and the practice have been applied simultaneously in the respected position. The governance Amanda the sustainability-based framework that has been done in the organization has dealt with the ethical and unethical-based globe. One of the better characteristics that may have the greatest impact has been acknowledged to be the thorough examination and its level-based methods (Smith & Van Der Heijden, 2015).

The level best arrest and its associated flat have been controlled according to their final significance in terms of better segregation. The high standard of management has been pushed together with the HR management and audit-based management, which might be spartan for the better assessment and establishment of the organization. Most of the suckered measures have been thought to be produced through the diversity and its dependability of keeping the equilibrium.

c. Unusual pressure on management

The management must process the pressure put on it to make increasing amounts of profit in decreasing amounts of time through its highest level of comprehension. Strong management has made use of the use and many sorts of appointments, including sisals and exposure of permeability. The senior chair and the person who is motivated by the improvement of viewpoints must comprehend the right assignments, such as non-executive and executive-based management. Through its right acceptance and complete management, compensation and its faultless assessment have been achieved. Through the development of a better assessment and its associated level of aperture, internal approaches may now make sense of it.

The major responsible assessment that may be useful via the overall existence through the level of approaches is made by the directors and executive management. Through the company's governance, the board committee has established the intense pressure and its level-based approaches. The company's anticipated expansion is predicated on some items needing to be altered in accordance with precedent. The strong performance-based pressure and its significance could increase the growth's engagement a little bit.

d. Nature of the entity’s business

The company's founders and chairman have owned it with a very limited number of shares that have been precisely controlled in the context of techniques relating to improvement. The business has been taken into account by the improvement of each individual property's entirety and overlaps, and the shared basis of development has been taken into account through the statement's total sales volume. The business entity is compared to a business that only makes money through internal and external announcements. The dividend and share basis of the component, which is based on having the consideration to be signaled, has been taken into consideration.

e. Factors affecting the industry in which the entity operates

There are many different types of things that could have a direct or indirect impact and could serve as an excellent foundation for improvement. The overall importance of the growth margin would be taken into account after the influence of entity operation, and it is likely specifications, such as the rate of growth, have been excluded. Entities like the tiered business approach relate to being taken through the higher approaches in terms of obtaining better quality for the goods and other export-related items. Through their work methods, the GDP and other financial-based parts are taken into account in accordance with the overall quantity of consideration (SimMet, Carson & Vanstraelen, 2015).

3. Risk of Material Misstatement (Inherent Risk) at the Assertion Level

a. Explain why the account balance is at significant risk of material misstatement

The corrective procedure has been used to explain the higher risks associated with market opportunities in terms of misstatement. Statements that could be advantageous to the firm could put people in danger, and those who might not normally be at risk could be made to perceive them as such in the statement's potential.

However, according to the comprehensive management of the early and final stage of assessment, the company has exclusive confidentiality to the company director and manager. The entries must be in their specific position due to the material assessment of the company's current assets as liabilities (Beard et al. 2019). The specific situation, such as the excellent foundation of their improvement through the anticipated methods. The assets could have a significant impact on the company's profit and other aspects, which is very beneficial for the best management feasible in terms of company-based accomplishments. The correct management procedure could make extensive use of high-quality-based methodologies.

b) Explain The Key Assertion at Risk of Not Being Valid

c) Detail one (1) relevant substantive audit procedures to address the assertion at risk as identified in b) above

Other Current Assets

Inquiry

The other assessment was made using one of the most accurate bases for calculation and methods that could work after observation. The right number of auditors will be present during the asset observation procedure to assure quality. The value must be significantly greater than other values. It might be far more dependable than other items.

Property, plant, and equipment

Observation

The observation must be carried out carefully and through the equipment based on the outer level of significance, with the final significance being noticed. The use of equipment maintenance is predicated on having higher importance through the final evaluation for a better assignment. Through its associated administration, the suitable implementation through better applications has been fixed.

Intangible assets

Recalculation

The right execution of the recalculation has been taken into consideration, and we also need to be concerned about the points-based assessment.

d) Detail one (1) relevant practical internal controls that would mitigate the risk in relation to the assertion at risk of the many kinds of tasks. For the heavy and accumulated analysis to be used, a computation has to be made first. It must be accurately managed if better services are to be managed in accordance with the document assessment. High levels of evaluation using the convenience assessment's intermittent level of assessment.

Conclusion

One of their top quality-based assessments has allowed for a thorough understanding of the company's significant significance. The audit-based evaluation has been taken into account when providing final advice through their proficiency assessment and may be useful in maintaining accessed competency in relation to the following segment. The foundation around the risk account and management has been understood in accordance with the significance assigned. The awarded evaluation and its associated relevance would be highly pertinent in several ways. Through its previous and preceding yearly reports, the higher level of approaches and this level of quality-based satisfaction have been understood. The majority of the working criteria have been issued using both tangible and intangible assets as criteria. Through the assessment, the better strategies and their level best components have been understood. The general manager's strategy of managing exclusively has been evaluated to produce higher quality and higher competency.

Reference List:

Sanderson, K. A., Brown-Liburd, H. L., and Barr-Pulliam, D. (2017). On perceptions of audit quality, assurance, and auditor negligence, the internal control opinion and use of audit data analytics have an impact. Negligence in Assurance and Auditing (August 17, 2017).

J. Beard, P. Coram, R. Espahbodi, & T. J. Mock (2016). If adjustments to audit reporting standards are warranted, recent academic research is supportive. 30(2) of Accounting Horizons, 255-275.

Vasarhelyi, M. A.; Dai, J. (2017). Moving toward accounting and assurance based on blockchain. 31(3), 5-21, Journal of Information Systems.

Jones, M. J., Edgley, C., and Atkins, J. (2015). A field study approach to the application of the materiality idea in social and environmental reporting assurance. 47(1), 1-18 of The British Accounting Review.

Fmgl. (2019). (2019). Retrieved on September 20, 2019, from www.fmgl.com.au/docs/default-source/annual-reporting-suite/fy19-annual-report.pdf.

Mohamad, N. R., Salleh, & Hardan, A. O. (2016). Ancestors of human capital A conceptual analysis of the effects of the international standard on quality control 1, or isqc 1, on the performance of audit firms in Jordan.

Schmidt, J. J., Valentine, K., and S. J. Kachelmeier (2017). The consequence of important audit matters being disclosed in the auditor's report serves as a disclaimer. working document

Mayhew, B. W., Tegeler, A. C., and Z. T. Kowaleski (2018). An experimental approach to the effect of advisory services on audit quality. 56(2), 673-711, Journal of Accounting Research.

Carson, E., SimMet, R., and Vanstraelen, A. (2016). International research on archival assurance and auditing: trends, challenges, and prospects. A Journal of Practice & Theory: Auditing, 35(3), 1-32.

S. Smith and H. Van Der Heijden (2017). Analysis of the usefulness, standardization, and assurance of KPIs. 18(1), 63-86 in Journal of Applied Accounting Research.

ACCM4400 Auditing and Assurance Assignment Sample

Assessment Title: Case Study

Weighting: 40%
Word limit: 1,800 words (max.) (Do not include title page, table of
contents, executive summary and reference list in the word count.)

Due Date: Tuesday of Week 13 at 19.55 AEST

Your Task

You must complete a report detailing your findings and suggested audit procedures as stated in Assessment Question for an ASX listed company.

Assessment Description

This assessment is designed to test your ability to apply the knowledge gained from ACCM4400 workshops during the semester, in identifying assertions at risk and developing appropriate audit procedures. This will be done by analysing available information of an Australian company (hereinafter referred to as “The Company”) that is listed on the ASX. The name of The Company will be made available on the Assessments page of MyKBS for ACCM4400 on Friday of Week 11 and you must submit your report at 19:55 (AEST) on Tuesday of Week 13.

Your facilitator will discuss the assessment requirements during Workshop 11. Workshop participants will be divided into groups to discuss the assessment requirements based on a sample case study.

Your facilitator will then give feedback on each group’s responses to the application of the questions to the sample case. It is expected that the discussions during Week 11 will clarify the expectations and requirements for performing at a high standard in this assessment.

Please remember that this is an INDIVIDUAL ASSESSMENT and must be based on The Company, name of which will be released at 08:00 (AEST) on the Friday of Week 11.

Learning Objectives:

After completing this assessment, you will be able to:

1) Research information about the selected company (using multiple sources)
2) Address particular areas of the audit process and develop appropriate audit procedures
3) Develop professional report-writing skills

Case Study for Assignment Help

During your semester break, you participated in a vacation program at a local audit firm. During the vacation program, you assisted an audit senior on the planning of a medium sized company, including developing appropriate substantive audit procedures. You have one more semester to complete your post graduate course and have indicated to the audit manager that you would like to work on a full- time basis at the audit firm on completion of you course.

The audit manager has asked you to write a report as part of the process of determining your suitability as a candidate for a permanent role in the audit firm. The manager wants to assess your ability to apply the knowledge you gained, to the audit planning process and developing appropriate substantive procedures as well as your report writing skills.

You are required to address the following in your report (refer to rubrics on page 4 & 5 of this document for breakdown of marks and achievement criteria by component):

1. Identify 4 business risks of The Company, that will increase the risk of material misstatement (specifically inherent risk) at the assertion level for classes of transactions or account balances.

For each business risk, identify only 1 class of transaction or account balance (income statement or balance sheet line item), and for each class of transaction/account balance please identify the assertion most (only one) at risk of misstatement. You need to explain why each business risk will lead to a risk of misstatement to the specific class of transaction/account balance and assertion that you have identified.

2. Describe in detail, the appropriate substantive procedure that will address each of the class of transaction or account balance and assertion identified as at risk of material misstatement. The description of procedures must be detailed enough for someone without auditing knowledge to be able to carry out the procedures correctly.

Additional Requirements:

You must include the following in your report:
1. Title page
2. Table of contents
3. Executive summary
4. Introduction
5. Body of report
6. Conclusion
7. References

Sources of information for this assessment may include:

1. The latest annual report of The Company
2. The Company website
3. Announcements on ASX with regards to The Company
4. News articles on The Company
5. Corporate Governance statements of The Company

Solution

Executive Summary

The report has discussed TPG Telecom Limited and the risk associated that would increase the assertion level in the misstatement in the transactions. Each class of transaction has been discussed by pointing out one risk for each of the risks and their substantive procedures. The risk identified in this report includes network capability and performance, competitive industry and market disruption, legal and regulatory risk and technology stability and resilience. Four different substantive tests have been mentioned to address each class of transactions. This is also helped in understanding how every operation of an organisation is related to the transaction and balance statement of the company. This is pointed out that the operations and management of the telecommunication sector request sustainability, especially in this pandemic era. The substantive procedures that have been identified include reviewing the board of directors and how they manage every step of the operation. There should also be an understanding of the inventory valuation calculation and the asset records to manage the misstatement of accounts. The payable balances and loan balances must be kept under record to minutely follow the board of directors' decision and the financial performance of the company. The bank confirmation and also the cash balances must be monitored to see if there are any problems with the technical stability and the resilience of the company. Following all these addresses substantive tests will help TPG in controlling its operations and managing risk in the future years.

Introduction

The report will discuss the business risks of TPG Telecom and how the risk can increase the material misstatement at the level of assertion in transaction or account balances. TPG Telecom Limited which was formerly known as Vodafone Hutchison Australia was renamed after the merger with the TPG. This is the second largest telecommunication Organisation on the Australian Securities Exchange (TPG Telecom, 2022). This is home to many brands in Australia including TPG, Vodafone, iiNet, AAPT and so on (TPG Telecom, 2022). After the risks are identified substantial procedures will be addressed to state how the risk has been identified for material misstatement.

Discussion

Four Business Risks of TPG Telecom Ltd

Network Capability and Performance

As the company primarily deals with telecommunications, the key risk that has been identified in its annual report is related to the availability and performance of its fixed and mobile networks. Any form of network congestion or outages can lead to a poor consumer experience which can negatively impact the reputation of the company. The pandemic has highlighted the role of the telecommunication sector and has reinforced the importance of reliability and resilience in the services of telecommunications. Various potential problems can cause the network failure that may include accidental damage, extreme weather, human error, power outages and natural disasters and so on. Moreover, as it deals with telecommunications the systems and technology must be kept up-to-date, especially in this present time where people are completely dependent on digital communication.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be managerial incompetence. The company is planning to increase the network infrastructure and also significantly invest in their resilience and network capability to provide a robust operational management process. The company has paid 84 million dollars in the spectrum payments of Dense Air Limited's 3.6 GHz spectrum and also in their 2.6HHz spectrum in the networks Australia Pty Limited. This TPG corporation merger has come into effect on 26 June 2020 (TPG Telecom, 2022). This is an important part of the financial misstatement of balance because if the network does not function properly then the company will lose a lot of capital in repairing the process. The company has also added additional leases of 124 million dollars that have less termination of 15 million dollars.

Competitive Industry and Market Disruption

The competitiveness of the industry is quite high as there are several other telecommunication organisations present in Australia. The industry is susceptible to rapid changes as the technological innovation and the trends of the consumer are evolving rapidly in the practices. These trends can cause a discontinuity and affect the business models leading to a failure in translation for quick adaptation. The pandemic is still a continuing risk for the business as many migrations and international travel have slowed down even after the reopening of borders. The company has focused on proposition development so that the appeal in the domestic market can increase and also offset new ways like monetisation of 5G. The consolidated financial statement said that the company has put almost 1963 million dollars in 2021 for the cost of the provision in the telecommunication services (About TPG, 2022). The revenue that has been generated from the contract with the customer is 5274 million dollars in 2021. The finances are yet not quite down but have decreased when compared to the previous years as in 2020 the provision of telecommunication services will be 1351 million dollars (About TPG, 2022). The industry is challenged with complex operational processes that require customised solutions (Aivo, 2022). This is often a risk for companies as updating faster becomes a challenge.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be the operation of the rapidly changing industry. Another important aspect of the pandemic was that the financial stability board has shown that Covid-19 has helped in accelerating the digital transition which is the positive side for the telecommunications industry. The company is still in the number two position in the Australian telecommunications market and so there is less chance of misstatement of any account balances very soon. The existence assertion will affect the assets and liabilities including the equity balances if there is a problem in the financial statement.

Legal and Regulatory Risk

The company works in a highly regulated industry and does have an evolving and complex legal requirement that is subjected to various regulations from the consumer service delivery following the network security. This forces the company to change its regulatory policy and other interventions of the government which could impact the financial performance and also the commercial viability of its operations. The company has established various codes and policies for the training and awareness initiatives that help in ensuring that the employees are adequately equipped and also can manage the compliance obligations. This part of transactions is often included in the various sales and purchases of the accounting period. The legal part is important as it helps in understanding the transactions and events related to completeness, occurrence, accuracy, classification and cut off. The rights and obligations and also the presentation help in assertions about the account balances that can be related to the disclosures of a current period (About TPG, 2022). The investment that the company makes in the legal compliance department is sufficient to regulate the body regularly to stay relevant to the business rules.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be poor oversight of the board of directors. This is important and a grave risk because if the legal part is not followed properly then the company is not only going to lose the financial part but also would face a lot of problems in remaining in the business. The test completeness is a procedure that starts from the underlying documents and also checks the entries of the relevant ledgers to ensure that nothing is missed.

