Auditing Today and Tomorrow, the Price Waterhouse Coopers - Assignment Example

Auditing today and tomorrow Lecturer Part A Summary of the Price Waterhouse coopers’ report The Price Water House Coopers (2011), recognizes and discusses essentials of corporate reporting such as: duplicate information, in relation to the operations of the business; instances where there is need of more explanation; and areas in which there is a shortfall in the output because of the frameworks set aside by the organization. According to this report, PWC put emphasis on the transparency during the whole process of auditing. The report discusses transparency in auditing as that element which provides accurate and valid data, maintains integrity and gives an opportunity to market the services. Transparency also plays a significant role in remitting data. According to the Price Water House Coopers (2011), preliminary statements contain information that concerns main judgments of the company in terms of true and fair view of its position and business activities. The report gives investors an opportunity to work together for purposes of gaining confidence for the operations of the company.Currently, investors require more information in areas such as management, accounting techniques, areas of resource management and going concern. The report further denotes that, investors need an assurance on quantitative performance. This PWC report indicates that the currently used auditing practices are more valuable to the corporate managements than they are to small time investors. The report also shows that the practices do not cover areas such as the model of the business operation. According to the report, the auditors and government regulators are the main barriers to changes in auditing and corporate reports. It explains there is no independence in those organizations that do not enact an auditing process and that it is extremely important for the capital market to observe and maintain audits of the financial records of companies. The PWC report summarizes the auditing information by asserting that investment professionals have a mixed view on non-GAAP information, this is because even the quality of the data itself is a suspect. Companies do not follow a consistent manner of calculating data, making it hard for investors to make a comparison of the data with (Price Water House Coopers, 2011). According to this report, the audit opinion is very important to an organization. The results of the survey indicate that more than 80% of the investors prefer to invest in a company whose audit report outlines its financial records as reliable, and stable. Some however put claims that the audit reports arrive late after making an assessment of the report. According to the Price Water House Coopers (2011), investment professionals do not read statements of an audit report. The organization leaves this task to the corporate organizations to read audit reports. One of the reasons cited why investors do not read these reports is because they do not provide data regarding consultations with external auditors, which compromises their reliability. Another reason is because there is no comparison of the audit opinions. The report also explains that auditing methods and techniques must reflect transparency, and credibility. According to the Price Water House Coopers (2011), credibility of the report is reliable only after investors have read it, and satisfied with the findings. It also explains that the opinion of auditors should supplement the reports of the audit committees. In the report, the quantitative matters such as the validity of the financial figures in place have been emphasized. This information is essential for analyzing the company’s economic performance. However, there is limited need of an assurance concerning information regarding corporate governance. The reports explain that the investors need an assurance of the information that addresses risks facing the business. This information is presented as strategic issues. Investors are of the opinion that methods of collecting and disseminating data are reliable, and any information contained in the preliminary statement, must be on the audit report. Therefore, for reasons of auditing in the future, auditing must encompass periodic meetings between shareholders, the leader of the audit committee team, and the auditors to discuss the annual audit reports and opinions. The auditor must be available for consultations, and tripartite channel of communication, such as communication amongst shareholders, the audit committee and the auditors. Other issues considered in the report include; availability of investors during the audit process, provision of a risk statement of the company and auditing information must reflect the organizations association with credit companies. The PWC report highlights the importance of privacy and confidentiality in auditing, and it indicates that privacy enhances the independence of the organization and accelerates the virtue of honesty. The investors are more concerned with information regarding the going concern element of a business organization. There are different opinions between corporate organizations and mainstream organizations in relation to the aspect of the going concern. Corporate insist on the need of more information concerning the issue, while mainstream organizations believe that the information should emanate from the management (Victoria, 2007). Ideally, investors need information that pertains to the aggressiveness of the business, in relation to its