CSR and Auditing Assurance Services

Question: Discuss about the CSR and Auditing Assurance Services. Answer: Introduction: Modern business environment is characterised by the widespread economic and financial reformation procedure whose purpose is to promote and apply harmonised methods with best practice across the world. Legally entitled person called auditors execute the auditing procedure. Information concerning the particular entity is carried out in professional manner through using specific techniques and procedure. The auditors issue an audit report, which is obtained through substantial audited data known as audit evidence (Arenset al., 2015). The auditors issue a document called audit report, holding an autonomous opinion based on evaluation criteria arising out of the legal regulations or good practice. The financial audit lays down the subject, which is beyond the accounting sphere involving except of the accounting knowledge. The accounting knowledge consists of the legal information, familiarity regarding economic and economic analysis, arithmetic, information and principles. The fiscal audit should bear out the compliance of financial statements with authenticity in one hand and observation principles and criteria established for management of the bookkeeping information on the other hand. In accordance with the auditing standard, the fiscal audit consists of the examination of activity by the auditors to establish an opinion on the financial statements (Beynonet al., 2014). The report deals with the auditors responsibility during the economic crisis that hits the society due to global financial crisis. Lehmans brother case overview: Referring to the case of Lehman brothers on September 15, 2008 Lehman brothers filed for bankruptcy with 639 billion of assets and 619 billion in debt. The Lehman brother bankruptcy is considered as the largest in the history since the assets have far surpassed the previous bankruptcy giants such World com and Enron. Lehman was considered as the fourth-largest US investment bank during the time of their collapse having more than 25,000 employees throughout the world. Demise of Lehman also made it the largest victim of the US subprime mortgage, which lead to financial crisis sweeping through the financial market in 2008. The collapse of Lehman was seminal event, which largely intensified the 2008 financial crisis and attributed to the erosion of close to $10 trillion in market capitalization from the global equity markets in October 2008. The decline of Lehman is considered as the biggest monthly decline during that time (Ye Simunic, 2013, pp.1191-1215). Lehmans higher level of levera ge consisting of total assets to shareholders ratio was 31 during the financial year of 2007. It also had high amount of portfolio mortgage securities, which made the company increasingly vulnerable to the deteriorating market conditions. The collapse of Lehman toiled the international financial markets for weeks given the size of the company and its prevailing status of major player in the US and overseas market. Several questions were raised pointing towards the US government decision leading to failure of Lehman. The bankruptcy of Lehman has led to more than $46 billion of its market value being washed out. Report objectives: The report objective is not just to study but also to conduct preliminary and essential stage of research. The objective of this report is to illustrate the accountability of the auditors throughout the fiscal crisis. The objective of this study is understand the noteworthyfunction of the fiscal auditors and the lies which the auditors is unable to provide through a reasonable assurance that the fiscal statement is not tainted by frauds and material errors (Christensenet al., 2015,pp.36-42). The results derived from the international standard on auditing lays down that a large number of users of financial statement depend upon the financial statement in the form of preliminary source of information. The fiscal crisis and auditors liability: To go after the reasonable thread of the most vital phase of fiscal instability is completely important to comprehend the notion of crisis. Financial crisis represents the manifestation of difficulties in the form of economic, political and social aspects. Financial represents the phase of tension, chaos often critical testing which manifest the civilization. The monetary crisis generally arises due to cumbersome economic activity. The financial crisis is a form of breakdown or the embodied slowdown of the economy reflecting a stagnation or fall of the economic activity (Cohen Simnett, 2014, pp.59-74). The financial crisis demonstrates the environment of mistrust in the financial system due to the large drop of transactions on stock exchange. Such drop in transactions reflects a disorder in the market equilibrium. The financial crisis can be considered as a chance to rectify certain elements of the monetary system particularly those inadequacies, which have led to such crisis. The financial systems demand maximisation of transparency concerning the several aspects of audit report. Establishing the regulations on the activities of hedge funds would help in reducing the volatility of the market conditions. According to the ISA 200 the major purpose and universal principle governing the audited fiscal statement is to provide the auditor with the opportunity to put across his views on the fiscal statement prepared in all material respect. As stated under the fiscal reporting framework the audit procedure should be conducted according to the legal and specialized standards (Harrison, 2015, p.38). The audited statement should be signed by the auditor and must send to the owners or the