Auditing Report Workability and Reliability

Question: Discuss about the Auditing Report for Workability and Reliability. Answer: Introduction According to the analysis of entire financial scenarios of Lehamn brothers has been collapsed due to negeligence and ignorance of appointed auditors and it is also a potential liabilities on them rectify because it is the one of big reason behind collapse of entire economy due to financial crisis at that particular moment of time. basically financial deficiencies are measured on the basis of approvement on specific part of the financial structure for resolving the related problems which initiated at the beginning point of time (Crockett and Ali, 2015, pp.80-104). The auditors are initially faced issue while finding out difficulties to gain the confidence of the short term investors, because for long run concern, company required to reform their financial system, redevelop the regulations and securities with esurance of proper market guidelines for efficiently handle the business and economic activities. These concern products are also showing reliability concern for cooperating with the proper guidelines and collaboration between each and every monetary concern in all around the world. The financial structure of the company required to be improved and enhanced in several aspects. There are many similar business activity players in the market prefers hedging the holding funds which is not required to be bound, according to the severe system reporting within that specified period of time. It is also complex job to decide the specified price for a newly generated financial instruments, on the other hand, it is also difficult to identify the reviewing the risk related to investment activities (Dorfman and Cather, 2012). it was also raised several questions for the investors for the investment related risks. As per the study and analysis, there is an opportunity which is related to the reviewing the investment related risks and also identify the initial point, from these risks are generated. After measurement if the specified risks related to the investment activities, it will be easier for the auditors to develop the appropriate guidelines and regulations for the finan cial scheme company about to start to recovered the affect of fianncial crisis. About Financial Crisis and Auditor Liabilities: There are several guidelines which is facilitating the aim and objectives of an auditors while fulfilling their goals related to preparation of auditing and financial reports. As per the ISA 200, it is found that the primary objectives and goal of an auditor and financial reporter is to properly applied for the financial structure of a specified organization. every organization should follow the guideline which declaring that each and every audit procedures required to be followed, on the basis of professional standards and also always required to be open house policy with shareholders and stakeholders of the company after their auditing process completed (Gerrans, Faff and Hartnett, 2015, pp.165-185). As per the entire financial crisis analysis shown that auditors liability within an organization is always subject of judgement and analysis on financial statements retstated by the organization for a specific financial period of time. It is also essential for an auditor while shaping their nature, scope and auditing processes for the evaluation processes on the basis of different evidence of financial audits and related outcomes. The appointed auditors of the company required to show some professionalism for structuring the financial statements of the company by removing all manipulations and errors (Carson, Fargher and Jiang, 2013, pp.301-338). The appointed auditors of Lehman Brothers might would faced difficulties while proper identification of material misrepresentation which is actually considered higher priority, in terms of providing fair financial services to their investors in the market. The authorized auditors job responsibility within an organization like Lehman Brothers is to proper and appropriately accessing the merits and measurement which is related to the specified amount of outcomes on the procedures of the auditing as per the specific analysis of the auditors. As a auditor, the prime responsibility of an auditor is to appropriately accessing the reliability and fairness of an financial statement produces by the organization within a specified financial period. There are also identifies that auditors in the organization are sometimes not able or authorized to provide their proper point of view regarding several problematic scenarios and also faced difficulties due to maintaining the specific auditing standard in the organization. there are several inverse scenarios are also affecting the genuine and proper financial report (Holm, 2014, pp.7-26). It is also is possibility that the auditing liabilities of an auditor might be enhanced with prospective of preparation of proper statement of financial position of the company. According to the IAS 10, All the events performed after Balance sheet date mainly refers to proceeding with most positive and adverse attitude also the occurrence schedule between financial statement and declaration filling for monetary transactions. There are mainly two ways for checking the auditing process from auditors end: By providing the confirmation for the financial statement schedule as per the existing circumstances. Identification of the different scenarios by measuring the alteration in the fiscal report and its measurement accordingly. The