Technology Stability and Resilience

The company has identified that technology stability and resilience are one of its key risks in the present year. The company states that although they have invested enough to make the operation efficient there have still been issues regarding service interruptions and unavailability in critical business systems. The company has also invested enough for a strong governance framework that would help in any disaster recovery and manage destruction appropriately. Disruption in this area can impact the company to their reputation, operations, revenue, customer retention and even costs. The assertion that has been identified in this risk is the evaluation of the financial statement regarding the investments. For example, if the company does not provide accounts receivable then the customer will period accounts receivable amount that is owed.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be declining economic conditions. This risk can be managed if an auditor comes to examine the accounts receivable and determine if there are any bad that allow accurate ones. The inventory of the company can also be reviewed to understand if there are any issues in the appropriate valuation method. The company has a target of 485 million dollars to be spent on their operating FCF. This is almost 15% of the total service revenue that the company has fixed in their annual report for 2021 (About TPG, 2022). The financial reporting of the company is clearly showing that they have invested a substantial amount in the risk management of this particular issue. This can be mitigated by various other methods that have been taken as an approach to solving the problem in the current year.

Substantive Procedure To Address Each The Class of Transaction

? The substantive test that can address managerial incompetence is true by reviewing the board of directors' minutes and verifying the existence of all the approved evidence by the organisation. This is the best method to understand the substantive test for internal audits as the board of directors makes the prime decisions in the company. This will also provide the path for future audits while understanding managerial competence and changing it if need be (Bragg, 2022). This is a singular substantive test which can help in understanding the balances and the misstatement that can occur through the risk that has been identified.

? The substantive test that is most applicable for the misstatement of operations in the industry can be addressed through inventory valuation calculations and fixed asset records. This would help in understanding what the present valuation of the inventory is and how the company must upgrade their operations to meet the requirement. The fixed assets would also help in determining the operations that required changing especially after the pandemic. The balance line can also be mitigated by understanding the fixed assets and evaluations of the company that has been already invested in 2021 (Girsch-Bock, 2022). This would also provide a clear understanding of how much investment should be done in the inventory in the upcoming year.

? The substantive test appropriate for this statement is contacting the suppliers and lenders and understanding loan balances and the payable balances are affecting the financial part that has missed the sight of the board of directors (Ozlanski et al., 2020, p.28). Financial performance is important because unless that is monitored well by the top management it can cause problems in the legal and regulatory areas of the company. This is one of the prime risks that the company might face if the balances are not checked properly by the auditing system.

? The last risk can be addressed by bank confirmation and testing the cash balances to monitor the technical stability and resilience. This would help in understanding how much the company is investing in improving its technology and also providing a resilient service in the coming years. This can be done by the internal audit of the company as the internal recordation systems can be performed in a planned manner (Aldhamari et al., 2020, p.4). This will also provide a cleaner audit as external auditors conduct the various tests at the year-end and this might create more risk in the entire year.

Conclusion

It can be concluded from the above discussion that TPG has various risks identified by themselves in the annual report. Although only four risks have been discussed in this report that is related to network capability and the performance. There has also been discussion about the competitive industry in which this organisation is working including the legal and regulatory risks. The various issues regarding technical stability have been mentioned and how it would affect their misstatement is also explored. After identifying the risk, the substantive tests have been mentioned that would help to solve these issues. This would also encourage an understanding of the auditing system of TPG better. The report has also highlighted how the risks associated with the present management can affect the present position of the organisation.

References

About TPG, 2022, Annual Report 2021, Tpgtelecom.com.au. Retrieved 6 June 2022, https://www.tpgtelecom.com.au/sites/default/files/asx-announcements/TPG_Annual_Report_Accessible%20Version.pdf.

Aivo, 2022, Top 5 Challenges in the Telecom Industry and How to Overcome Them with Chatbots. Retrieved 7 June 2022, https://www.aivo.co/blog/5-challenges-telecom-industry-with-chatbots

Aldhamari, R., Nor, M. N. M., Boudiab, M., & Mas' ud, A, 2020, ‘The impact of political connection and risk committee on corporate financial performance: evidence from financial firms in Malaysia’, Corporate Governance: The International Journal of Business in Society. Retrieved 6 June 2022, <DOI 10.1108/CG-04-2020-0122>

Annual Report TPG, 2022, TPG Annual Report, Tpgtelecom.com.au. Retrieved 6 June 2022, https://www.tpgtelecom.com.au/sites/default/files/asx-announcements/TPG_Annual_Report_Accessible%20Version.pdf.

Bragg, S, 2022, Substantive testing definition — AccountingTools, AccountingTools. Retrieved 6 June 2022, https://www.accountingtools.com/articles/what-is-substantive-testing.html.

Girsch-Bock, M, 2022, Understanding Audit Assertions: A Small Business Guide, The Motley Fool. Retrieved 6 June 2022, https://www.fool.com/the-ascent/small-business/accounting/articles/audit-assertions/.

Ozlanski, M. E., Negangard, E. M., & Fay, R. G, 2020, ‘Kabbage: A fresh approach to understanding fundamental auditing concepts and the effects of disruptive technology’, Issues in Accounting Education Teaching Notes, vol. 35, no.2, pp. 26-38. Retrieved 6 June 2022, <DOI: http://dx.doi.org/10.2308/issues-16-076>

TPG Telecom, 2022, About TPG | TPG website. Retrieved 7 June 2022, https://www.tpg.com.au/about-us
TPG Telecom, 2022, TPG Telecom | TPG Telecom, Tpgtelecom.com.au. Retrieved 6 June 2022, https://www.tpgtelecom.com.au/.

Audit Quality Essay on Australian Parliamentary Committee Assignment Sample

Question

Task: Writing a research article on the most recent Australian Parliamentary Joint Committee on Corporations and Financial services is the assigned task.

This is an independent research project that broadly relates to audit quality, audit regulation, auditor independence, and user expectations. The interim report is supposed to serve as the foundation for your submission, but you'll also need to do some further reading and gather material online and via newspaper stories.

The assignment must be formatted in essay form (report style is not required), and Harvard referencing is also required. Subheadings are encouraged, 12 font caliber or times new roman styles are advised, and the assignment must be written in essay form (please seek assistance from the librarian if necessary).

Part A - Background, Impetus, Rationale, Momentum and support and/or resistance:

• What is the goal of auditing quality in large businesses, and how well has it worked in Australia?
• What does a parliamentary committee do, please?
What drove the investigation's goals?
• Did the Joint Parliamentary Committee encounter any opposition? In that case, who and why?
• How were the data gathered?

Part B - Interim findings, Revelations:

• What are the Committee's most important findings to date? Discuss any specific instances that have been proven to have violated moral and professional standards.
• What apparent conflicts of interest exist?
• What independence-related threats were discussed?
• What responsibilities do auditors have in connection to a GPFR?
• Has Australia seen any indication of systematic audit failure?

Part C: User Expectations, Scope of The Audit, Digital Financial Reports:

• Which parties are most likely to be affected by the parliamentary report?
• What functions do ASIC, AUASB, FRC, Treasury, and professional organizations perform?
• What do you think of the research so far?
• What repercussions and reforms the parliamentary committee is likely to bring about, including a debate of self-regulation, etc. Who will most likely be impacted by these measures, and will they be positive or negative?
• How has the audit's scope changed?
• What adjustments have been made in terms of the expectation gap?
• How is digital reporting doing right now?

Answer

Introduction

A crucial phase in the audit process that aids in tracking the risk associated with the organization is the notion of audit planning, which is discussed in the suggested audit quality essay. The auditing method and analytical framework, according to Geoffrey et al. (2016), aid in risk assessment. The report's objective is to undertake an impartial investigation into the auditing rules, audit quality, independence, and user expectations. The recent Australian Parliamentary Joint Committee on Corporations and Financial Services is discussed in the audit-quality essay.

The audit quality essay is divided into four components for this reason. The background and intermediate findings come after the introduction. The user expectation comes next, and last, global awareness, support it.

Part A

Background, Impetus, Rationale, Momentum and Support and/or Resistance:

Financial statements of an organization can reveal information about its condition and financial performance. Investors frequently examine an organization's financial accounts before making significant investment-related choices. According to Kim (2013), a sensible investor will always opt to buy stock in a business that has good financial standing as evidenced by its financial statements. Few businesses frequently decide to alter their financial statements in order to obtain investor capital, which compromises the accuracy and dependability of the financial statements. Companies must now get independent third-party verification to guarantee the transparency, dependability, fairness, and integrity of their financial statements in order to protect the interests of investors.

Purpose of Audit Quality for Big Business

An independent auditor is necessary to conduct this third-party examination of the financial statements, and both the auditor and the company must make sure that the audit quality is never jeopardised (Gay & Simnett 2018). For all types of firms, audit quality is extremely important. The goal of audit quality for large corporations is to guarantee that their financial statements accurately portray their financial performance. Additionally, thorough compliance with all regulatory obligations is ensured by audit quality and essay writing help. By ensuring financial stability, it fosters market confidence by proving the accuracy and legitimacy of an organization's financial reporting (Gay & Simnett 2018).

Success in Australia

Despite the fact that investors place a great deal of importance on audit quality, Australia has fallen short of expectations in this area. According to the ASIC findings taken into account in the essay on audit quality, Australia's audit quality is subpar, and the problems contributing to this failure must be found, addressed, and fixed. According to the conclusions of the audit inspection programme report for ASIC 2017–2018, the auditors were unable to obtain reasonable certainty for confirming that the financial reports of the companies were free of fraud and mistakes in 24 percent of the 347 audit areas. Despite these findings, Australian audit professionals assert that the country's audit quality is excellent and improving over time (Gay & Simnett 2018).

Purpose of a Parliamentary Committee

The Parliamentary Committee is in charge of overseeing and examining ASIC's operations. On February 15, 2019, a report from the Parliamentary Committee was released, noting that while the ASIC's report indicates a decline in audit quality, this cannot be substantiated from the latter's presented numbers and may even be the other way around. The Australian Parliamentary Joint Committee on Corporations and Financial Services is tasked with looking into specific issues relating to administration, performance, or performance of government policy. The goal of having a Parliamentary Committee, according to the audit quality essay, is to give people and organisations an equal opportunity to participate in policy-making and to express opinions that can be made public and even be seen as a key factor in the decision-making process (Parliament of Australia 2020).

Motivations for The Inquiry

The Senate requested that an investigation be made into audit quality in Australia by the Parliamentary Joint Committee on Corporations and Financial Services. The deadline for the Committee to compile and provide a report on the results of their investigation on the nation's audit quality was originally March 1, 2020, but it was later extended to September 1, 2020. This investigation was undertaken to assess the efficiency, level of competition, and relationship between consulting and auditing services, audit quality, performance, and level of appropriateness of standards, disciplinary, and regulatory bodies, appropriateness of regulation, legislation, and licencing, the role of audit in the identification and reporting of errors and frauds, ongoing changes in the scope and role of audit, and potential for conflict of interest (Parliament of Australia 2020).

Resistance to the Joint Parliamentary Committee

Bill Edge, the Chairman of the Financial Reporting Council of Australia, issued a warning to the Joint Parliamentary Committee, stating that if a firm is seen to be manipulating its audit function and paying the lowest audit fees, it will be given a worse audit ranking (Australian Government FRC 2019). The Parliamentary Joint Committee's report on audit quality in Australia and the possibility of an increase in conflicts of interest raised a number of issues.
Collection of the information

According to the essay's examination into audit quality, the data for this report was gathered by undertaking a thorough investigation within the Big Four accounting firms, with a particular focus on the upkeep of quality, regulation of corporate audits, and potential for conflict of interest. For the investigation, the effectiveness of the standards, disciplinary, standards, and other bodies was also examined.
Part B – Interim findings, revelations:

Key Findings of The Committee

According to the main conclusions of the Parliamentary Joint Committee that were noted in the current context of the essay on audit quality, the nation's audit quality has severely degraded. The Committee is also aware that the persistent problems with audit quality are not unique to Australia. The results indicate that implementing new and revised procedures is the only way to increase audit quality in Australia. According to the study released by the Parliamentary Joint Committee, the big-four accounting firms are the pioneers of large corporate audit, but they also generate more income from non-audit services. According to a study by Glen Unicomb, a former forensic investigator at ASIC, auditors employed by the major four audit firms run the risk of being under pressure from their superiors to accept financial statements in order to preserve advisory ties (Grayston 2019). Auditor professional and ethical standards have been proven to be broken in a number of instances. Due to a lack of documentation, non-compliance engagements, connected parties, etc., the majority of these breaches have occurred. This essay on audit quality notes that there have been multiple instances where the auditor's working paper does not contain any indication of his comprehension of and risk assessment of the clients' related party transactions (Grayston 2019). In some instances, it was also noted that there was not a single piece of evidence demonstrating that the auditor had made an effort to comprehend both his client and the organization's level of internal controls. It was also discovered that the majority of auditors have the authority to source representation letters after the audit report has been issued.

Conflicts of Interest

The texts utilised to produce this essay on audit quality show that the audit industry has a very intricate structure since only a small number of audit firms conduct the auditing of significant corporations and because the top four accounting firms' operations are diverse. Conflict of interest risks are inherent in this framework (Geoffrey et al 2016). The fact that a company's directors choose the auditors while the investors, who are the actual users of the audit report and who construct significant investment-related decisions based on it, have no input when it comes to hiring and selecting auditors, may be one factor contributing to an apparent conflict of interests (Geoffrey et al 2016). Another instance of a conflict of interest is when an auditing firm worries that it will stop working with the client if the client receives bad audit results. This anxiety may lead the audit firm to choose unethical strategies by releasing audit results that do not accurately and fairly portray the client's company's financial health.

Threats To Independence

The Parliamentary Joint Committee also called attention to a few details regarding dangers to auditors' independence. As stated in this portion of the audit quality article, an auditor may encounter four different challenges to their independence: the familiarity danger, the self-interest threat, the intimidation threat, and the self-review threat. In contrast to the threat posed by self-interest, the familiarity threat arises when the auditor and the client have a significant amount of work pending from the client's end or when the auditor has a direct financial stake through shares (Parliament of Australia 2020). Self-review danger occurs when the auditor only provides bookkeeping and audit services for the company, whereas intimidation threat to independence occurs when the auditor receives replacement pressure from the client if he portrays the latter's genuine state of affairs in his audit reports.

