Auditing Theory and Practices The Higher Management Team

Question: Discuss about the Auditing Theory and Practices for The Higher Management Team. Answer: Introduction The report is intended to show an evaluation of the various types of parameters required in the development of an audit process and which needs to be considered in the case of the selected company that is bio sustainable feeds Limited. The very first section of the report provides the predetermined conditions, which needs to be included for the purpose of amendment of the project. The different types of inherent conditions taken into considerations are from the previous legislative activity, which shows the inclusion, and provision for the regulation of action, which have been imposed by BSF Limited. It needs to be considered that the repetition of the previous auditors considered as a part of the report with respect to the turnover rate of the higher management team also needs to be taken into account for the mining whether the company has involve itself in any sort of unethical activity. In addition to this the report is considering not only the inherent risk factors but also respo nsible for identifying the several risk categories which need to be considered in order to accept the level of audit risk. The different types of identified risk are demonstrated in the project based on audit engagement program. It has been further observed that the audit risk arising for the internal controls need to be taken into consideration (VAN DAEL et al. 2015). One needs to consider several types of the factors needed for integrity associated the auditory services. The main service among them is considered initial screening of the prospective clients before it is considering the different types of the offers. The level of involvement in accordance to the clients provided the necessary details about the services related to the non-audit services. This adheres to the different set of the regulatory controls for stating the ethical guidelines for the different types of the audit services. This should also consider the degree to which the preparation of the audit report is done by considering all the important factors. The degree of the audit risk should involve the principle of constituting the related factors. Hence the quantum of the risk is seen t be varying from other based on the historical analysis and the amount is reflected by the preparation financial reports. In addition to this, the preparation of the financial statement is able to assess the level of incompatibility with the objective of the executive and the senior management with that of the stakeholders with other shareholders. With the increase in the financial and accounting frauds of the different types of different types of accounting issues it is important to consider the necessity of the prudent framework in auditing related to then addressing of the unethical corporate behavior. This also includes the incidences of reporting of the decision relating to the decision and various types of material, misstatements (Mshandete, Temu and Kivaisi 2013). The changing nature of the auditory guideline in the financial market shows the different types of the trends, which leads to a more standardized set of regulations for the publications of the financial, reports of the company. The standardized set for the compliance of the documents for maintaining the overall transparency in the audit process is also necessary. Different types of cases related to AIG, Enron, One Tel and Lehman Brothers have shown the extent to which there has been misappropriation in the financial components and the resources. Furthermore, the increasing level of the agency cost has increased the problem related to the growing level of the conflict in the interest, which has led to provide a more standardized set of the issues for the present study. The different types of the solutions have been prepared in with respect to the international set of the auditory guideline. Is has been further observed that the various types of the risks related to the BS Ltd. are cat egorized as pre-existing risks or inherent risks (Temu, Mshandete and Kivaisi 2013). Factors needs to considered for the acceptance of the audit engagement The existence of the several types of the accounting scandals related to the misrepresentation in the financial information and the delay in the proceeding of the audit stating about the independence of then external and internal auditors accounts for the selection of the clients. It has been further mentioned that before a contract is accepted the auditor is needed to take in to consideration whether the acceptance can lead to a situation of following a basic standard for audit disclosure and acceptance can create a space for the inclusion of the aforementioned standards, which were compromised in the previous situations. The overall audit process is required to assess threats, which will lead to the integrity in the overall audit procedure. The auditors are required to evaluate the audit framework based on the financial statements, which is implemented by the management team, and prepare in accordance to current principles and standards in the accounting (Dewangan 2013). The main factors, which are considered for the purpose of the acceptance of the audit assignment are, relates to the investigation of the information of the several types of the relationship, which is enjoyed by the BSF. The examination of the previous records of the company has further shown that the reviewing of the financial data of BSF Ltd. is to assess whether