competitors. The PWC reports states that auditing provides a high level of assurance in the following area, quantitative performance, corporate governance, and on strategic issues. Part B Evaluation of the findings in the Price Waterhouse Coopers’ report Due to the information needed by the investors to rate their businesses with those of their competitors, the corporate reports becomes of great significance since they show the aggressiveness of the business to the investors and assist in the company procedures and processes of decision making and also indicate a true and fair view of the position of the company assets and liabilities as well as the actual profit and losses for the year without any window dressing. From the PWC report summarized above, the investors need audit information that will assure them on corporate governance, company quantitative performance and the strategic issues of the company. These reports are hence very important that therefore must address the interests of the users and provide knowledge on the operations of the company. According to Regan (2003), the purpose of such is to explain the performance of the business in relation to its competitors and social responsibility. It is important, in the report, for the organization to feature figures and graphs in the report since this will help in explaining concepts and ideas to investors, the government and other stakeholders. The graphs will also enhance a clear understanding of the report at a glance. A good corporate report must identify its target, and the purposes of the report. According to Rittenberg et al (2005), auditing reports must identify areas of the business operation where there is a shortfall in production, and explain the mechanisms the institution puts in place to rectify errors emanating from the organization. Transparency in the auditing process is an essential requirement for the validity and reliability of the audit reports. Gramling et al (2012) asserts that investors seek knowledge of generally acceptable principles of accounting in an audit report (GAAP).These are rules that accounts and financial analyst follow in preparing accounting and financial records. Every organization must prepare this information, and rely it to investors, for purposes of knowing how the company perform and to government agencies for purposes of taxation. In preparing the financial records, the following principles must be portrayed: going concern, monetary unit, the entity assumption and the time period assumption (Moeller et al, 2009). Going concern is an intangible asset of the company, which comes along with its brand name, and its clients. It assumes that the business will operate to a foreseeable future. Moeller et al (2009) further believes that auditors must calculate its market value, and reflect it on the financial records (p.16).The assumption based on business entity is the idea that the organization is a legal personality, and must obey rules and procedures. The corporate organizations and government require an independent investigation of the organization for purposes of finding a solution to these problems emanating from the management of the organization. Government may also be interested in the actual profit and loss in order to calculate taxes accurately. However, the audit report and procedure must not always be available to the public. This is because it will reveal sensitive matters affecting the company, and the impact of highlighting such issues might affect the day to day affairs of the corporation. Transparency in the auditing process will result to mistrust between auditors and the corporate management, and lower the ability of auditors to add value to the operations of the company, by pointing out the weaknesses of the organization (Regan, 2003). According to Moellar et al (2009), transparency in an organization markets the auditing services. The authors assert that companies will not seek the services of auditing in future because they will adopt internal control mechanisms that will help in solving their problems. Audit reports mainly target the stakeholders of the company, in order to write an effective preliminary statement, the corporate organization must ensure that the reports show a consistent financial record and operations of the company. According to Chambers et al (2010), the statements must identify important data, and set them aside for purposes of efficiency in analyzing the financial records. The authors also believe that preliminary statements are important for predicting the future cash flow of the business organization. Information regarding financial and liquidity of the company must be on the statement. Such information is essential for stakeholders in assessing the flexibility of the company in relation to their financial capability. According to Millichamp (2012), report on strategic issues must identify specific risks the organization faces, and recommend the necessary mitigation measures to reduce or prevent the risk from occurring. The report must also identify the main risks facing the company, conduct an analysis of the situation, and write a report on it. Scholars agree with the notion that for future purposes, auditors must involve shareholders to access information and data during the process of auditing. According to Rittenberg et al (2005), the monetary unit assumption is the belief that auditors used a standard currency, while the time period assumption explains that the financial report depicts a certain period of time. The report identifies barriers enacted by auditors and government