Auditors ‘Duties in Relation To a GPFR

The auditors must constantly uphold ethical standards in their practises and resist being swayed by threats that are directed at them. An auditor must make sure that he is assigning all of his responsibilities related to a GPFR ethically and that he is preparing an ethical audit report for the company based on its financial statements. He must also make sure that he is not afraid to form an adverse opinion when necessary, making inquiries on his own when necessary, adhering to all auditing standards and requirements, and identifying and reporting financial statement frauds and errors (Geoffrey et al 2016).
Evidence of systemic audit failure in Australia

Despite statements from the audit sector that audit functions are carried out in Australia with ethics, professionalism, and sincerity, there is mounting evidence of systematic audit failure in the nation. The pervasive audit failure in Australia has been confirmed by ASIC inspection reports (ASIC 2020). It was discovered in this essay on audit quality that there was no evidence in the audit reports that the auditors had carried out the necessary steps to obtain a reasonable assurance that the client's financial statements were free of any kind of material misstatements brought on by fraud and errors. Additionally, breaches in compliance were found with regard to audit engagements such SMSF compliance audits, trust account audits, etc.

Part C – User expectations, scope of the audit, digital financial reports:

Stakeholders for the Parliamentary Report

According to research done on the audit quality case study essay, the Australian Securities and Investment Commission (ASIC), Auditing and Assurance Standards Board (AUASB), Financial Reporting Council (FRC), Treasury, and CADB are the stakeholders for the Parliamentary report (Companies Auditors Disciplinary Board). The total audit role in Australia is governed by regulatory frameworks such as treasuries, standards, legislation, and professional organisations. Developing the appropriate standards for adhering to the reporting obligations is the duty of statutory agencies including ASIC, AUASB, FRC, Treasury, and professional bodies (Parliament of Australia 2020).

Roles of ASIC, AUASB, FRC, Treasury, Professional bodies

ASIC's job is to determine how well independent legislative requirements are being followed and to take appropriate action when necessary (ASIC 2020). While the function of FRC is to monitor and attest to the effectiveness of the nation's financial reporting structure, ASIC is also charged with the duty of monitoring and even cancelling the registration of auditors. It is also accountable for providing strategic guidance to the government and ASIC on issues relating to the nation's audit quality. Furthermore, in accordance with Sections 334 and 336 of the Corporations Act, the AUASB is in charge of creating, issuing, and maintaining Australian Accounting Standards. For the auditors that the Australian Securities and Investments Commission has licenced under the Corporations Act, CADB serves as an independent, disciplinary, and administrative body. The CADB's responsibility is to penalise auditors who don't make sure the Corporations Act's obligations are being followed.

Findings

The results of the comprehensive study conducted for the audit quality essay show that, despite ongoing oversight from professional and statutory agencies, audit quality in Australia falls short of expectations. Questions about the nation's audio quality have been raised not only about the companies' financial accounts but also about the ethics of the auditing profession. The bad findings for all audit companies, including the main four audit firms, are consistently on the rise, but the key audit areas are also declining significantly. The audit quality in Australia is clearly diminishing every 18 months, according to the figures taken into account in the essay on audit quality. Despite all the shortcomings in Australia's audit function, the Parliamentary Committee advises taking into account changes like self-regulation (KMPG 2020).

Impacts and Reforms

Although it is likely that international reforms will be successful, it should be underlined that Australia may not benefit from them because its legislative framework for the auditing culture does not appear to be uniform with that of other countries (KMPG 2020). Even though there will always be those who support and those who oppose certain policy options, this does not always imply that foreign reforms will be the most effective in raising the standard of auditing in Australia.

Scope of The Audit Changed

It is proposed that these changes to the audit laws in Australia only be made when there is sufficient data to support their effectiveness because these worldwide reforms have the potential to be either positive or detrimental. Failure to gather sufficient evidence while continuing to apply foreign reforms may further compromise the quality of Australian audits (Cernusca and Balaciu 2015).

Changes Have Occurred in Relation To The Expectation Gap

The Parliamentary report is divided into five chapters, numbered 1, 2, 3, 4, and 5. The scope of the audit and how it has changed over time are discussed in Chapter 5 of the report, which was used to create this article on audit quality. The early audit was only available to large businesses, but today every other company looks to periodically have its financial accounts audited. The revisions in the audit's scope have also greatly assisted in addressing and bridging the stakeholders' expectations gaps (Matthew 2015). The ability to successfully identify frauds and errors in an organization's financials has been made possible by the ongoing development of numerous professional standards, which has changed the game in terms of bridging the expectations gap.

The current state of digital reporting in Australia appears to be rather difficult because different sorts of users, such as regulators, professional organisations, and standard-setters, have a tough time accessing information. Although DFR has not yet been fully implemented in Australia, certain Australian businesses are nevertheless forced to utilise it in other settings. Australian corporations who have their securities listed on US stock exchanges are now required to file digital financial reporting with the US SEC. The Australian Securities and Investment Commission (ASIC) has allowed corporations to file DVRs there since 2010, but stakeholders have noted that no DFRs have been filed as of yet. The analysts may not have modified their systems to use DFRs as there are no entities that produce the DFRs, which is the most likely explanation for why DFRs have not been filed with ASIC.

It is now abundantly obvious from this article's exploration of the essay's portions on audit quality that Australia confronts significant difficulties with regard to audit quality. This is most likely caused by the absence of a code of ethics and professionalism in the Australian auditing sector. However, similar issues with audit quality are currently existent not just in Australia but also around the world. The main distinction is that different countries have different standards of ethics and professionalism. The regulators in Europe and the United States have been looking into various measures to improve audit quality since since the 2007–2009 financial crisis. Global regulators are making every effort to raise the standard of audits. It was also noted in some instances, as mentioned in this essay on audit quality, that the U.S. affiliate of the major auditors failed to meet the responsibilities of the audit function carried out by him in his audit. In the case of the Indian company "Satyam," another instance of audit quality mismatch was discovered. In order to confirm the cash reported by the company, the Satyam auditors neglected to carry out a fundamental audit function. In reality, Satyam's cash and bank accounts were less than $100 million, while reporting a total of $1.1 billion (Manoharan 2011).

The Committee has brought up a number of concerns regarding Australian audit quality. These problems with audit quality that the Committee has identified are widespread. The majority of audit-related problems that the Committee has identified are the result of assumptions or inaccurate information. This is also the reason the Committee is perceived as emphasising the importance of distinguishing between problems that affect audit quality and those that are caused by perceptions. It was discovered that at least 24 percent of the 347 major audit areas showed that the auditors had either purposefully or accidentally failed to obtain sufficient assurance to certify the accuracy and credibility of the companies' financial statements (National Audit Group 2020). There are four different forms of risks to audit quality in the world: dangers stemming from self-interest, familiarity, self-review, and intimidation (Narayanaswamy 2019). The risks discussed in this section of the audit quality essay have a strong propensity to affect an organization's audit function, and as a result, investors throughout the world must deal with the consequences of these threats. Threats like these force auditors to engage in unethical and improper behaviour and ignore the companies' financial reporting.

The research looked at in this essay on audit quality shows that there are major problems with audit quality in Australia, and they must be fixed right away. Australia must develop suitable controls and methods that can aid in raising the level of audit quality in the nation. The level of audit quality in Australia can be significantly raised in a number of ways. Numerous stakeholders have recommended that ASIC enhance its approach to audit inspection (Parker 2019). They recommended that ASIC implement a mechanism that would allow it to categorise the severity of its audit inspection findings. Standards such as the adoption of balanced financial reporting and the release of the business' inspection reports can also greatly enhance the nation's auditing standards. The audit function must be assigned in the nation in an ethical and competent manner, according to ASIC. Additionally, ASIC must periodically undertake checks to ensure that experts are not compromising the quality of the audit function in response to client threats (Parker 2019). The big-four audit firms have also advocated for and recommended the adoption of DFRs. Since January 2020, all businesses that are listed on European exchanges are required by EU to utilise DFRs. Australian companies that are listed on the US stock exchange are now compelled to utilise DFRs, according to the research paper on audit quality. There are a few more approaches to improve the quality of audit in Australia, including restricting the duration of the audit function by mandated partner/firm rotation, fixing the audit fees, appointing regulators, and limiting the provisions pertaining to non-audit services (National Audit Group 2020).

Conclusion

This essay of audit-above quality's debate comes to the conclusion that investors rely significant investment choices on data drawn from a company's financial statements. The auditors can vouch for the veracity and accuracy of an organization's financial statements. The functions and responsibilities of auditors are vitally important for an organization's survival and well-being as well as for enabling investors to make educated decisions. Despite the importance of the audit function, it is clear that audit quality is consistently declining on a global scale. This is not because auditors are under threat, but rather because they lack the ethics and professionalism that should be expected of them. As a result, the countries must carefully assess the audit quality and adopt the necessary steps to successfully improve it in the near future.

References

ASIC 2020, ASIC audit inspections, and Audit quality essay is accessible at: https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/auditors/asic-audit-inspections [Retrieved on April 11, 2020]

Australian Auditing Standards 2019, or AUASB 2019. From: https://www.auasb.gov.au/Pronouncements/Australian-Auditing-Standards.aspx [Retrieved on April 11, 2020]

Australian Government FRC 2019, examination of the procedures for disciplining auditors From: Treasury.gov.au/sites/default/files/2019-04/p2019-t374191-review.pdf [Retrieved on April 11, 2020]

2015, Cernusca, L., and Balaciu, D.E. The perception of accounting students towards the profession of accounting and the image of an accountant. quality essay audit 21(1), 7–24; Journal of Economics and Business Research. cite: 10.1515/sues-2016-0010

Simnett, R., Gay, G., and 2018 Australia's Auditing and Assurance Service, M.H. McGraw Education (Australia)

Attracting Applicants for In-House and Outsourced Internal Audit Positions: Views from External Auditors, Geoffrey D. B., Joleen K., K. Kelli S., and David A. W., 2016. Pages 143–156 of Accounting Horizons, 30(1). Accessible at https://doi.org/10.2308/acch-51309 [Retrieved on April 11, 2020]

Grayston, C. 2019, Audit quality: Is a new strategy needed? quality essay audit A fresh strategy is needed after an audit, according to the resource at https://www.intheblack.com/articles/2019/02/01/audit-quality [Retrieved on April 11, 2020]

Accounting standards, company acquisitions, and financing choices, Kim, S. The University of North Carolina's Regulatory Audit for KMPG 2020, At: https://home.kpmg/au/en/home/services/audit/regulatory-audit.html quality essay audit [Retrieved on April 11, 2020]

T.N. Manoharan (2011) Corporate governance and fraud in financial statements. The University of George Washington.

Does Internal Audit Function Quality Deter Management Misconduct? by S. E. Matthew (2015). 495–527 in The Accounting Review 90(2).

2019; Narayanaswamy, R. Evidence from India on the Impact of Mandatory Audit Firm Rotation on Audit Quality, Audit Fees, and Audit Market Concentration WP%20No.%20582.pdf is accessible from: https://www.iimb.ac.in/sites/default/files/2019-03 quality essay audit [Retrieved on April 11, 2020]

Latest News On Audit Inquiry - 8 Key Recommendations, National Audit Group 2020, Parker, D. "Latest News on Audit Enquiry: Eight Key
Recommendations" Available from: https://www.audits.com.au/2020/03/02 2019, gaining new insight into the audit quality in Australia. Seeing audit quality in Australia in a new light is available from: https://www.intheblack.com/articles/2019/10/01/ [Retrieved on April 11, 2020]

Audit quality essay, Parliament of Australia 2020, Parliamentary Joint Committee on Corporations and Financial Services Information accessible at: https://www.aph.gov.au/Parliamentary Business/Committees/Joint/Corporations and Financial Services [Retrieved on April 11, 2020]

ACCY962 Auditing and Risk Assurance Assignment Sample

Assignment Brief

Weighting: 20%
Length: 2,000 words ± 10% (excluding references and appendices)

The individual assignment aims to give you an understanding of real life auditing issues and an appreciation of the link between theory and practice. It further aims to foster your research, critical analysis and communication skills.

Your Essay Should Cover The Following:

The Wirecard collapse in Germany raised several issues with regard to accounting and auditing. Discuss three audit issues that arose during the Wirecard collapse. Refer to APES 110 in your answer.

Students must reference at least 5 academic journals for assignment help (and 5 or more newspaper or professional accounting magazine articles), and any applicable audit or ethical codes or standard(s). Students should also identify any other standards or references to the Code of Ethics for Professional Accountants, which should have enabled the auditor(s) to identify and address the problems in the Wirecard Audit. Less than 10 references will be considered insufficient.

Style and Format

• This assignment requires the student to complete an academic style essay (not report). Students can find the difference between essay/report here: link https://www.uow.edu.au/student/support-services/learning-development/resources/#d.en.5810

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using double-line spacing with a left margin of 2cm.

• The Faculty of Business uses the Harvard method of referencing. The library website
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Assessment Submission

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Solution

APES 110 Code of Ethics for Professional Accountants is a set of rules and regulations a professional auditor must comply with while auditing its client is based on the International Code of Ethics for Professional Accountants (including International Independence Standards) and the Final Pronouncement: Revisions to the Code Pertaining to the Offering and Accepting of Inducements of the International Ethics Standards Board for Accountants (IESBA), published by the International Federation of Accountants (IFAC) in April 2018 and July 2018 respectively, and is used with permission of IFAC (Apesb.org.au, 2022). In relation to APES and the violation of the code of ethics, a case of multi-billion fraud by Wirecard is addressed.

According to an article published by ABC News, the CEO of a prominent payments company Wirecard and two other ex-managers of the company was charged with fraud and false accounting, and it is believed that they had a significant role in the collapse of the company in 2021 (abcnews.go.com, 2022). The allegations raised by Germany's prosecutors stated that most of the company assets and its revenue were made up and presented in the company's financial statements. As mentioned in the article published by the Financial Times, 1.9billion euros were missing from Wirecard's accounts (ft.com, 2022). The article published by ABC News also stated that ex-CEO of Wirecard, Markus Braun, knowingly signed off on the false financial reports (abcnews.go.com, 2022). The prosecutors mentioned that Wirecard recorded false revenues attributed to several partnerships with international companies; the company used fake documents to show that the company had funds. Wirecard's former head of accounting and the managing director of a subsidiary company based in Dubai were also charged with fraud and false accounting. The banks were severely affected as the fraud cost them nearly 3.1 billion euros. The banks which provided funds for the company have to write off the loans (abcnews.go.com, 2022).

The first issue discussed is the Breach of Integrity. According to the Code of Ethics for Professional Accountants (including Independence Standards), section 100.1 A1 states that the accountancy profession is responsible for acting in the public interest (Apesb.org.au, 2022). The accounting professionals are not exclusively responsible for satisfying the requirements of the client or the organisation employing them. However, in the case of Wirecard, the organisation's members did not comply with the ethical code of APES 110 (Apesb.org.au, 2022). The members acted in the interest of the legal entity hence violating the code of ethics.