there is no criminal enforcement of the company. The previous reputation of the key members of the company in the board of directors such as the Chairman, CEO and CFO need to be considered for the purpose for n evaluation. It has been further observed that the firms, which consider the results based on the damaging of the sustainability and profitability, are related to the ethical standards of the auditory standards (Schmid and Padel 2016). The information stored in the regulatory actions with the corporate organizations show the different parameters, which have led to the inefficiencies in the control mechanisms. The review of the previous records that was imposed on BSF LTD. is taken in to consideration for the evaluation is essential for maintaining the internal control systems in the management and structural efficiency. A high amount of the turnover for the management has also displayed about the various types of the inefficiency in the internal structure of BSF LTd., before the acceptance of the assignment it is essential to take into account turnover ratio. It is also important to consider the board members for the purpose of evaluation. It has been further suggested that the audit takes into consideration the engagement of the quip pro quo which shows the relation of the external auditors and the level of the involvement of the company into the various types of the non audit service which needs to be taken into account (Mohan et al. 2014). The past analysis of the of the several cases related to the companies show Fannie Mac, HIH Insurance and Enron, this shows that the companies are known to rely opinions of the external audit services for the different types of the non audit services for the aforementioned companies shows the reliance on the external auditors (JIN et al.2013). Discussing the risk detection procedure and providing control techniques for inherent risk The study takes into account the research done by BSF, which is complicated thereby knowing about the existing risk factors considered in the audit report. It has been further observed that the inherent risk existing in the project is expected to be very large. The amount of the misstatement in both of the financial and the non-financial information takes into consideration the different types of the omissions in the inherent risks. The comments based on the auditors for the determination of the existing risk which depicts the deviation initial dealings as per the audit work. The different types of the control risk related to the material misstatements and the shortcomings are related to the internal mechanisms of then control system. The control risk is also seen in the book of the client in form of the accounting omissions and the falsification shown in the financial report. In addition to this the control risks are related to presentation of the risks in the non-detection of the error in by exclude the different forms of the components and excluding the mechanism related to the internal control. The robustness in the internal system is pre-requirement for the fraud prevention leading to then essential formulation plan to know about the problems in the various types of the financial report. The detection of the risks takes into consideration the different types of the factors, which are required for the risk detection, which may occur due to the failure on the part of the auditors. The different types of the detection of the risk are based on the audit evidence, which is considered insufficient for an any sort of exclusion done in the misstatement, and omissions in the material control. The computation of the audit risk has been shown below with the following calculation Audit Risk = Inherent risk*Control Risk * Detection Risk Or, Audit Risk = (0.9*0.05*0.80)*100 = 0.036*100 = 3.6% The present situation of the Bio Sustainable Feeds Ltd. shows the lower amount of the control risks, which shows the internal control in the areas of the any sort of the sections, which shows the arising on the material misstatements main due to the issue pertaining to the internal control system. Even if the inherent risks are observed to be on, the higher side it is expected to change as and when the auditory proceedings are started for the initiation. The existence of the high amount of presence of the detection of the risk on the several, types of the areas are controlled through the trends of maintaining a lower amount of the risk level which have a positive impact in lowering the risk in the audit assurance. It has been also observed that in the level of a risk of 3.6% index, BSF LTD need to accept the current proposal of the audit firm (Watson 2014). Discussion of the factors, which needs to be included in the audit program of BSF Ltd The overall process of the audit program comprises of the implementation of the different types of then auditory process, which defines the set of the rules required for meeting the audit objectives. The audit module should further take into consideration the several types of the steps which needs to b e taken into consideration for the examination and verifying showcasing of the data in a way which is able to depict the relationship of one of the steps with another. In other context of it can be further stated that the variations in the case, in the operations need to be included in different types of the scenario where the overall audit procedure can be conducted based on the client to client interaction. It can be further observed that the audit program of the Bio sustainable fees LTD. should be able to include the following type of