shareholders of the company disclosing all the materiality aspects of the audit. The auditor as a professional is accountable for issuing an opinion on the fiscal statement of an organisation with subject to considerable liability. During the time of performing an audit, the financial auditor assumes the responsibility in agreement with the audit appointment considering the nature of specialized services rendered. The primary supposition of the auditors liability is the phrasing of the audit engagement (Hayeset al., 2014). After giving his assent on the letter of engagement, the auditor defines the terms and mission of the audit statement that must be in accordance with the audit standards. The auditors responsibility is to establish the objective mission by recognising the financial statement to be audited under the reporting framework accounts. The auditor should implement professional scepticism at the time of audit events while evaluating the audit evidence and results. The auditors responsibility is to ensure that financial statement is free from material misstatement due to fraud and error. On few occasion it is found that audit procedure proves to ineffective to determine the material misstatement which is concealed by people occupying the position of leadership. According to the guidelines set under the framework of ISA, the hazard of material misstatement of fiscal statements occurs even when the audit engagement is planned and conducted. In evaluating the work of audit,the auditor determines his responsibility by analysing the correlation between the results obtained under the audit procedure along with the auditors opinion expressed by his audit report (KnechelSalterio, 2016). In the environment of economic crisis, the foremost accountability of the auditor is to formulating a viewpoint on the financial statement by verifying that they display a fair materiality concept along with the fiscal transactions to which it refers. There can also be state of affairs where the auditors hardly express his opinions and this generally happens in those circumstances where the scope of audit is limited (Pitt, 2014). If the auditor provides an unfavourable opinion that all the matters contained in the financial statement are correctly reflected then under such circumstances the auditors derives such responsibility from its own view. The liability of the auditors may increase due to the probable happening of events after the data of balance sheet. As stated under the IAS 10 events after the balance sheet date represents those proceedings which are equally favourable and unfavourable events occurring amid the date of balance sheet and the date when the financial statement are authorised for filling. Managers generally consider the materiality events before deciding it and if necessary adjust the financial statement. Under such circumstances it is difficult for the auditor to determine the whether such adjustment reflects a fair value of the objects in the established financial statement (Pizziniet al., 2014,pp.25-58). The auditor is also accountable for assuringthe quality control of the audit work. IFAC standard put a great amount of emphasis on the quality control, as it is the obligation of each Audit Company or individual cabinet to properly execute the audit work. The procedure of quality control should be properly organised so that they are sufficiently able to get rid of the risk of mistake. Auditors ensure the work of quality of control by completing all the relevant sections of audit programs. In the wake of the fiscalcrisis, the auditor is answerable for evaluating the use of internal control system (RupysSta?iokas, 201,5pp.49-53). It is noteworthy to denote that if there is no proper existence of internal control system then the auditor may not be able to properly identify the danger of fraud and error. According to the International Auditing Standards, ambiguous information are of two types namely fraud and error. Fraud can be defined as the deliberate action executed by one of more person to gain monetary benefits. These include counterfeiting of important documents, theft of assets, omitting the effects of transactions to monetary statements, misapplication of financial guidelines to misguide the users. Errors on the other hand, can be defined as the unintentional mistake-taking place in the financial statements (Shah Nair, 2013). Errors are generally accidental hence, an individual committing an error are not anticipated to have made for personal gain. Errors though may be considered as intentional but it may contain consequences of fraud. Therefore,the auditors determine that the errors are not occurred as fraud. Thus, errors might occur due to the mathematical or accounting transaction mistakenly understood or misrepresentation of facts with important influence on the monetar y statement. Consequently, targeted users of the financial statement are subjected to locate the errors and fraud however as stated under the ISA 240 it is responsibility of the auditors to recognise errors and fraud in the financial statement. It is responsibility of the auditors to cut down the instance of fraud and error belonging to the entitys administration, which should be continued by applying the principles of sufficient systems of bookkeeping and internal control. In the current global financial crisis the financial auditor although cannot be held accountable for averting errors and fraud but shoulders the responsibility of planning and performing the audit to gain sufficient assurance (SohMartinov-Bennie, 2015,pp.80-111). The auditors ensure that the financial statement is not significantly inaccurate on both fraud and fault. Presentation of the incorrect financial statement