Under Subsection 111 - Integrity, R111.1 states that a member should comply with the principle of integrity (Apesb.org.au, 2022). This subsection necessitates the members to be direct, straightforward and honest in all sorts of business and professional relationships. However, this code was also violated by the CEO of Wirecard, Markus Braun and EY (Ernest &Young), the independent auditing firm (Ft.com, 2022). The independent auditor of Wirecard, Ernest &Young, has long speculated foul play by the company (Reuter.com, 2022). The auditing company decided to closely monitor Wirecard's payment settlements by partners in Asia. Upon scrutiny, it was discovered that the online merchants supposedly identified as Asian clients of Wirecard did not exist (Bloomberg.com, 2022). The executives of Wirecard carefully orchestrated the records to make the auditing firm believe that the payments were genuine and the partners in the Asian region were real. This is a direct violation of the APES 110 code of ethics. R111.2 under subsection 111 - Integrity states that a member should not be associated with having knowledge of returns, communications, reports or other information where they believe the information under clause (a) contains false or misleading financial statements, (b) contains information or statements presented carelessly (c) omission or obscuring necessary information which may mislead (Apesb.org.au, 2022). In this regard, Azim and Sharif (2021) stated that the member of Wirecard violated clause (a) of APES 110 code of ethics, as the CEO of the company knowingly signed off the financial statement, hence associating himself with the falsified financial statements.

Under subsection 111 - Integrity, 111.2 A1 states that presenting a reconciled financial report concerning a breach under R111.2 effectively disassociates the organisation's member from such breach of code. According to Apesb.org.au (2022), this violation could have been avoided if the CEO of Wirecard had provided a reconciled report with respect to the breach under R111.2. As Engelen (2021) mentioned, the CEO of Wirecard did not take such action and continued to present falsified statements and reports to the auditing firm and mislead them for nearly a decade. According to Krahnen and Langenbucher (2020), the APES 110 code of ethics has also laid down a provision under subsection 111 - Integrity; R111.3 allows the member of the organisation to take necessary steps to dissociate themselves when he or she becomes aware of a breach under R111.2 and is being associated with the event. As stated by Stadtmann and Croonenbroeck (2019), there were no such steps taken by the CEO and the executives of Wirecard; it implies that the CEO and the executives of the company were aware of the fraud, and this took place in their supervision and knowledge.

The second issue identified is the threat to compliance. A parliamentary investigation listed several incidents where Ernst & Young failed to take necessary steps to unearth the multi-billion euro fraud by Wirecard. According to the article published by Bloomberg, the documents and reports presented to Ernst & Young by Wirecard executives were either verbally or written statements. The documents were not substantiated by neutral third parties such as foreign banks. The auditing firm came under severe criticism for auditing Wirecard, and a criminal lawsuit was filed against the auditing firm. The article published by Bloomberg also stated that Ernst & Young was the sole auditor of Wirecard until the company's collapse; the auditing company defended itself by stating that they were a victim of an elaborate fraud.

APES 110, Section 120, subsection 120.1 states that certain circumstances in which a member functions might threaten compliance with the stated fundamental principles of ethics (Apesb.org.au, 2022). Under section 120, subsection 120.2, the conceptual framework has mentioned the approach for a member under clause (a) that to identify threats to compliance with the fundamental principles, clause (b) states the evaluation of threats identified, and clause (c) focuses on addressing the threat by mitigating or decreasing it to an Acceptable Level. Apesb.org.au (2022) has also stated that section 120 has set out the requirements and application material along with incorporating the conceptual framework to aid members in compliance with the fundamental principles and adhering to their responsibilities to act in the interest of the public. These requirements and application materials consist of an elaborate set of facts and situations along with several Professional Activities, relationships and interests. These may create scenarios where the threat may arise to comply with the fundamental principles. They also prevent Members from deciding that a scenario is permissible just because the code does not explicitly prohibit it.

In light of the conceptual framework of APES 110, Section 120 and the case of Wirecard, it can be said that Ernst & Young did not adhere to the fundamental principle. There could be several reasons for the auditing firm not adhering to the laid out fundamental principle of APES 110. As mentioned by Stadtmann and Croonenbroeck (2019), one fine example is when Ernst & Young conducted an Anti-Fraud investigation called Project Ring in 2016. The investigation conducted by the auditing firm discovered several accounting issues in the books of Wirecard. According to Fortune (2022), the auditing firm came across nearly 20 issues in their books. However, according to Azimand and Sharif (2021), Ernst & Young still signed off the financial report based on late replies from Wirecard's board, and Ernst & Young certified the 2016 financial statements without following up to get written verification. As stated by Voss (2020), to a certain extent, this action of Ernst & Young implies that the auditing firm might have been in some kind of threat which prevented the firm from complying with the fundamental principles of the audit and accounting code.

Subsection R120.9 re-evaluates and addresses threats that have been removed or lowered to an acceptable level if new information or modifications in facts and circumstances are discovered. Therefore, Ernst & Young, at the time of discovering the threat, could have taken the necessary steps to lower it to an Acceptable Level (Apesb.org.au, 2022).

The third issue which was discovered was the non-compliance with law and regulations. As per section 360(1), auditors of Wirecard are required to comply with fundamental auditing and accounting principles. It is the auditor's responsibility to apply the framework conceptually, which is identified in section 120. This framework helps auditors to identify and evaluate threats. Section 360(2) defines that Ernst & Young is unaware of the non-compliance of law and regulation of auditing standards (Apesb.org.au, 2022). Because awareness of non-compliance creates integrity and professional behaviour, which helps to protect the public interest from threats. Ernst & Young does not maintain suspected non-compliance-related laws and regulations during auditing in Wirecard. Section 360(3) defines awareness of non-compliance to help the auditor assess the matter's implication (Apesb.org.au, 2022). It also helps to assess possible courses of action where auditors should make an activity-related chart for their auditing team.

During auditing in Wirecard, every member of the team should follow the chart to complete the audit. As per section 360 sub-section 3 clauses (a), law and regulation help disclose Wirecard's financial statement items and help determine material amounts. Clause (b) defines other laws and regulations not directly related to the Wirecard financial statement to determine material amount and disclosure (Apesb.org.au, 2022).

Other laws and regulations affect the operating aspect of a business. Other laws and regulations affect business and avoid Wirecard incurred material penalties related to expenditure. In the given case, auditors do not respond to suspected non-compliance and non-compliance. Due to this, the public interest is affected (Jo et al. 2021).

Auditors should maintain integrity and professional behaviour; auditors are required to communicate those matters that affect the financial statement of Wirecard. In the given case, auditors are required to communicate cash transactions if auditors find any deficiency between the cash book and bank statement (Nyreröd et al. 2021). The auditor does not communicate this material transaction to the appropriate authority or those charged with governance of Wirecard, or it also happens that the auditor communicates material transactions, but the appropriate authority refuses to rectify the transaction. It is also the auditor's responsibility to give an adverse opinion or disclaimer of opinion in their auditor's report (Jo et al. 2021).

The auditor omitted this section in their opinion. Management and those charged with governance of Wirecard are also responsible for seeing whether client business is conducted in accordance with law and regulation. Management is also responsible for assessing and identifying NOCLAR for any individual who is working under the client's direction, a member of management, any individual who is charged with Wirecard governance and any member of management (Nyreröd et al. 2021). Wirecard fines and other consequences depend upon NOCLAR. It also affects the financial statement of Wirecard. NOCLAR also harms potential investors such as creditors, investors, the general public and employees. Due to non-compliance with law and regulation in the case of NOCLAR, Wirecard collapsed and was bankrupted. And it harms creditors, investors, the general public and employees (Jo et al. 2021).

According to Ft.com (2022), priority is given to the investigation of Wirecard's ex-executive by Munich prosecutors. No one has been charged as a result of either inquiry. Former CEO Braun, who is in judicial custody, denies any involvement or awareness of involvement in the payments business he formerly ran. Although Ernst & Young had some unexpected help from inside the company, it was still a difficult situation for the company. Some employees at the organisation were ecstatic when they learned that Wirecard was a scam in June 2020. People acquainted with the scene said that a senior Ernst and Young partner ecstatically exclaimed, "We nailed them." It is still unclear why Ernst & Young was unable to "nail" the Wirecard scam sooner.

References

Jo, H., Hsu, A., Llanos-Popolizio, R. and Vergara-Vega, J., 2021. Corporate governance and financial fraud of Wirecard. European Journal of Business and Management Research, 6(2), pp.96-106. Nyreröd, T. and Spagnolo, G., (2021). Surprised by Wirecard? Enablers of Corporate Wrongdoing in Europe. Enablers of Corporate Wrongdoing in Europe (April 9, 2021). https://www.econstor.eu/bitstream/10419/249249/1/hasite0054-1.pdf

Apesb.org.au, (2022). [online] Available at: <https://apesb.org.au/uploads/home/02112018000152_APES_110_Restructured_Code_Nov_2018.pdf> [Accessed 6 July 2022].
Ft.com, (2022). EY and Wirecard: anatomy of a flawed audit. [online] Available at: <https://www.ft.com/content/bcadbdcb-5cd7-487e-afdd-1e926831e9b7> [Accessed 6 July 2022].

Abcnews.go.com, (2022). German prosecutors charge 3 with fraud in Wirecard collapse. [online] ABC News. Available at: <https://abcnews.go.com/International/wireStory/german-prosecutors-charge-fraud-wirecard-collapse-83432812#:~:text=Wirecard%20grew%20rapidly%20and%20wound,a%20trial%20can%20be%20held> [Accessed 6 July 2022].

Reuter.com, (2022). [online] Available at: <https://www.reuters.com/article/us-wirecard-accounting-stock-report-idINKBN1WU14K> [Accessed 6 July 2022].

Bloomberg.com, (2022). Bloomberg - Are you a robot?. [online] Available at: <https://www.bloomberg.com/news/articles/2021-04-17/ey-s-wirecard-audits-faulted-by-german-parliament-investigator#xj4y7vzkg> [Accessed 6 July 2022].

Wsj.com, (2022). [online] Available at: <https://www.wsj.com/articles/wirecard-scandal-puts-spotlight-on-auditor-ernst-young-11593286933> [Accessed 6 July 2022].

Fortune, (2022). If Wirecard's auditors had done this one thing, they might have uncovered a $2 billion fraud years sooner. [online] Available at: <https://fortune.com/2020/06/30/ey-wirecard-fraud-2-billion-euros-auditing-auditors/> [Accessed 6 July 2022].

Stadtmann, G. and Croonenbroeck, C., (2019). The ups and downs of Wirecard AG: An application of the reversed news model (No. 414). Discussion Paper. https://www.econstor.eu/handle/10419/204840

Krahnen, J.P. and Langenbucher, K., (2020). The Wirecard lessons: A reform proposal for the supervision of securities markets in Europe (No. 88). SAFE Policy Letter. https://www.econstor.eu/handle/10419/222230

Engelen, K.C., (2021). Germany's Wirecard Scandal. The International Economy, 35(1), pp.9-12. http://www.international-economy.com/TIE_W21_EngelenLetter.pdf
Voss, D., (2020). What the Wirecard scandal reveals about the state of German financial supervision. LSE European Politics and Policy (EUROPP) blog. http://eprints.lse.ac.uk/107683/

Azim, M. and Sharif, M.J., (2021). IMPACTS OF EARNINGS MANAGEMENT ON CORPORATE FAILURE: A CASE STUDY OF WIRECARD. International Journal of Accounting & Finance Review, 8(1), pp.37-49. http://cribfb.com/journal/index.php/ijafr/article/view/1411

MAA705 Corporate Auditing Assignment Sample

Due date and time: Friday, 8th April 2022, by 8:00 pm (AEST)
Percentage of final grade: 20%
Word count: 1500 words (excluding reference list)

Description for Assignment Help

Probuild is a large commercial construction firm with construction projects across

Australia. On 23 February 2022, Deloitte were appointed as administrators to Probuild’s Australian parent company WBHO Australia Pty Ltd. In the court documents, Deloitte noted that the appointment of the administrators followed the decision of Probuild’s ultimate parent company, Wilson Bayly Holmes-Ovcon Limited’s (a South African-based construction firm) decision to withdraw financial support to the Australian subsidiaries on 22 February 2022.

Among those affected are the 786 employees who are collectively owed more than $14 million (according to the records of the companies). Insolvencies such as this would also leave unsecured creditors at risk of not being paid.

It is important to note that there are usually several factors (both internal and external) that can cause a firm to enter into administration, which are not related to the audit quality. However, in cases where the client company fails, Kadous (2000) finds that the auditor is more likely to be found “guilty” even when they provided higher-quality audits. This points to the expectation gap relating to audits of financial reports.

In April 2020, the International Auditing and Assurance Standards Board (IAASB) ventured on a new project relating to going concern in an audit of financial statements.

According to the IAASB, the “aim of this project is to determine if, and to what extent, the IAASB should take further action on going concern in an audit of financial statements.

Addressing the identified issues and challenges may involve possible future standard-setting, issuance of non-authoritative guidance, or other actions.” They expect the auditing standard relating to going concern (ISA 570) to be updated in December 2023.

The going concern project is important as corporate collapses are often used as a metric of audit quality, especially in the eyes of the public. Research has provided some support for the reasons auditors can fail to issue going concern modified opinions for financially stressed clients. Basioudis et al. (2008) find that financially distressed companies with high non-audit fees are less likely to receive a going-concern modified audit opinion, suggesting that non- audit fees can impair auditor decision making. Second, the concentration of supply by the Big 4 audit firms is documented to reduce audit quality, especially among complex firms despite an increase in audit fees (Gunn et al., 2019).

Given the importance of going concern in an audit of financial statements, the task in this assignment is to envision yourselves submitting a report to provide research-based evidence on the issues surrounding the going concern reporting.

Requirements:

You are to write a professional report in which you:

• Define who the stakeholders of a firm are and define the audit expectation gap.

• Identify Probuild’s stakeholders and discuss the main causes of the expectation gap among the identified stakeholders relating to going concern in the audit of Probuild’s financial reports.

• Consider what can be done to narrow the expectation gap among Probuild’s stakeholders.

• Discuss whether non-audit services impair auditor decision making and elaborate on a
suggestion to mitigate potential issues.

• Discuss whether reduced competition can affect audit quality and elaborate on a suggestion to mitigate potential issues.

Although there is no specific structure for the report, consider the following structure/sections:

1. Introduction [consider providing a general discussion on auditors’ responsibilities relating to going concern. You can provide a definition of stakeholders and the audit expectation gap here.

2. Probuild’s stakeholders and the expectation gap [here you can identify and elaborate on at least 3 stakeholders. Also, consider discussing at least 2 causes of the expectation gap and provide a solution.

3. Non-audit services and auditor decision making [providing research-based evidence and 1 potential solution.

4. Audit market competition and audit quality [providing research-based evidence and potential solution.

5. Conclusion [a summary of the main points of the report and your thoughts about the importance of going concern in an audit of financial statements.