the components in the business data through the following procedure It is important to monitor the previous records for the process of the auditing and the several types of investigation procedure include the engagement of the auditors of Bio Sustainable Feeds Limited. Secondly, the company should include the different types of modules related to the safety of the research conducted and making the modifications for the audit program for accepting the different types of safety standard for experimentation and pertaining to the laboratory activities for the developmental activities of fish feeds. It is also important for the company for holding a meeting with the managers and the top-level officials were in charge of the research and developmental activities of BSF Limited it is also necessary for the company to take into consideration the various types of recognition activities needed for the purpose of coordination the audit activities and taking an augmented step towards the carrying out of auditory procedures of the selected company. It is also important for the company to examine the minutes prepared in the meeting relating to the various types of modifications and changes, which needs to be implemented in the current process of the research and developmental activities (Heera 2013). Assessment of the findings to verify the set of requirements of employers within the firm Review of the assessment with the standards specified by the regulatory authority. Such findings need to be complied with the prior report of auditors who were associated with the company in the previous year. After finding any unfavorable outcome, the audit team needs to be discussed such matter with the management for the suitable recommendation for resolving such problem Delegation of authorities needs to be checked out while making the statement of report for the company Maintain the disclosure as per the specified standards Investigate the external structure of the firm A process verification for examining the research and developmental activities performed by BSF Limited. Auditors Concerns related to Journal Entries: AASB 1011 is all about deals with accounting for activities related to the research and development which needs to be incorporated in the general purpose financial reports. In means disclosure of the costs of research and development activities are indeed for users of the financial reports. However, users find it difficult while segregating costs in terms of the social science along with the natural science maintaining all the reporting disclosures as per the provided guidelines of AASB 1011 (Rust et al. 2011). Additionally, the standard is also considered facts which are result from the developmental activities which are highly sensitive related to the planning of pre-production activities. In the context of the given case study, Bio-sustainable Feeds (BSF) Limited is largely associated with the research and developmental works for the production of the high value aqua culture feeds. The concerned research activities are discovered new technologies to enhance the production process in the fish-based feeds (CBC. 2016). Here it is significant to classified expenses as per considering the nature of the research and development in compliance with the guidelines provided by the AASB 1101. In the case scenario, this Australian Company is engaged with several types of research and developmental works after getting the permission from the Australia Government. The government has given the relaxation of 40 percent in their new budget which are applied for the financial year of 2014-15. BSF Limited has been benefited while offsetting the tax at the settlement of the turnover amounted of $20 million every year. On the other hand, BSF Limited received a grant of the amount of $500 million AUD from the Commonwealth Scientific and industrial Research Organization against the spending of minimum $100 million AUD per year in the context of production of the alternative aquaculture feeds. Needless to say the grant provided by the authority is a matter of condition. Additionally, this has also been overviewed that the payment of such grant completely depends upon the advance amount (Lothe 2013). Such amount, thus, to be considered as pre-payment despite the prescribed conditions being fulfilled by the company. While making journal entries, the pre-conditions provided by the Australian government in relation of grants and the allocated amounts has been considered separately for considering the expense related to the research and capital for patents. Furthermore, it is needs to be considered that $100 million shall be assigned for the expenditure related to the scientific research. It is based on all information and conditions, the journal entries of transactions related to the research and development for the next five years are as follows: Year Particulars Amt (Debit) Amt (Credit) 2013 Cash A/C 500000000 To CSIRO A/C 500000000 (Being grant has been received from CSIRO for scientific research ) 2014 RD A/C 360000000 To Cash 360000000 (Being expenses incurred related to four research activities) 2014 Plant Feed A/C 360000000 To RD A/C 360000000 (Being payment made related to the cash for feed of plant-based) 2015 RD A/C 160000000 To Cash A/C 160000000 (Being cash payment for research works) 2015 Development Costs A/C 160000000 To RD A/C 160000000 (Being payment for expenses incurred in relation of research and development) (Source: Created by Author) Related arguments to signing of triple-bottom line addendum: As per the given case scenarios, there are several