Financial Management and Audit Process - Research Paper Example

Audit According to Alexander and Fairbridge (p 122), audit is the process of analysis of accounting records with the intentions of verifying their accuracy. The process involves making adjustments as well as corrections pertaining to the subsequent accounts. Additionally, according to Simon and Hatherly (p 154), the audit process is one that involves the incorporation of the terms true and fair perception of the financial aspects with regards to application of the relevant sections of the law. On the other hand, there are various types of auditors in the business fraternity. Some of them are like the independent auditors; these are the types of auditors who are always CPA’s. These individuals are always either practitioners or otherwise members of the public accounting firms who always hire their services to the professional auditing to the customers in need. On the other hand, these individuals are always licensed after going through the CPA tests after which they are certified. These individuals are always ready to render their services after having a factual experience in a working auditing firm. In the contemporary world, the elevated levels of competition subjects external auditors to roles of value incorporated services that can be characterised by business risks as well as providing the necessary management of a business internal management risks. It is noted to be very necessary for the external auditors to act in the control as well as under the perception of an independent thinker as well as with the intents done on good faith while performing their audit responsibilities. The internal auditors are always employees of an organisations concerned with the auditing activities. These types of auditors are always concerned with the analysis of facts in the organisations, often referred to as internal auditing. The major responsibility of the internal editors is always concerned with the management in the firm with the aim of impacting the objectives of the organisation. On the other hand, there are the government auditors. These kinds of auditors are always employees of a particular local government, state or otherwise the federal government. This class of auditors can be further categorised into three other classes; general accounting officers, internal revenue services and lastly the defence contract audit agency. On the other hand, the last classification of auditors is the independent auditors. The independent auditors are neither employed by the government or other agencies but rather they provide their services upon consultations. These classes of auditors are always concerned with the analysis of a particular company, firm, and organisation with the aim of analysing the statements as well as reports in a manner perceived to be accurate and fair. These classes of auditors always assist the organisations in the provision of a financial report that might be misleading. The salary provision of the various classes of the auditors is always widely varied. The salaries are always provided with regard to the different types of auditor, states, the company that one might be auditing and the workload that is involved in the auditing that need to be done. On the other hand, factors such as the experience of an individual in the profession are important in the determination of the salary that one might be entitled to. The following salary provisions are ranges of the various types of auditors across the United States on annul basis in dollars. Inventory taker auditor 20, 000 High end auditor 60,000 Senior associate auditor 65,000 Tax auditor 45,000 Night auditor 20,000 Coding auditor 60,000 Hotel night auditors 23,000 Manager information technology auditor 120,000 Auditors are appreciated in virtually all over the world. The profession gained much significance in the last two decades. The profession has been treated with the much respect that it deserves. On the other hand, there have been ethical issues that have been incorporated with the profession as well. Taking for instance in the analysis that was conducted by Horst, (p 650) the paper states that there is the need to put more efforts in the development of the ethical issues that will be responsible for the management of the different professions. On the other hand, a quote from Horst, (p 651)"A man without ethics is a wild beast loosed upon this world". To gain more relevance in the modern world, the profession had to curve the regulatory measures that guide the profession activities. Some of the significantly noted failures in the contemporary world, taking the instance of Enron, or even Parmalat have sparked a lengthy debate on the concerns of ethics that re used in the guidance of the profession. These particular cases pushed the various governments globally to initiate changes on the freedom of the auditors to operate their activities. Furthermore, the governments initiated the need to change the regulatory measures that were used in the government of the professional bodies. On the other hand, there was a need to develop new code of ethics in the profession. On the contrary, the changed that were initiated were varied from the various nations and states. Different states and nations developed measures that were relevant and applicable in the various contexts the nations operated. An exemplified case is like the Sarbanes Oxley Act that was passed in the United States. The Act was passed with the major aim of enhancing the level of quality of services that were offered by the auditors. On the other hand, the Act was responsible for the development of a code of ethics that was to be used to govern the activities as well as the legal requirements of the profession. Hence corporate disasters are always the outcome in most organisations in countries that do not embrace or otherwise have not enhanced their management of the legislative measures concerned with the profession. Moreover, there have been a large number of studies that are now available in literature, that have noted the various aspects of the auditing profession sine the failure of Enron. Hence the various debates that have always been among professionals is “to what particular level of the aims of providing safety to the auditor independence has so far been achieved especially by these responsible in the managing the prospects of failure in the profession. There are reports that are generated with regard to annual or otherwise periodical reports that are generated by auditors. On the other hand, during the periods that the final accounts are closed or the trading periods are approaching, the audit reports are always generated. In