6. List of references

Solution

1. Introduction

Auditor's responsibilities and a quality audit are based on the review of a project along with its quality and effectiveness in this perspective. In order to produce better results and the fact-finding mission of a project, the auditor's responsibilities play a crucial role to maintain all the objectives and aims of this particular project. The study is mainly focused on the case study analysis on the basis of the stakeholders and their performance along with the expectation gap relevant to Probuild's. ISA 570 is an ongoing concern in this case and indicates material uncertainty and auditor’s responsibility in this case of ISA 570 is to obtain betterment of audit evidence along with the appropriate management and financial statements. In this regard, there is an uncertainty of material that must be focused by the stakeholders in Probuild’s construction. Major responsibility of auditors’ is to manage the ability of performance and maintain the financial statements in an appropriate way.

On the basis of auditor's responsibility for a construction industry like Probilud's, several possibilities need to be managed by the auditors, and these are as follows:

Preparing of audit report

Necessity and its exact activity in this regard

Making of inquiries

The lending of assistance in case of branch audit

Reporting of fraud

Complying with auditing standards

Managing of investigations

Focusing on code of professional conduct and code of ethics

Stakeholders are mainly defined as a particular person or organisation that can be helpful to manage all the conditions relevant to the organisation by influencing several kinds of factors. In this case study, it is seen that Deloitte has been appointed as administrators to Probuild's Australian parent company and that it will be represented as WBHO Australia Pty Ltd in 2022. Apart from that, expectation gaps indicate the difference between organisational expectations and providing results by the auditors and this case study, financial report and its statement is considered as an expectation gap for Probuild’s.

2. Probuild’s stakeholders and the expectation gap

In order to identify and illustrate brief management of Probuild's stakeholders, three major stakeholders for the company can be chosen "Deloitte", "Wilson Bayly Holmes-Ovcon Limited", and “International Auditing and Assurance Standards Board” (IAASB). As a commercial large construction company, Probuild has a better reputation over Australia, and in the year 2022, Deloitte has appointed Probuild's Australian parent company as administrators and named "WBHO Australia Pty Ltd". In this particular manner, the major role of IAASB is to determine the proper action and its plans that can manage all financial statements and auditing roles in a promising way for Probuild's.

From analysing the particular case study relevant to this Probuild's construction company, two expectation gaps are observed, such as administrator issues and improper managing of audit in financial statements and its reports. Deloitte has been appointed as the Australian parent company, and that is named WBHO Australia Pty Ltd. Based on this decision, the firm of African construction has taken a decision about withdrawing financial support for the Australian subsidiaries in 2022, and this has very much effect on employees and a big financial loss to the company (Kadous, 2000). For mitigating this issue, it can be undertaken that insolvencies like this can be left unsecured creditors at risk and not to be paid.

Additionally, IAASB ventured is considered as a new project relating to concern, and that is fully based on the audit of financial statements. The overall financial report of Probuild’s is not good, and that is not properly arranged for maintaining the process with good delivery of project and employee management (Mitchell et al., 1997). The main aim of this process is to identify the issue and determine the proper action plan relevant to financial statements. In order to identify the solution for this, an ongoing concern "ISA 570" is to be updated by 2023, and for future development, all challenges and issues need to be addressed by IAASB. This can be fruitful for Probuild’s, and a better concern about financial reports and its audit management can be possible in a significant way.

3. Non-audit services and auditor decision making

Non-audit services are connected with the audit services, whereas the financial statement is not involved. In such correspondence, not-audit services are provided by the auditors. Along with that, as a metric of audit quality, various corporate collapses are used. In such circumstances, various supports can be provided, whereas different modified opinions blended with the stressed clients can be failed to issue (Basioudis et al., 2008). Furthermore, a concerned modified opinion is taken by the non-audit services. Furthermore, the decision making of the auditor can be impaired by the audit fees. Besides, the label of confidence is not impacted through this process.

On the basis of the court documents, it followed the appointment of the administrators, and that was managed by the parent company Wilson Bayly Holmes-Ovcon Limited. It is a South African construction firm and has taken the decision to withdraw financial support from the better subsidiaries in Australia in 2022. On the other hand, IAASB ("International Auditing and Assurance Standards Board") ventured on a new construction project regarding audit financial statements and its ongoing concerns.

For solving different issues, the cost regarding the audit observations has to be communicated. Besides, the regulatory effects blended with the non-confirming protocols have to be explained. Through the statement, the role of the management regarding the audit program has to be explored. Along with that, for the management, an audit report has to be distributed (Gunn et al., 2019). There are multiple kinds of factors, including internal factors and external factors, in order to enter the firm into administration. Public subsidies have to be identified as a decision blended with the case study.

4. Audit market competition and audit quality

WBHO has decided to withdraw the financial support to the Australian subsidiaries in 2022. Additionally, IAASB ("International Auditing and Assurance Standards Board" has started a new project and ongoing concerns corresponding to audits regarding the financial statement. Furthermore, taking different kinds of actions blended with the financial statement is the main target. As per the case study, auditing standards will be concerned in December 2023. Along with that, as a metric of audit quality, various corporate collapses are utilised. Besides, various modified options corresponding to financially stressed clients are not issued by the auditors (Basioudis et al., 2008). According to this case study, an audit market competition helps to track major competitors within particular measurements based on the project like construction Probuild's company, and that can be visible online. After that, the aim is to discover the better working process as well as strategic work within the industry on the management of competitive advantages. It is good to involve Deloitte and IAASB in Probuild's construction company to manage administrative and financial statements by providing quality audits. In this regard, audit expectation gaps also occurred in these particular scenes, like improper management of financial reports and bad quality administration to overcome the employee issues (Xu & Kalelkar, 2020). According to this case analysis of Probuild's construction, an expectation gap such as the users regarding financial statements perceives the audit profession to claim the proper conduction of the audit. For example, it is seen that expectation gaps regarding audit and stakeholders' performance, 786 employees are affected, and those are collectively owed approximately $14 million on the basis of the company's record.
On the other hand, in order to manage the solution and identify exact mitigation to the financial supports and its statements, a concerned modified audit option is less likely to be received by different financially distressed companies along with different non-audit fees. In such circumstances, the decision making of the auditor can be impaired by the non-audit fees. For this company, supply is processed from 4 big audit firms, which has been documented for reducing the quality of audit, whereas the concentration of the supply has been documented. In addition, audit fees are increased for various complex firms. In such accordance, the audit market competition is too high where the financial statement of the company has great importance.

5. Conclusion

From the above discussion of the entire case study regarding audit quality, stakeholders of the construction company and expectation gap, it can be concluded that audit of financial statements management is really important for every construction industry like Probuild's Australia. In this manner, responsibility of stakeholders’ depends on the appropriate financial management and its activity to grow material productivity by mitigating the uncertainty under the ongoing concerns ISA 570. On the basis of this report analysis, a major concern is to take better action plans by IAASB in case of audit financial statements. Moreover, for addressing the identified issues and challenges regarding the ongoing concerns “ISA 570” relevant to financial statements and material uncertainty, a betterment of standard needs to be added in a suitable way. In the case of issuance in non-authoritative guidance and further settings in financial reports, this particular ongoing concern (ISA 570) is to be updated by 2023. Therefore, it can be realised that the construction company of Australia can manage their issues and faults in audit and non-authoritative concerns by including several stakeholders' roles and responsibilities within a certain time period in an adverse way.

Reference List:

Basioudis, I. G., Papakonstantinou, E., & Geiger, M. A. (2008). Audit fees, non?audit fees and auditor going?concern reporting decisions in the United Kingdom. Abacus, 44(3), 284-309.

Gunn, J. L., Kawada, B. S., & Michas, P. N. (2019). Audit market concentration, audit fees, and audit quality: A cross-country analysis of complex audit clients. Journal of Accounting and Public Policy, 38(6), 106-693.

Kadous, K. (2000). The effects of audit quality and consequence severity on juror evaluations of auditor responsibility for plaintiff losses. The Accounting Review, 75(3), 327-341.

Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts.

Academy of Management Review, 22(4), 853-886. Xu, Q., & Kalelkar, R. (2020). Consequences of going-concern opinion inaccuracy at the audit office level. Auditing: A Journal of Practice & Theory, 39(3), 185-208.

MPAA604 Advanced Audit and Assurance Assignment Sample

Instructions:

This assignment is to be submitted in accordance with the assessment information stated in the MPAA604 - Advanced Audit and Assurance Subject Outline.

Students have the responsibility to ensure that the submitted work is in fact their own work.

• Incorporating another source, information or ideas into one's own work without the appropriate acknowledgement through the correct in-text citation protocols is potentially grounds for academic misconduct.

• Students must submit all assignments for plagiarism checking in turn-it-in in Moodle prior to the final submission. For further details, please refer to the MPAA604 Subject Outline and the MPAA604 - Advanced

Audit and Assurance unit information in Moodle.

• Maximum marks available: 15 Marks.
• Refer to the marking rubric for the marking criteria on page 7 of this document for assignment help
• This assignment should be a total of 1,500 words (maximum).
• Please use the "word count" function and include the number of words in the report on the front cover page.

• Due Date: Week 10

Topic: How is Enhanced Auditor Reporting currently being embraced in Australia?

Background and Context:

Since 2016, there has been a strong push to improve the quality of audit reporting. Listed entities now have to report on "key audit matters" and improve the way material information is communicated using "plain English”. As mentioned in the CPA Australia podcast "How is Enhanced Auditor Reporting Being Embraced around the Globe?" (available at CPA Australia website):

“The IAASB's new auditor reporting requirements commenced in December 2016. Standard setters in many jurisdictions, including Australia and New Zealand, have issued the new requirements with the same effective date, whilst others have committed to issue the standards but have not yet done so. The UK have had similar requirements in place since 2013 and some firms in other countries have early adopted the IAASB's requirements. Jim Sylph, Co-chairman of the IAASB's Auditor Reporting Implementation Working Group, and Merran Kensal, IAASB member and AUASB Chairman spoke to CPA Australia about the uptake and impact of enhanced auditor reporting around the globe.”

Research Assessment:

Download an annual report of an Australian Securities Exchange (ASX) listed company that is in the S&P/ASX 300 list. Review all the sections within the selected company's annual report which relate to the Auditor's role in providing reasonable assurance over the entity's financial statements and control environment. Students will need to review and analyses the following key areas included in the selected company's annual report:

• Auditor's Independence Declaration

• Independent Auditor's report

Non-audit services performed by the auditor

• Auditors' remuneration
Role, functions and composition of the Audit Committee

• Independent Auditors' report to the members (shareholders)

• Review all Key Audit Matters noted and the associated audit procedures

Requirements:

Based on your analysis of the auditors' sections and other areas pertaining to the auditor, as included within the annual report, submit a report which summarizes and evaluates the auditor's assurance services performed for the client company.

As part of your review of the assurance services provided, consider the following:

• Has the auditor complied with Independence requirements?
• If there were non-audit services provided, what was the nature of such services?
• Provide an analysis of the auditor's remuneration in a table with prior year comparisons. Include percentage changes and explanations of the remuneration.

Assignment Report Structure:

1. Executive Summary

• The Executive summary should be concise and not involve too much detail.

• It should make commentary on the main points only and follow the sequence of the report.

Write the Executive Summary after the report is completed, and once you have an overview of the whole text. The Executive Summary appears on the first page of the report.

2. Contents Page - This needs to show a logical listing of all the sub-headings of the report’s contents.

3. Introduction - A short paragraph which includes background, scope and the main points raised in order of importance. There should be a brief conclusion statement at the end of the Introduction.

4. Main Body Paragraphs with numbered sub-headings – Detailed information which
elaborates on the main points raised in the Introduction. Each paragraph should begin with a clear topic sentence, then supporting sentences with facts and evidence obtained from research and finish with a concluding sentence at the end.

5. Conclusion – A logical and coherent evaluation based on a thorough and an objective assessment of the facts. Key information has been appraised from an analysis of the company's annual report and supplementary research to support the final evaluation of the Auditor's findings based on the selected company's annual report.

6. Appendices – Include any additional explanatory information which is supplementary and/ or graphical to help communicate the main ideas made in the report. Refer to the appendices in the main body paragraphs, as and where appropriate.

Solution

Introduction

AGL Energy Ltd is one of the oldest and largest business houses that provide essential energy led products and services to households and business houses. It also owns the largest private hydro fleet and power station in Australia. The Board plans to put a demerger to be held in the financial year 2022. The number of customers in Australia is increasing and increasing the industry towards energy businesses (AGL, 2021). It is also engaged in battery development in bulk quantities and energy renewable. The company is engaged in energy products and services that will benefit the customers in the long run. Therefore, the company should make aware of the customers for better results.

Background

The Auditor independent declaration highlights the key audit matter on property, plant and equipment and intangible assets. They also reported on financial instruments acquired by the company during the year. The management of the company has unbilled revenue at the reporting period and the invoice was not raised to the customers. Therefore, the auditors have correctly disclosed in the financial statements of the company.

Scope:

The Independent Auditors have complied with Independence requirements. As per section 307C of the corporation's Act 2001, the auditor has given an opinion on the financial report providing a truthful and fair picture of the company's financial situation as of June 30, 2021and also complying with Australian accounting standards (CPA Australia, 2021). The organization also commenced contracts related to long term arrangements for power purchase agreements.

Main Emphasis

The auditor has pointed out the value of goodwill of $ 2,440 million in the property, plant, and equipment in the financial statements of the organization (AGL Energy Limited, 2021). Auditor has pointed out that the company has invested in derivative financial instruments that have been recorded at a fair value price. Auditor also pointed out unbilled revenue due to collection was not executed during the reporting period. The Audit report also emphasizes environmental rehabilitation.

Analysis

Non-Audit Services

During the financial year 2020-21, the external auditor, Deloitte Touché Tohmatsu Australia (Deloitte), provided non-audit services. The Financial Report 2021 contains information about non-audit services. For audits and related services, the organization maintains a management policy. An external auditor, on the other hand, is prohibited from providing any services that would jeopardize its independence. The Board of Directors has approved the policy of external auditors, which is in line with the general standard of auditor independence. Non-audit services are those that auditors give outside of the scope of the audit.

Auditors Remuneration

The analysis of the auditor’s remuneration is shown below with prior year comparisons. (‘$000)
 

The table shows that remuneration of the auditor has increased by 7.89% as compared to the previous year (AGL Energy Limited, 2021). However, remuneration of the assurance services, assurance services have increased during the current financial year.

Action taken by auditors on Key Audit Matters

Key Audit matters:

1. The auditor has pointed out the value of goodwill of $ 2,440 million in the property, plant, and equipment in the financial statements of the organization (AGL Energy Limited, 2021). However, management conducted impairment expenses on such tangible and intangible assets.

However, the procedure adopted by the auditor is not only limited to obtaining understanding associated with valuation models and boards approval for impairment charges (AUASB, 2021). The auditor has checked the mathematical accuracy of cash flow models. They have also assessed the historical forecasting accuracy.