arguments have been identified related to the development of animal feedstock and fishes since the last ten years. There are many scientists have been found that there is an enough improvement scope of the research and development of the animal feeds as per the modern environments. For this reason, several companies have shown an effort to make farming of fish more sustainable by cutting back on feed made of other fish and replacing it with plant based alternatives. This has been found that the minor acid in the agricultural stock provides adequate nutrient requirements for fishes which increases the net volume of fishes and enhances the fish farming potentiality (Rust et al. 2011). Due to this fact, there has been a revolutionized transformation has taken place in the fish firming agricultural business by focusing high-protein feed in terms of shrimp, salmon and trout. This encourages the growth potentiality of the business due to t he presence of the supplemented omega 3 variant. The further arguments available for the consideration of the lipid rich pallets in the fish feed which is highly beneficial for the consumption of the human. As per the broader perspective, the case scenarios have improved the deficiencies of bone of the fishes. There are a remarkable changes has been identified in the field of reduction fisheries due to the result of the comprehensive marine growth and the production of fishes. Now there has been intensity that agricultural feeds for fisheries have been changed due to usage of Glutton, soya beans and canola which all other protein sources. By the use of this plant into the fish feed production, the company can decrease the overall cost and provides a high level feeds elements to fishes. Evaluation on prospectus: This has been found in the case study that the Bio Sustainability Feeds Limited has not considered the fact of patent while evaluating the technology based treatment for bacteria at the time of the production of methane. On the contrary, the case scenario also indicates that the company faced difficulties and collapsed due to use of bacteria-driven bio sustainable feeds. Moreover, it has been incorrectly assumed that BSF Limited has the limited privileges for the application of the bio feeds which are bacteria-driven. Therefore, the company is not being considered as the owner of patent related to the bacteria based technology by the auditor. Thus it is not correct to assume that the company has the exclusive right to produce those bacteria. This have further evaluated that the potential growth has been decreased by ten percent for the scarcity of the fish feeds and thus, it wont be feasible for making the removal of feeds of fishes from the diets till the time of the alternative con sideration of the nutrients items. Conclusion: The bio research firm listed on the ASX, BSF Limited has engaged in the several research works on sustainable aqua-culture feeds since the last two decades. The report clearly covers the considerable treatment of governmental grants obtained by BSF Limited. The report clearly incorporates the fact of social and environmental impacts in terms of the research and discovering the fish foods nutrients for ensuring the potential growth of the fish farming in Australia. The report identified that there is a global shift to make these business more sustainable. For this, the agricultural companies like BSF limited realized that the cost cutting is needs to be implemented by replacing it with the alternatives of plant based items. However, the company faced controversies that fish less diet may have negative impacts for the natural species on the environment. For instance, environmental suggests Greenpeace is one of the negative practices for the environment (Sarker et al. 2016). In the give n case study the report further highlighted the research and development operations which have been carried out by the company along with the definition of scientific expenditure. In the due course, the report clearly explored all decisions made in accordance with the audit engagements have been maintained based on the relevant standards and present guidelines. The assignment has been further assessed all the relevant rules related to the research and development activities which has been followed by the given company. In this process, the company has obtained the tax relaxation by the Australian Government. Thus the rate of 45 percent of tax has been entitled by the government. In this context it is imperative that the company needs to be fulfilled the conditions for the development of the plant and aqua based feeds such as tax concession over exceeding $100 million per year. Lastly, the report has shown journal entries concerning the factor of patent. In that case, the company dis closed that BSF limited can have the potential to gain more than $700 million after observing the developmental rate for making sustainable aqua feeds. References: CBC. 2016. Shift to plant-based fish feed could hurt health, environment, CBCNews Technology Science, (23 Mar/16), Retrieved on 11 Jul/16 from: https://www.cbc.ca/news/technology/aquaculture-feed-1.3262922 Dewangan, S.K., 2013. employment generation with sustainable development and bio-diversity through sericulture: a study of three tribe blocks of raigarh, india.Journal of Environmental Research and Development,8(1), p.175. Heera, S., 2013.BIOLOGICAL TREATMENT OF HAZARDOUS BIO-MEDICAL WASTE ASHA SUSTAINABLE APPROACH JIN, B., DONG, S., TIAN, X., WANG, F., GAO, Q., LIN, G. and GUAN, J., 2013. 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