agencies. Auditors view changes in the procedures and methods of conducting an audit as a threat to the profession. Auditors view these changes with suspicion about its motive, and a belief that the changes will create a rift amongst the auditors themselves, their clients and government regulatory agencies. It is also difficult to initiate these changes because of the human capital required. These changes need expertise on designing and analyzing the new requirements and procedures of the auditing process. It is quite expensive to train staff on such a new approach. This hence limits the application of new auditing procedures and practices. In order to analyze quantitative material, auditors must take into consideration all the relevant auditing evidence. The auditor must analyze all information pertaining to the overall financial performance of the business, and any misleading statement he comes across during the process of auditing (Arens, et al, 2012). Auditors must review the accounting procedures of the company, and any factor that relates to the financial performance of the company. This will ensure the reliability and accuracy of the audit report. Auditing is concerned with the performance of the corporate governance team. The report must hence identify their qualifications and competencies, and analyze them in relation to the functioning of the corporate. According to Gramling et al (2012), the following areas in the auditing practice need further training; proposal writing and analysis, instrumentation design, identifying and initiating objectives, and appropriate data collection procedures. According to Beale and Russ (2012), audit opinions are important to the company because they relay information concerning the viability and position of the business organization. From such opinions, the corporation gets the opportunity to effectively design internal control procedures of the organization. The opinions help in assessing the vulnerabilities of the company, and therefore initiate risk control measures. Conclusion In summary, auditing is very important to the investors and shareholders of the company as well as the management. The discipline provides the investors with information related to corporate governance, quantitative performance, and strategic issues of the company. Audit information is a necessity to the success of the company since it gives a true and fair view of the position of the company in terms of its assets and liabilities, profits and losses among other aspects of financial statements. The audit reports are used by the investors, management, government agencies as well as the company employees. The stakeholders need to know the operations of the company, and to prevent the theft of its assets. Therefore, the only way of identifying the operations of the company is to make an audit of all aspects and the organization of the institution in consideration. From the audit reports, shareholders will analyze the tangible and non-tangible assets of the company, the market position of the company, its profitability, the employees of the company and the skills in their possession. The future prospects of auditing are bright. There is an increased interest on the auditing profession, and the auditing skills. Companies require internal auditors as well as external auditors, and this creates vacant position for the auditing skill. To effectively tap on this demand, government agencies must create a framework of training personnel in this field. The institutions should liaise with the private sector for purposes of developing a relevant curriculum. Audit information is useful to shareholders for purposes of making decisions on whether the company is on the right direction or not. Investors also require the audit reports, as it will guide them on whether to invest in the company or not. In practice, nobody can invest in a company that is making losses; therefore their main area of concern is the profitability of the company, and its long run prospects. Government agencies require these reports for taxation purposes, and it will guide the government on the amount of tax to claim from the organization. Bibliography Andrew, Rand. The operational auditing handbook: Journal of auditing businesses and IT processes, 2010. 7(2), 26-54 Beale, Jay. Nessus network auditing: Auditing and Assurance Association Journal. 2007. 5(2), 122-143. Bradley, Schwieger. Audit concept: Journal of International Certified Public Accountants Kenya, 2005. 6(2), 211-256 Gramling, Audrey. The Role of Auditing: Journal of Auditing and Assurance, 2012, 7(4), 31-40- John R. Taylor. Auditing. 10th ed. Andover: Cengage Learning, 2012. Print. Jones, Michael. Audit practice audit reports. Journal of Auditing and Assurance, 2008, 4(2), 12-45. Moeller, Robert R.. Sarbanes-Oxley internal controls: Journal of effective auditing with AS5, 2008. 3(5), 45-51 Price Waterhouse coopers. Audit, Today and Tomorrow. Price Waterhouse Coopers, 2011. Print Randal, Elder. Auditing and assurance services: an integrated approach. Journal or Auditing and Assurance, 2012, 7(2), 21-45. Regan, David. International auditing practical resource guide, Hoboken, N.J.: J. Wiley & Sons, 2003. Print. Russ, Rogers. Nessus network auditing. 2nd ed. Rockland, Mass.: Syngress ;, 2007. Print. Sam, Williams. Investors’ demand on audit information, Auditing, assurance and ethics handbook 2012, 2012, 4(3), 65-78 Zinn Brink. Brinks modern internal auditing a common body of knowledge: Journal of Business Management and Auditing, 2009. 6(4), 21-42 Top of Form Bottom of Form Read More