2. The Auditor has pointed out that the company has invested in derivative financial instruments that have been recorded at a fair value price. The auditor has sought a significant judgement from the management for the valuation and accounting of those financial instruments.

The auditor has obtained the internal risk management process and controls, and systems adopted by the management for relevant accounting. The auditor has checked for accuracy on a testing basis and assessed for hedging effectiveness, the integrity of the models, contract terms and disclosure of their appropriateness in the financial statements.

3. The Auditor also pointed out unbilled revenue due to collection was not being executed during the reporting period.

The auditor has checked for process flows of the organization and key control management to estimate the unbilled amount. The auditor has also checked for management's challenges for assumption, pricing, and distribution tariff rates. These data have been checked on a sample basis by the auditor. They have also compared the historical data and current data. They have also checked for distribution tariff rates.

4. The Audit report also emphasizes making provisions for environmental rehabilitation.

The auditor has advised the company to restore and rehabilitate the environment disturbed by electricity generation. The auditor has asked for the amount of provision for environmental rehabilitation. They have asked for activities conducted for rehabilitation, the expected timing, and regulatory requirements.

The auditor has assessed the rehabilitation cost estimated with an independent expert. They have compared with historical data and also assess inflation rates and discount rates.

5. The company has recorded contracts relating to long term arrangements for power purchase agreements.

The auditor has checked for onerous contracts and also evaluated methods for completeness of unavoidable costs.

Audit Committee Meetings

The company has audit & risk committee meetings in the financial year ended on 30 June 2021. There are about 5 non-executive directors in the company. The company has an audit committee charter, and it is displayed on the company's website. The main purpose of the audit charter is to assist the Board in fulfilling its responsibilities to provide timely financial reports (IIA, 2021). The audit charter reviews and recommends a risk management framework. Members of the audit committee meetings are chosen by the Board of Directors from among the company's non-executive directors. The committee is required to convene at least four times per year. A quorum of two people is required for such gatherings. Every two years, this charter is reviewed and modified.

Audit Opinion

The auditor has given the unqualified report and stated that financial statements prepared were following the corporation’s act 2001 and given a true and fair view on the financial position prepared by the management as of 30 June 2021. The remuneration report for the year ended 30 June 2021 is in complies with section 300A of the corporation's Act 2001.

Difference between Director’s duties and auditor’s responsibilities

Auditor’s responsibilities are to comment or give emphasis on matters that are seen from the external point of view. However, directors’ duties and management responsibilities are to protect the interest of the company. The director has to implement the policies and take responsibility for any adverse happenings. The auditors are assigned with the responsibility of giving an opinion on the policies and financial viability of the organization. The auditor may give an adverse opinion if the documents asked for are not provided. Therefore, they are not implementers, but they are only entrusted with the task of giving an opinion (IAASB, 2021).

Material Subsequent Events

AGL Energy Ltd has received two penalty notices for releasing emissions beyond the limits. The company enhanced the emission limits with amendment limits that took place on June 1, 2021. However, implementation of such limits has to occur from such dates, but it was not followed.

Third-Party Assessment

Being a third-party stakeholder, the auditor has pointed out effective point’s relation to unbilled revenue and collection cycle. The management should make provisions for environmental rehabilitation. The cost of expenditure towards preserving the environment should be prepared by the company. They should take out effective cost emission costs and rehabilitating the environment for destroying the environment.

Follow-up questions

The auditor would be asked whether they have checked for expenditures and incomes earned during the reporting period. During the current financial period, the expenses have increased and whether they have been checked on a testing basis. The auditor is asked for an increase in liabilities and trade receivables. The auditors have to be asking for checking of dividend pay-out ratio as compared to previous declaration dates. The most important question to be asked to auditors is about the disclosure of financial assets acquired by the company during the reporting period.

Conclusion

Though the company has increased its revenue for unbilled collection, the company has not accounted for the actual amount against the sale of electricity. Therefore, the company should adopt measures to generate the bill within the due date and collect the amount accordingly. The company is also advised to show the financial instruments at fair market value. The company should complete contracts and duly give the information to the board and shareholders. It is also advised that the debt of the company is to be reduced and liabilities are also to be reduced as compared with assets. The company is also advised to increase the customer base for increasing the income. The company should contribute towards society as a whole and should maintain the interest of the customers. The company should adopt transparency policies to enhance its customer base. The company should look out for payment to subsidiaries and businesses before finalization and reduce long term loans.

References:

AGL. (2021). About AGL. Retrieved 13 October 2021, from https://www.agl.com.au/about-agl

AGL Energy Limited. (2021). AGL Energy Limited Annual Report 2021. Retrieved 13 October 2021, from https://www.agl.com.au/-/media/aglmedia/documents/about-agl/asx-and-media-releases/2021/210813_fy21annualreport.pdf

AUASB. (2021). Retrieved 13 October 2021, from https://www.auasb.gov.au/admin/file/content102/c3/ASA_500_Compiled_2019-FRL.pdf

CPA Australia. (2021). Audit and assurance | CPA Australia. Retrieved 13 October 2021, from https://www.cpaaustralia.com.au/tools-and-resources/audit-and-assurance

IAASB. (2021). Retrieved 13 October 2021, from https://www.iaasb.org/system/files/meetings/files/Discussed%20September%2018%20-%20Extract%20of%20ISA%20570%20-%20Wording%20Responsibilities%20of%20management%20and%20auditor.pdf

IIA. (2021). Model audit committee charter | Audit committees | Technical guidance | IIA. Retrieved 13 October 2021, from https://www.iia.org.uk/resources/audit-committees/model-audit-committee-charter/#:~:text=The%20audit%20committee%20charter%20sets,within%20the%20audit%20committee%20charter.&text=The%20audit%20committee%20may%20engage,to%20carry%20out%20its%20duties.

MA611 Auditing Assignment Sample

Unit Learning Outcomes Addressed:

a. Explain and apply the principles, practice and process of auditing to practical situations.

b. Interpret the legal and ethical requirements involved in an audit and apply them to diverse situations.

c. Compare and contrast the organisation’s and the auditor’s responsibilities for an audit.

d. Explain the importance of planning an audit and distinguish the steps involved.

e. Identify and critically evaluate the risks inherent in an audit.

Weight - 20%
Total Marks - 50 marks
Word limit - Not more than 1,000 words
Release Date - Week 3
Due Date - 28 th April, 2021 at 5 PM.

Submission Guidelines

1. All work must be submitted on Moodle by the due date (as above) along with a completed Assignment Cover Page.

2. The assignment must be in MS Word format, 1.5 spacing, 11-pt Calibri (Body) font and 2 cm margins on all four sides of your page with appropriate section headings.

3. Reference sources must be cited in the text of the Assessment Task, and listed appropriately at the end in a Reference List using APA 6 th edition for the School of Business.https://library.mit.edu.au/referencing/APA

 Assessment Task Description

In addition to the Submission Guidelines appearing on page 1, the assignment is to be completed individually. The submission into the specific assignment drop box in Moodle is to be made by each student individually.
The marking rubric below sets out the requirements:

Principally you will be marked on five components for assignment help

(1) Critically examine what happened at Western Desert Resources, including who held primary responsibility for the shambles. (10 marks)

(2) Who was the auditor, and explain whether they should have issued an unqualified report? (10 marks)

(3) Examine in detail the key legal issues. (10 marks)

(4) Discuss critically the key ethical issues. (10 marks)

(5) Format, Presentation Quality and Demonstration of Research (10 marks)

A key aspect in your choice of format/layout should be to ensure you impart your key messages effectively (i.e., complete the requirements) and efficiently (i.e., it should be succinct and take into account the word limit).
Make sure all pages are numbered, and the text fits within the margins of your pages. Make sure to include the relevant heading.

Required:

Critically examine the failures of Western Desert Resources Limited and the issues surrounding the failure, and the responsibilities of the Audit Firm in regard to the failure in terms of the above five components.

Solution

Introduction:

The aim of this study is to critically examine the failures of Western Desert Resources Limited and the issues surrounding the failure, and the responsibilities of the Audit Firm in regard to the failure. In order to perform this examination, the researcher has discussed the background of the case study including the primary stakeholder, who held primary responsibility, evaluating the key legal issue, ethical issue, and auditor’s role.

Situation analysis:

The Wagner’s is one of the biggest creditors that have collapsed the iron ore junior Western Desert Resources. The creditors of miner ore were close to $ 135 million, out of that almost $ 71 million was unsecured. The organization was also subject to damages worth $ 27 million which was claimed by the creditors (Muneer, Sayl & Kamal, 2021). The collapse was happened due to the Roper Bar venture which is in the Northern Territory that ran after the Macquarie Bank at the time they lost patience when the negotiates was carried out related to the restricting payments that were close to $ 80 million and there is further need of short term funds. Bruce Mathieson, the hotel billionaire who holds almost 21.5 % of the shares of Western Desert Resources, was caught up in a collapse and became high profile victim related to the iron ore price (Khalifa & Abdelall, 2019). The Western Desert Resources was collapsed and the amount of market capitalization was almost close to $ 285 million. As the Roper Bar venture suffers some issues due to heavy rain, there were some operations in Bing Bong port. There was a weak beginning and the financial risk was much higher which was very critical and there was schedule repayment which is from debt. Though there was some partial protection that was provided, the iron ore spot price worse the situation which they were getting from hedging arrangements.

Auditors and their role:

The auditor of Western Desert Resources is Deloitte. As per the audit report, it was declared there was compliance with independence requirements as per Corporations Act 2001. The audit report of Western Desert Resources comprises the statement of financial position, statement of comprehensive income, statement of cash flow, statement of changes of equities, and there are notes provided for the accounting policies (Abdel, Metwalli & El Sayed, 2018). As per the report, there was a declaration of directors based upon a consolidated entity that comprises the organization. The directors were held fully responsible for the preparation and presentation of the financial report which is as per the Australian Accounting Standards and the Corporations Act 2001. As per the responsibility of auditors, the audit requirements were made as per audit engagements and can perform the audit as per reasonable assurance and it is assured the report which is prepared is fully free from the material misstatement (Abdelazeem, Fathy & Gobashy, 2021). At the time of the audit, it involves several procedures through which it can easily obtain the audit evidence related to the amount and disclosures that are in the financial report. The procedures are usually dependent upon the judgment of auditors that includes risk assessment related to a material misstatement in the financial report if there is any fraud or error. At the time of preparing a risk assessment, the auditor will help in making internal control which is quite relevant to the preparation of financial reports (Belal et al., 2021). At the time of the audit, it helps in the evaluation of accounting policies so there are no chances of an unqualified report.

Key Legal Issue:

The Western Desert Resources do put the administration in start-up problems. The share price related to iron ore was battered. As the prices of iron ore are dealt with a blow in Australia, the administration has to deal with the issues and they were unable to reach the bank over the debt. Western Desert Resources is one of the top four iron ore producers that have flooded the market with supplies that are lower in cost (Gad & Saafan, 2021). The producer of Northern territory faced issues through the Roper Bar mine, but there were warnings from analysts due to the smaller to medium size producers of Australia have seen the price slump which was faced recently. The prices of the US dollar were at $ 83.60 which was the lowest as per the statistics of five years. The miners in Australia have failed this impact as the Australian dollar was raised by 5 % in comparison to the US dollar at that time (Zaher et al., 2018). The output of iron ore from Australia and Brazil was dominated by the giants like BHP Billiton, Fortes cue Metals Group, and Rio Tinto that have raised more than 15 percent in the present year that has added close to 132 million tonnes. For Western Desert Resources, all the shares were suspended and the Macquarie Bank has rejected the proposal for the payment of AUS $ 81 million.

Key Ethical Issue:

Western Desert Resources was negotiating with creditors for some time and it can be seen that the Macquarie is not supporting from September 2, which forces the organization to a trading halt as per for advancing of the advancement. The projects which were carried out by Western Desert Resources were highly leveraged with the debt as the full facility of AUS $ 80 million was withdrawn by Macquarie and added a short-term loan of AUS $ 12 million and it was not disclosed to the trade creditors (Adham et al., 2018). Though there was an improvement in production level, some changes were there in shipping contractors. There was little chance in additional equity funding which is in the soft market and the debt provider was stepping up but the Macquarie Bank instead of providing funds, they kept it to the administration itself. The new mining operation which was planned was very uncertain and was an expensive process that was not possible to execute (Moghazy & Kaluarachchi, 2020). Additionally, there was the one secured creditor which is the bank, but it was ended as they were possibly trying to own first and then resale the whole thing and took the replacement cost, through which they thought of making profit through quick resale. The option which was provided was quite attractive rather than paying the interest.

Conclusion:

Thus to conclude, it can be said that the study rightly pointed out the reason behind failure of Western Desert Resources Limited. In addition, this study also rightly explained the role of auditors behind this failure.

Reference list

Abdelazeem, M., Fathy, M. S., & Gobashy, M. (2021). Magnetometric Identification of Sub-basins for Hydrocarbon Potentialities in Qattara Ridge, North Western Desert, Egypt. Pure and Applied Geophysics, 1-26. Available at: https://link.springer.com/article/10.1007/s00024-021-02678-2

Abdel-Fattah, M. I., Metwalli, F. I., & El Sayed, I. M. (2018). Static reservoir modeling of the Bahariya reservoirs for the oilfields development in South Umbarka area, Western Desert, Egypt. Journal of African Earth Sciences, 138, 1-13. Available at: https://www.sciencedirect.com/science/article/pii/S1464343X17304181

Adham, A., Sayl, K. N., Abed, R., Abdeladhim, M. A., Wesseling, J. G., Riksen, M., ... & Ritsema, C. J. (2018). A GIS-based approach for identifying potential sites for harvesting rainwater in the Western Desert of Iraq. International Soil and Water Conservation Research, 6(4), 297-304. Available at: https://www.sciencedirect.com/science/article/pii/S209563391830114X

Belal, A. B., Mohamed, E. S. S., Abdellatif, M. A., & AbdelRahman, M. A. (2021). Soil Conditions of Dakhla Oasis, Western Desert, Egypt. Sustainable Water Solutions in the Western Desert, Egypt: Dakhla Oasis, 123-144. Available at: https://books.google.com/books?hl=en&lr=&id=rzsiEAAAQBAJ&oi=fnd&pg=PA123&dq=western+desert+resources&ots=bSl31-_uYX&sig=RWdMuOdD65Dp4r5UAh0lQRKjMQQ

Gad, M. I., & Saafan, T. (2021). Future Visions for The Integrated Water Resources Management for Old Cultivated Areas of Siwa Oasis, Western Desert, Egypt. (Dept. C). MEJ. Mansoura Engineering Journal, 28(3), 102-120. Available at: https://journals.ekb.eg/article_141851.html

Khalifa, M. M., & Abdelall, M. I. (2019). Ecological desert settlement Egypt western desert. Alexandria Engineering Journal, 58(1), 291-301. Available at: https://www.sciencedirect.com/science/article/pii/S1110016819300031

Moghazy, N. H., & Kaluarachchi, J. J. (2020). Assessment of groundwater resources in Siwa Oasis, Western Desert, Egypt. Alexandria Engineering Journal, 59(1), 149-163. Available at: https://www.sciencedirect.com/science/article/pii/S1110016819301590

Muneer, A. S., Sayl, K. N., & Kamal, A. H. (2021). Modeling of spatially distributed infiltration in the Iraqi Western Desert. Applied Geomatics, 1-13. Available at: https://link.springer.com/article/10.1007/s12518-021-00363-6

Zaher, M. A., Saibi, H., Mansour, K., Khalil, A., & Soliman, M. (2018). Geothermal exploration using airborne gravity and magnetic data at Siwa Oasis, Western Desert, Egypt. Renewable and Sustainable Energy Reviews, 82, 3824-3832. Available at: https://www.sciencedirect.com/science/article/pii/S1364032117314582

HI6026 Audit, Assurance and Compliance Assignment Sample

Assignment Brief

Learning Outcomes:

• Evaluate the economic and legal basis for auditing and the applicable auditing standards and reporting requirements

• Analyze and communicate knowledge of the auditor's professional judgement, legal and ethical responsibilities to their clients and third parties

• Assess audit strategies including the evaluation of business risk and internal controls

• Apply audit concepts and processes to gather evidence and formulate judgments with respect to the underlying information

Weight - 40% of the total assessments
Total Marks - 40
Word limit- 3,000 words ± 500 words

Submission Guidelines for assignment help

• All work must be submitted on Blackboard by the due date, along with a completed Assignment Cover Page.