the given instances, the auditors come to the organisation often once in the financial year to analyse the accounts in the subsequent visit. T6h objective of visiting the organisation is to generate a report of the accounts of the organisation according to his analysis. On the other hand, this kind of visit of the auditor to the organisation is always one of the most important activities in the business houses. On the other hand, it is important to the big business houses to have continues auditing activities carried out in the company. This is because there is the need to keep up with the wide range of activities that takes place in the financial realms in the organisation. The notable difference in the continuous audit and the final audit is the distinction between the works that is done in the various forms. The continuous audit does not cover the total assets and liabilities in the company while the final audit is inclusive of all the assets and the liabilities in the company. Additionally, final audit is carried out at the end of the year while the continuous audit is carried out all through the organisations time line. On the other hand, there are some items that may be only be verified at specific points of time. The final audit can be described to be free from defects that may be associated with the continuous audit. The final audit has with it vast advantages over the numerous defects as opposed to the continuous audit. Some of the most acknowledged advantages that can be associated with the final audit are like the less cost of carrying out the process that is usually periodical whist being most useful for generally smaller businesses, the final audit may be preferable over the continuous audit. The final audit on the other hand is not inclusive of any inconvenience as well as dislocation that may be experienced in the report with regard to concerns pertaining to the auditor who comes only once in a year. Additionally, the final audit is a significantly fast and efficient procedure that has a reasonable time line. It is also important to note that in the final audit, there is significantly less chances of the work getting mechanical while at the same time the link of the assignment is maintained. Furthermore, the periodic audit there is limited chances of undue collusion that can be detected among the auditor and the clerks. Finally, a final audit can be performed with the use of a significantly simplified work schedule (Aad 28). Despite the vast number of advantages presented by the final audit, it is important to note that there are a number of disadvantages that are presented as well. The type of audit there is limited chances that there would be a detailed as well as a comprehensive checking and analysis of the books that will be carried out. On the other hand, the time that the audit is carried out in the final edit dies not allow for the detailed checking of the books. The audit technique does not also take into account that there can be chances of errors in the accounts; however, it is important to note that there exist such errors in the account ting books. Usually, auditor who is responsible for the analysis of the company has to take his time in the production of the report from the analysis that has been carried out (Lowe 38). During this time of the report preparation by the auditor is usually presented with anxiety in the organisation hence creating some imbalance in the management of the organisation. On the other hand, the final audit does not always provide chances of predictability, the result that may be achieved from the analysis might not be to the expectations of the organisation. On the other hand, for bigger concerns in the organisations, the result of the audit does not always present their clear sentiments. It is also important to note that the auditor in this circumstance is not always in the management of the organisation. Hence it is often perceived that the auditor maybe misrepresented in the organisation. On the other hand, there are little chances that the auditor is presented by the management of the organisation (Duflo 318). The auditing process is always inclusive of various aspects of the organisation. There are audit carried out in terms of cash audit. In this type of audit the auditor is concerned with the cash transactions in the organisation. The cost audit is concerned with the costing systems in the organisation as well as the mechanism that is used in the variation of the correctness of the accounts. This is carried out with the bid to ensure the correct form of costing plan is maintained in the organisation (Libbyand Timothy 56). Complete audit is concerned with the compilation of the various aspects of the auditing procedures to come up with the final report of the organisations transactions. For the complete audit all the aspects of the organisations are auditors as well. On the other hand, the partial audit is concerned with the compilations of just the relevant aspects of the audit aspects that are needed for a particular reason at a particular time of need. It can then be concluded that there are wide aspects of auditing that the auditors as well as the companied are concerned with. It is then important for the various companies to determine the aspects of audit that they might be in need of. The importance of the audit process is one that is notable in organisations; hence the topic of audit is one that should be treated with much cautions and measures that gives the profession the needed work ethics. Work cited Alexander, David E., and Rhodes Whitmore Fairbridge, eds. Encyclopedia of environmental sciences.Vol. 20.Springer, 1999. Porter, Brenda, Jon Simon, and David J. Hatherly.Principles of external auditing. J. Wiley, 1996. Aad, Georges, et al. "Observation of a new particle in the search for the Standard Model Higgs boson with the ATLAS detector at the LHC." Physics Letters B 716.1 (2012): 1-29. Horst, René Harder."Guerrilla Auditors and the Politics of Transparency in Neoliberal Paraguay. A Review of Kregg Hetheringtons Guerrilla Auditors, the Politics of Transparency in Neoliberal Paraguay (Durham: Duke UP, 2011)." A Contracorriente 10.1 (2012): 649-655. Duflo, Esther, et al. "What does reputation buy? differentiation in a market for third-party auditors." The American Economic Review 103.3 (2013): 314-319. Libby, Robert, and Timothy Brown."Financial Statement Disaggregation Decisions and Auditors Tolerance for Misstatement." The Accounting Review 88.2 (2012): 641-665. Lowe, Jordan. "The expectation gap in the legal system: perception differences between auditors and judges." Journal of Applied Business Research (JABR) 10.3 (2011): 39-44. Read More