having the elements of fraud and error creates a significant impact on the users of the financial statement. Und er such circumstances, it becomes difficult for the auditors to locate all the errors and frauds in order to establish the threshold of error being relatively important to position their opinion expressed. Concerning this, the auditors supplement the audited entity with the help of document entitled with risk factors. The document is assisted with the list of factors in order to help the exercise of assessment. The auditing standards does not makes in the distinction regarding the liability of statutory auditors in locating errors from the economic liability of auditors in detecting fraud. Concerning the errors and fraud the fiscal auditors is required to acquire and lay down reasonable declaration that the monetary report remain free from any kind of incorrect information (Stewart, 2013). It is understood that locating fraud is hard that does not contains does not contains unintentional errors where managers and employees commit fraud by trying to conceal the information. Such kind of difficulty in location of fraud does not reflect any transformation in the responsibility of the auditor in successful financial audit engagement. Consequently, another liability of the financial auditor is related with the rectification and corrections aspects along with the necessary adjustment to be made in the financial statement. The auditors are required to adjust their opinion corresponding to the audited financial statement. This states that there is direct liability of the auditor to comply with the reporting standard on the event of exclusive accountability of the administration of the audited entity. Given the situation of financial crisis auditors responsibility is greater than the management as it involves preparation of the financial statement for compliance. This consist of the agreeing with the financial reporting framework accounting in order to ensure proper functioning of the internal control systems (Williamet al., 2016). In an attempt to cut down the issues of errors and frauds, the auditors report should always include the sections upon the areas of responsibility of management and auditor. Given the circu mstances of financial crisis it is responsibility of the auditors to explain the nature of audit and the statement in order to state that their opinion is reasonable assurance and not absolute assurance. The audited financial statement prepared by the management also represents their responsibility. This responsibility consists of; Designing, implementing and maintaining internal controls in order to cut down the instances of material misstatement due to errors and fraud (Chambers Odar, 2015, pp.34-55). Choosing and applying accounting policies which is an accordance with the regulations; Designing and implementing sufficient estimates estimate circumstances According to the ISA, the responsibility of the auditor is to express an opinion on these financial statements, which is based on their audit. Responsibility should be viewed as leadership, which speaks out to all the concerned parties and transactions amid them. The auditor takes this information as the important dossier. The auditor cannot avail verification of accuracy concerning such transactions. In order to curb down the prevailing circumstances of financial crisis the auditor should eliminate the errors arising from the fraudulent financial reporting (Ye Simunic, 2013,pp. 1191-1215). Thus, the auditors should prevent errors arising from the misappropriation of assets involving theft. This helps in reducing the effects of these thefts in the financial statement by complying with generally accepted accounting principles while executing the work of audit. Recommendations: Bearing the financial crisis in mind below stated are the recommendations for the financial audit concerning the global financial crisis; Establishing audit committees: Ever since the financial crisis, regulatory inquiries have illustrated a large number of interests in the potential strengthening of the role of audit committee. By allotting, the companys board of directors with responsibility the auditors can assure are undertaken sufficiently with integrity. Expansion in the role of audit: The auditors should not be asked to frequently address the stakeholders of the company, which the company should itself do. This helps the auditor to perform interim reporting of the financial statements. Conclusion: To conclude with, during an audit of accounting data, one of the most important factors is to determine whether the information recorded correctly indicating the economic transactions occurred during the accounting year of an entity. In context to the audit of the financial statement, the most important rule is to comply with the materiality of audit in accordance with the generally accepted accounting principles. In addition to this, understanding of an accounting requires an audit to have sufficient experience in the process of collection and interpretation of audit evidence. It is noteworthy to denote that the planning and execution of audit must be performed in accordance with the rules of International Auditing Standards in order to represent fewer aspects that could question the liability of the auditors. The report significantly lays down the role of financial auditor to provide reasonable assurance that the financial statements are not contaminated by frauds and materiality errors. Reference List: Arens, A.A., Elder, R.J., Beasley, M.S. Jones, J., 2015.Auditing: The Art and Science of Assurance Engagements. Pearson Canada. Beynon, P., Smith, D. Hopkins, S., 2014. 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