• The assignment must be in MS Word format, single spacing, 12-pt Arial font and 2cm margins on all four sides of your page with appropriate section headings and pagenumbers.

• All reference sources must be provided using Harvard referencing Assignment Specifications

Assignment Specification

Required Task:

Part A: Analytical Procedure (15 marks)

Obtain a copy of a recent annual report (2019) from ASX Top 300 listed companies list (most companies make their annual reports available on their website). Perform analytical procedures of the Statement of Financial Position and of Financial Performance over the two years (2018 and 2019) using appropriate ratios and/or metrics.

Required:

Measure and discuss income statement, balance sheet and cash flow ratios from your selected company and How does this affect your assessment of materiality, detection risk and overall audit Risk? Provide a brief explanation in the report. This should be presented in a table format. (15 marks)

Part B: Audit Committee Effectiveness (20 marks)

1. “Audit committees do not prepare financial reports, nor do they conduct audits. But they have an essential role to play in ensuring the integrity and transparency of corporate reporting”. Explain this statement? Who should be members of the Audit Committee? Is there an association between Audit committee effectiveness and audit quality after IFRS adoption? (10 marks)

2. Explain your selected company’s (same selected company from part A) and prepare the following responses about the application of audit committee effectiveness recommended by ASX Corporate Governance Council (CGC) principles using Corporate Governance Principles and Recommendations (4th Edition) was released on 27 February 2019? (10 marks)

i. Members of the audit committee meet all applicable independence requirements.

ii. The audit committee demonstrates appropriate industry knowledge and includes a diversity of experiences and backgrounds.

iii. Audit committee members have the appropriate qualifications to meet the objectives of the audit
committee ‘s charter, including appropriate financial literacy.

iv. Discuss about audit committee size and members profile.

v. Discuss about meeting arranged by audit committee chairman and whether member participate actively?

vi. The audit committee monitors compliance with corporate governance regulations and guidelines.

The assignment structure must be as follows:

1. Holmes Institute Assignment Cover Sheet – Full Name, Student No., Contribution.

2. Executive Summary

• The Executive summary should be concise and not involve too much detail.
• It should make commentary on the main points only and follow the sequence of the report.
• Write the Executive Summary after the report is completed, and once you have an overview of the
whole text.
• The Executive Summary appears on the first page of the report.

3. Contents Page – This needs to show a logical listing of all the sub-headings of the report’s contents. Note this is excluded from the total word count.

4. Introduction – A short paragraph which includes background, scope and the main points raised in order of importance. There should be a brief conclusion statement at the end of the Introduction.

5. Main Body Paragraphs with numbered sub-headings – Detailed information which elaborates on the main points raised in the Introduction. Each paragraph should begin with a clear topic sentence, then supporting sentences with facts and evidence obtained from research and finish with a concluding sentence at the end.

6. Conclusion – A logical and coherent evaluation based on a thorough and an objective assessment of the research performed.

7. Appendices – Include any additional explanatory information which is supplementary and/ or graphical to help communicate themain ideas made in the report. Refer to the appendices in the main body paragraphs, as and where appropriate. (Note this is excluded from the total word count.

Solution

Introduction

The Wesfarmers Limited is one of the biggest Australian conglomerates currently operating as one of the biggest retails of the chemical as well as fertilizer and other energy related products and services. The company was inaugurated in the year 1914. The company is publicly listed under the Australian Stock Exchange (ASX) (Campbell, 2017). The company deals in the revenue generation from various products and services like the retailing of the departmental stores as well as the processing of the gas and energy production and distribution. The company also manufactures chemicals as well as fertilizers and the distribution of the different products related in safety. The company predominantly operates in the areas of New Zealand as well as United Kingdoms and Australia (Kinsella, 2012). The headquarters of the company is located in the city of Perth of Australia. The financial statement analysis of the company will be done using ratio analysis which will include different types of liquidity and profitability as well as asset and inventory efficiency ratio for the company. The effect of the materiality on the ratios analyzed by the report will be explained in details by the report and the effect of these ratios in the materiality of the company as well as the overall audit risk and the detection risk will be discussed (Sujan and Abeysekera, 2007). The audit committee of the company will be assessed critically and the different members of the audit committee will be discussed to check as per the requirements mentioned in the using Corporate Governance Principles and Recommendations (4th Edition). The preparation of the audit committee will be done with the explanation of the statement regarding the role of the audit committee in ensuring the transparency as well as the integrity of the financial statements reporting using the corporate financial analysis. This will be mentioned in the second part of the report.

Discussion

Part A

The income statement of Wesfarmers Limited is presented as:

Balance Sheet:

The different profitability ratios that were calculated are:

We can clearly see that net profit margin of the company increased in the financial year 2019 ending 29th June, 2019, as compared to the gross profit margin in the financial year 2018 ending 29th June, 2018. This is because of the increased competition that the company faced in the industry as a reason of which it failed to co-incite with the strategies being implemented for the production of the relevant operations in the business. The effect of the decrease of the profit in Wesfarmers will affect the assessment of the materiality (Curtis and Hayes, 2002). The net profit before tax for the company is calculated to be $ 55,10,000.00, which means that the approximately 1 percent to 2 per cent of the net profit before tax will be used for the assessment of the materiality. This means that approximately $55100 - $115000 will be used as the benchmark which will be assessed for the determination of materiality. At the same time, the benchmark which is set for the materiality of the auditing process of the company is set to be 0.5 percent to 1 percent (Chong and Vinten, 1996). One of the major process that the audit committee needs to follow is the proper documentation of the different figures mentioned in different accounts in the financial statements of the company. The evaluation of the materiality of the company will be determined using proper authentication of the documents present.

The liquidity ratios of Wesfarmers are calculated to be:

The current ratio as well as the quick ratio has increased significantly in the financial year 2019 as compared to the past financial year 2018. One of the major reasons for the same is the investment of the company heavily in the inventory department of the company. This is because of the fact that the company invested because of the increased demands in chemical and energy-based products prior to the emergence to the COVID-19 (Miah et al., 2020).

The efficiency-based ratios of Wesfarmers are calculated to be:

There is a decrease in the efficiency ratios of the company which means that the company is somewhere incapable of efficiently handling the assets and the inventories in the business organization and this is leading to poor revenue generation from the assets as well as the inventories. This will efficiently affect the materiality as the benchmark threshold for materiality is based on either the net income or the total revenues of the company. The Return on Assets as well as Return on Equity is affected with the changes in the net income of the company and at the same time, the asset turnover ratio will be affected by the net income earned by the company (Houghton, Jubb and Kend, 2011). The changes in the net income by the company can indirectly be affected by the changes in the net revenues of the company.

The debt management ratios calculated are:

The debt-to-equity ratio of the company has increased by 1.5 timesg which means that the company is subjected to higher levels of risk as it is majorly financing the operations in the company using the borrowed funds.

To determine the possibility of material misstatement, two related accounts are subjected to analytical procedures. Loans and borrowings, reserves.

Part B

1. The audit committee's position is critical to business ethics. The internal auditors of board members are responsible for providing successful oversight of the annual audit procedure. Once the rest of the board members are autonomous and impartial, they produce the highest quality work. The audit committee meets with departments and senior auditors to discuss the findings of an audit, particularly matters that must be reported to the panel under widely agreed auditing principles. The committee is responsible for financial statements, information and technology regulation, and organizational concerns. Internal auditors may be aware of the possible effect of financial statements if they have a complete sense of audited accounts (Budescu, Peecher and Solomon, 2012). Both members of the audit committee should be aware of recent legal and functional developments and notifications. The audit committee's biggest duty is to investigate major financial reporting problems. Audit committees engage with executive management and external auditors to discuss the audit's findings, which may include information that managers are expected to reveal mostly with audit committee within general auditing principles. The audit committee authorizes the audit plan, reviews staffing, as well as offers insight into the audit plan's organization for organizations that provide an internal audit function. The Sarbanes-Oxley Act of 2002 should be clear to audit committee members (SOX). In 2003, the Securities and Exchange Commission (SEC) issued a regulation requiring national securities markets and stock exchange associations to refuse listings that do not meet the SOX audit committee criteria (DeZoort, Hermanson and Houston, 2003). In addition, the committee will review potential audit methods as well as coordinates the audit effort through internal audit personnel. Once an internal audit role is established, the committee may check and approve its audit plan, examine the function's personnel and organization, and communicate with internal auditors and administrators on a regular basis to address any issues that may occur.

The members of an audit committee should have enough technical expertise in the fields of auditing as well as financial knowledge (Azzopardi and Baldacchino, 2009). The audit committee should be structured in an independent as well as functional way which will make it easy for the auditors to work in an harmonical environment as well as peaceful cooperation. There should be at least 3 members in the audit committee of the company, all of them should be the non-executive directors of the company as well as the independent directors should comprise the majority of the members of the audit committee (Gist, and Shastri, 2003).

The independent representatives of the audit committee should assist the agents in the process of the monitoring of the actions which will reduce the benefits of withholding the relevant information. There is a negative relationship mentioned under the IFRS between the audit committee independence as well as the audit report lag and the audit committee meetings as well. The committee is made with the ultimate responsibility of looking at the financial reports of the company and checking and authenticating the materiality and the assessment of the risk mentioned (Canning, O’Dwyer, and Georgeakopoulos, 2019). The quality should be at par with the methods used in the process of audit in the company and this should be regularly monitored by the audit committee as per the International Financial Reporting Standards or the IFRS.

2. a. As per the effectiveness which is recommended by the Australian stock exchange (ASX) as well as the corporate governance principles and recommendations, the applicable independence requirements of the members of the audit committee is at par with the audit committee of the Australian conglomerate Wesfarmers Limited. The applicable independent requirements of the members of the audit committee is kept in mind while the framing of the audit and risk committee in the company.

b. The audit and risk committee of Wesfarmers are inclusive of four much knowledgeable members and the chairman as Tony Howarth. All the members of the audit and risk committee possess a great amount of knowledge not only about the economic and business world, but they do have a great knowledge about the financial aspects of the company which will help them in the audit committee (WANG and XU, 2009).

c. The appropriate qualifications of the members of the audit committee should be such that the there should be a minimum of three members in the audit committee and they should be non-executive directors of the company. There should be an adequate knowledge about accounting and financial perspectives of a business. As per the corporate governance report of the company, all the members listed in the audit committee of Wesfarmers possess these types of qualities.

d. The audit committee of Wesfarmers limited has five members out of which the chairman of the audit and risk committee of the business organization is Tony Howarth with other four members in the audit committee being Bill English, Diane Smith-Gander, Sharon Warburton as well as Jennifer Westacott. These five members constitute the audit and risk committee of the Australian conglomerate, Wesfarmers Limited. The chairman of the audit and risk committee is also an independent director who is not a part of the Board of Directors team of the committee to ensure transparency as well as authenticity of the audit committee.

e. There were several meetings that were arranged by the audit committee and these meetings aw an active participation from the members of the audit committee during the course of the financial year. The members actively participated in order to show and represent a fluent and active working of the audit committee in the company which means that the audit committee is working actively and coherently in such a manner which will yield positive and true results at the end of the financial year. The meeting which resulted in the maximum participation from the members was held on the 2nd of October of the financial year.

f. As per the compliances and the rules and regulations set for the purpose of corporate governance, the audit committee is said to have complied very well in terms of the structure of the audit committee, the size of the members of the committee as well as the expertise in the respective accounting and financial fields for the members of the audit committee. The audit committee has a chairman, Tony Howarth which is not chairing the Board of Directors and this is one of the primary and crucial rules which is mentioned in the corporate governance rules and regulations as well as compliances. The audit committee has more than 3 members which are independent directors and non-executive directors of the company.

Conclusion

The financial overview of Wesfarmers Limited, an Australian based corporation and one of the largest Australian conglomerates, will be discussed in this article. Chemical and fertilizer retail, as well as other related items, are dealt with by the company. This corporation is one of Australia's most financially sound corporations. The report discussed about the ratio and financial analysis of the company and effect of them on the materiality of the audit statements. The financial statement analysis of the company has been done using ratio analysis which included different types of liquidity and profitability as well as asset and inventory efficiency ratio for the company. The effect of the materiality on the ratios analyzed by the report has also ben explained in details by taking loans and borrowing as well as reserves and the effect of these ratios in the materiality of the company as well as the overall audit risk and the detection risk were also be discussed. The audit committee of Wesfarmers were critically analyzed and the requirements were assessed with the rules and the regulations as well as the compliances set down for the purpose of corporate governance and financial reporting of the auditing statements by the audit committee and risk committees. The relationship between the compliances of the auditing procedures with the effect of fair and true materiality and the reporting of the financial statements have been scrutiny analyzed. The audit committee and the audit members of the Wesfarmers which is led by EY have been assessed and it seems that performed seemingly well while complying with the rules and regulations.

References

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Curtis, M.B. and Hayes, T., 2002. Materiality and audit adjustments. The CPA Journal, 72(4), p.69.

DeZoort, F.T., Hermanson, D.R. and Houston, R.W., 2003. Audit committee support for auditors: The effects of materiality justification and accounting precision. Journal of Accounting and Public Policy, 22(2), pp.175-199.

Gist, W.E. and Shastri, T., 2003. Revisiting materiality. The CPA journal, 73(11), p.60.

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McKee, T.E. and Eilifsen, A., 2000. Current materiality guidance for auditors.

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ACCT6006 Auditing Theory and Practice Assignment Sample

Question

Task Summary

Students are required to work in the group with maximum of three members. The assessment is designed to assess the subject learning outcomes above including students’ ability to research audit related issues and apply their knowledge to real cases. Students are expected to develop a professional report addressing tasks within following areas: i. Inherent risk identification. ii. Audit procedures in response to inherent risks identified. iii. Analytical review of the financial statements with the purpose of identifying areas of concern or comfort. iv. Substantive audit procedures addressing the identified risks. v. Audit report, its basis, and legal issues. The report should include an Executive summary, Introduction, Body (covering all tasks) and Conclusion.

Instructions:

Review the Financial Year 2021 audited annual reports including financial statements presented to the shareholders for the following organisations:

• Healius limited

• Telstra Ltd

Assume that your audit team is responsible for planning the audits for both companies for the most recent financial year. Discuss your strategies addressing each of the tasks below:

1. Identify at least three inherent risks that you would have to consider for each company in the audit planning phase and justify your answer. Cite the relevant ASAs/ISAs to support your answer. (10 Marks)

2. Which audit procedures and/or tasks would you have planned to carry out in response to the inherent risks identified above? Cite the relevant ASAs/ISAs to support your answer. (12 Marks)

3. Carry out an analytical review on the financial statements of these companies in the planning phase and identify areas of concern (high risk, problem areas) or comfort. Identify at least three areas for each company and justify your answer. (10 Marks)

4. Which audit procedures and/or tasks would you have planned to carry out in response to the high risks or problem areas identified above? Alternatively, in relation to which area would you have minimised your evidence gathering procedure? (10 Marks)

5. Discuss ethical and legal responsibilities/liabilities of the auditors in case they would have given an inappropriate audit opinion. Discuss safeguards available to the auditors. (6 Marks)

Effective communication, Presentation quality and peer review (6 Marks + 3 Marks + 3 Marks) The report should be expertly presented, persuasive, logical communication, coherent and consistency is expected throughout (e.g., formatting, language style, and linkages between the parts). Each group member is required to assess other members based on collaboration and contribution towards the assessment tasks. Please include the peer review commentary at the end of your assessment after the conclusion section. Peer review marks must be allocated in line with the learning rubric placed at the end of the assessment brief.

Solution

Executive summary

ASA 315 on Identifying and Assessing the risks of material misstatement defines those inherent risks as the susceptibility to a class of transactions, or misstatement that might be material whether at an individual level or when it is accumulated with other misstatements before any controls are put by the organization. This report cover the inherent risk related to Telstra and Healius Limited. It provides audit procedure and review of the financial statement of both company.

Introduction

This report provides the financial and audit related concern of the two business organization Telstra and Healius Limited. It also include the financial ratio analyses and ethical factor that can affect the company. Inherent risk analysis has also been included in this report.
Main Body

Identification of Inherent Risks in The Audit Planning Phase:

ASA 200 also states, that every company should assess the threat of inherent risks at the time of inception only i.e. at the assertion level when planning is done to determine the nature, timing, and extent of audit, as it will help to analyze the areas where additional analytical procedures are to be conducted to gather sufficient and appropriate audit evidence (Khelil, et al., 2016).

In this case, the inherent risks have been analyzed for two different businesses i.e. Telstra Ltd, and Healius Limited in the following manner:

Telstra Limited:

1. Telstra Limited is a public limited telecommunication company which provides network services to households and corporates of Australia. However, during the audit planning phase, the following inherent risks need attention. The company is controlling different types of entities. As per the nature of business, ASA 315 states that the risks of material misstatement in the company are increased because of the complex business structure of the company. Hence, the risk might be high in the form of inappropriate account balances, and the disclosure might be inadequate in financial statements.

2. Another inherent risk that the company might be facing is related party transactions. The company has several subsidiary companies as well, due to which it can be said that the company might not be disclosing correct related party transactions or the transparency is less (Cullinan, et al., 2017).

3. ASA 315 also states, that when inherent risks are assessed, it is important to assess the industry in which the company is working. And the industry in which Telstra is working is driven by technology, and the environment is competitive. In the past also, it is seen that the company is driven by competition, and there is a risk that due to increased competition, the company has been unable to meet the changing needs of customers. Hence, it can negatively impact the sales of the company and would increase the obsolete inventory as well.

Healius Limited:

1. One of the major inherent risks that are faced by the company is managing its supply chain. The company has suppliers from all over the world and is trying to reduce the risks but, as the operations of the company are complex, the risks regarding the supply chain are high.

2. The company has also risks regarding mergers and acquisitions. As the balance sheet of the company is strong, it gets involved in various acquisitions. Hence, the inherent risk is high regarding whether the company will be able to gain financial returns from the acquisitions or not. Hence, there are chances that acquisitions might not generate the revenue that the company has expected (Aigul, et al., 2021).

3. The company also operates in the international market, hence, there is a risk of foreign currency exchange, because the market is highly volatile, and the currency rates might fluctuate due to which the currency exchange risk is high, due to which inherent risk of the company is also high.
Audit procedures to be carried out:

Audit procedures are the steps that are to be carried out by the auditor to gather all the information regarding the financial statements of the company i.e. regarding the quality of financial statements to ensure that the stated financial statements are true and correct. It helps the auditors to form an opinion on the truth and fairness of the financial statements. The audit procedures are conducted to gather evidence when any kind of risk is identified. In this case, three different types of risk have been identified for the clients. It is also to be analyzed that there are seven different types of audit procedures that can be applied by the auditor, and in this case, the audit procedures to be carried out are:

Telstra Limited:

1. For account balance inherent risk, the audit assertion to be used is existence, completeness, and valuation. It is very important to ensure that the year-end balances of last year have been carried forward appropriately and there is no misstatement. It is also important to ensure that all the transactions exist, for instance, if an asset is shown on a balance sheet, the company should have the documents regarding that asset. Hence, the audit procedure to be used here is inspection and external confirmation.

2. The audit procedure for related party transactions should include testing how related party transactions are coded and traded in the enterprise resource planning system of the company. It also includes taking an interview with the personnel who is responsible for maintaining accounts of the company in the financial statements(Pankova, 2020).

3. It is important to understand the functioning of products and services sold by competitors. The auditor can use audit procedure, and inspection to analyze the degree of competition and technological advancement that the industry is facing.

Healius Limited:

1. ASA 500 states, that to collect audit evidence, regarding the supply chain the audit procedure of cross-checking the data should be used. The auditor should ensure that company is checking the performance of vendors to ensure that supply chain management is not at risk.

2. For this, the audit procedure of taking external confirmations, inspection, and interviewing can be used by the auditor, to ensure that external help or expert advice was taken by the company before finalizing the acquisition. Because it will ensure that the company is not entering into acquisitions to reduce or adjust their losses, or are not acquiring loss-making companies to reduce their profits.

3. The auditor should ensure that foreign exchange is as per the foreign exchange risk policy formulated by the company. They should also ensure the accounting of foreign exchange risk, and whether the company is creating any provision for the same or not. Here, audit assertion to be used are existence, valuation, occurrence should be checked, to ensure that all foreign exchange gains and losses during the period are reported accurately in the financial statements, and the balance sheet and profit and loss of the company include the impact of foreign exchange gain or loss.

Analytical Review of The Financial Statements:

The analytical review is a technique which is used by the auditor or accountant of the company to analyze the reasonableness of the components of financial statements, and the disclosures, omission of which might make the financial statements materially misstated. Hence, the analytical review is conducted when the auditor is aware of the environment in which the company is working. Hence, in this case, to conduct the analytical review of the financial statements of both companies, a technique known as ratio analysis has been used (O?NDER Tu?rkan. 2020).

Telstra Limited:

Ratio analysis is the technique which helps to evaluate the trend in account balances i.e. whether in the current year liquidity of the company has improved or not.

1. Current asset Ratio:

Here, the current asset ratio of the company has improved in comparison to the previous year because the current assets of the company have increased. However, likewise, the current liability of the company has also increased. This makes the current asset and liabilities of the company prone to risks because the current assets of the company are not sufficient to cover its current liability. The area of concern is current liabilities.

2. Gross Profit Ratio:

In the above case, the gross profit of the company has increased slightly, and the account balances that are at risk here are the sales and cost of goods sold by the company. If the sales of the company have increased, but, the related cost of goods sold has been increased by a higher amount, then the gross profit tends to decline. In this case, the sales have declined, but, the cost of goods sold has also declined by a relatively low percentage, due to which only a small percentage increase has been seen in gross profit. The area of concern is the cost of goods sold (Amanzholova, et al., 2019).

3. Non-financial factors:

The analytical review is also important for non-financial factors as well. Here those factors are the climatic change, that the company has to face, and its impact on the financial performance of the company. The company is also taking measures to reduce the climatic impact on the performance of the company because it hinders the operations of the company.

Healius Limited:

1. Current asset ratio:
 

From the above analysis, it can be seen, that the current assets and current liability account balance of the company are at risk. It is because the current asset ratio of the company has declined significantly in 2021 in comparison to 2020, and the current assets of the company are not sufficient to cover its current liabilities. The current assets of the company have declined by more than 300% which exposes the current asset to risk. The area of concern is current assets (Appelbaum, et al., 2018).

2. Gross Profit Ratio:

From the above, the account balance that is to be reviewed is sales and cost of goods sold. In comparison to previous, the gross profit ratio of the companyhas changed slightly, despite the fact that sales have increased. This has happened because the increase in sales is lower than the relative increase in the cost of goods sold, due to which there has been only a slight change in the gross profit ratio. The area of concern is the cost of goods sold.

3. Non-financial factors:

Here, the nature of the business of the company is highly exposed to data management risk along with the risk of cyber security. The information stored by the company is regarding the history of patients' clinical treatments as well as the financial data. Hence, if the company has been exposed to cyber risk it will have a negative impact on its reputation of the company (Sheehan, 2017).

Minimization of Gathering of Evidence:

In the above, the audit procedures to be conducted for high risks areas are as follows:

Telstra Limited:

1. The high risks area in Telstra is the current liabilities. It is important to check the existence and occurrence of liabilities to ensure that they are due. Here, external confirmations can be taken from third parties like banks, and also calculations can be done to examine the liability of the company (Dai, et al., 2019).

2. To check the sales and cost of good sold by the company, it is important to check the valuation i.e. whether the sales around the year has been recorded at the correct price, whether the cost of goods sold is accurate or not, and have occurred during the year.

3. Here, for the non-financial factors, the steps that the company is taking to reduce the impact should be checked along with analyzing the investment that the company has done to reduce the uncertain risks.

Healius Limited:

1. Here, the account balance at risk is a current asset. It is important to analyze the existence of current assets, and the reason why current assets have been diluted. The auditors can take confirmation from the bank regarding the dissolution of assets.

2. Here, the company can analyze the sales that they have made and check the price fluctuations throughout the year to check that valuation is carried out at the correct prices.

3. Here, the auditor should check the measures that the company has taken to reduce the impact of cyber risks, and what security measures have been taken to reduce the risks.

Here, the auditor could have found less evidences regarding the current liabilities in Telstra as it was increased due to pandemic, and sales in the case of Healius, because very slight change has come in the sales and cost of goods sold of the company and these areas of the company are not high risks, which needs the auditor to conduct substantive analytical procedures.

Ethical and Legal Responsibilities:

The code of ethics of auditors states that auditors should be independent while forming an opinion on the accuracy of financial statements. It states that the opinion of the auditor on financial statements should not be influenced by the third party because if the opinion formed by the auditor is inappropriate it will make the financial statements incorrect for those who take decisions based on financial statements. The institute has said that when it is found that auditors have given inappropriate opinions, they can be held liable for their actions legally, and the company has the right to remove the auditors and they will be liable for penal provisions as well, in the form of loss suffered by the company and can be sentenced as well(Saha, et al., 2017).

Conclusion

From the above report assessment, it can be conclude that financial analyses can both the companies has been performance well, although management of the Telstra need to improve the liquidity situation by using the appropriate liquidity policy. Ethical compliance should also be consider by both the companies to improve is non financial performance for the longer period. The auditor can attract criminal and as well civil liability in case of offences and can be prosecuted for fraud and being a part of insider trading. Hence, there have been cases where shareholders of the company have initiated proceedings against the auditor because of the inappropriate audit opinion that they have given. It reflects that the auditors have not followed the duty of care and were not diligent while conducting their duties to give an opinion on financial statements which is true and unbiased.

Reference:

Aigul, A., Lyazzat, S., Aleksandr, P., &Aldanysh, N. (2021). Organisation problems and audit of the effectiveness of interbudgetary relations, 20(5). https://doi.org/10.13165/VPA-21-20-5-05

Amanzholova, B., &Karakchieva, V. (2019). Performance audit in construction organisations: relevant criteria and analytical procedures. Journal of Corporate Finance Research / ???????????????????? | Issn: 2073-0438, 13(2), 81–103. https://doi.org/10.17323/j.jcfr.2073-0438.13.2.2019.81-103

Appelbaum, D. A., Kogan, A., &Vasarhelyi, M. A. (2018). Analytical procedures in external auditing: a comprehensive literature survey and framework for external audit analytics. Journal of Accounting Literature, 40(1), 83–101. https://doi.org/10.1016/j.acclit.2018.01.001

Cullinan, C. P., & Zheng, X. (2017). Accounting outsourcing and audit lag. Managerial Auditing Journal, 32(3), 276–294. https://doi.org/10.1108/MAJ-03-2016-1349

Dai, J., Vasarhelyi, M. A., &Medinets, A. F. (2019). Audit analytics in the financial industry (Ser. Rutgers studies in accounting analytics ser). Emerald Publishing Limited. Retrieved April 22, 2022, https://lesa.on.worldcat.org/oclc/1124605784

Khelil, I., Hussainey, K., &Noubbigh, H. (2016). Audit committee – internal audit interaction and moral courage. Managerial Auditing Journal, 31(4-5), 403–433. https://doi.org/10.1108/MAJ-06-2015-1205

O?NDER Tu?rkan. (2020). Analytical procedures in an audit: review and application by cases. O?neriDergisi, 99-106, 99–106. https://doi.org/10.14783/maruoneri.710692

Pankova, S. V., & Popov, V. V. (2020). Applying analytical procedures for performance audit of customs authorities. Economic Analysis: Theory and Practice, 19(6), 1035–1055. https://doi.org/10.24891/ea.19.6.1035

Saha, S. S., & Roy, M. N. (2017). Quality control procedure for statutory financial audit : an empirical study (First). Emerald Publishing Limited. Retrieved April 22, 2022.https://lesa.on.worldcat.org/oclc/993432933

Sheehan, K. (2017). The ongoing audit transformation. Accountancy Ireland, 49(6), 54–55.https://lesa.on.worldcat.org/oclc/7335029058