appointed managers of the organization are following the procedures for making business decision and other regulation for initiating the financial statement and reports. This is also found that it is sometimes problematic for the auditors of the organization for identifying and representating the fair valuation of the financial report generated by the organization (Wright and Wright, 2014, pp.35-50). The appointed auditors of an organization is also liable for ensuring the quality control activities through their auditing activities. According to the IFAC stanadards, it is found that proper monitoring on any job provides quality work as per the performance of an individual auditors. Quality control is one of biggest factor in auditing process to access the proper reliability and also eliminating the risk for that particular processes. This stanadards and policies are also providing assurance for monetary auditing: Auditors are bound to complete any auditing process by signing each and every paper reviewed from their end. Authorized person is liable to provide proper signature and specific date of auditing processes. Auditors are liable to analyse the appropriate profitibility scenario of a particular firm or organization within a specific schedule. The authosied auditors are also accountable for the assessment activities by using inner control system, which is supportive to recognize the manipulative and fraud activities. the auditors are also eligible enough to recognize the higher amount of auditing ability through the help of internal control system (Clout, Chapple and Gandhi, 2013, pp.88-108). According to the international auditing standards mainly misleading and misrepresentation activities are done for the purpose of doing fraudulent activities and due to intentional or unintentional activities. The entire fraudulent activities are recognised as intentionally done for the purpose of getting more financial benefits by the illegal process and also for the unjustified events like assets theft activities, documents manipulation and also forging with financial figures of the organization and also misrepresentation of the accounting policies attended within a specified period of time. Unintensional and intentional error in auditing process are considered as mistakes which is shown in the financial statement and figures provided by the appointed auditors of the company for receiving the illegal gain from the business processes. On the other hand, sometimes it is unintentional done by an individual on mistake basis, not for the purpose of achieving anything in monetary purpose. There are several mistakes and errors related to amending wrong accounting calculations and figure indetification, which is affecting the financial statement of that organization within that specified period of time (Symeonidou and Bruneel, 2014, pp.16364-16364). As per the ISA 240 stating that, Auditors job is to judge fraud in an audit of financial reports. The financial auditors are not allowed enhance or avoid the fruadulents and misrepresentation activities. The appointed auditors of the company like Lehman Brothers are also responsible for forging or misplacement of confidential databas e outside the organization. being holding a auditors position in an organization is very difficult and full of challenges for fulfilling their responsibilities. They are also required authorities to provide the essential risk factors enclosing the several factors for future assessment. There are various types of auditing risk factors are identified and classified as a essential factors for incorporating a false financial statement and also for several unintentional mistakes arises due to misallocation of the provided assets. The main responsibilities of auditors are recognised through creating a questionnaire for monitoring the fraudulence activities and also providing appropriate assurance for the fact sheet without including any misrepresentation (Couch and Wu, 2016, pp.83-98). The appointed auditors are required to be capable enough to keep transperency and transformation to meet their responsibilities and goals. On the other hand, auditors liabilities are one of the necessary part for making proper adjustment and corrections in the released financial statement reports. Incorporation Corporate Law Economic Reform Program 9 The Corporate Law Economic reform Program (CLERP 9) was implemented in the month of October in 2003 in the parliament. However, it came into the effect on the month of July in 2004. This new additions introduced in this project have the focus on boosting the public admission requirements of the corporations (Houghton, Kend and Jubb, 2013, pp.139-160). Some of the corporate statements required to comprise to allow the shareholders to evaluate the business procedures, strategies and the financial conditions during the progression of (CLERP 9) (Carey, Monroe and Shailer, 2014, pp.370-380). Section 299A of this program listed the public corporation requirements for including annual report of the directors for the shareholders to make efficient assessment such as understanding the financial status of the business and the efficiency of the strategies implemented by the organization for the future business operations. Compulsion on the public companies for testimony on the important environmental conditions, which may have potential impact on the financial status of the organization is highly require to understand the section 299A of the program (Kuan, 2014). The environmental issues may get an high importance in the governance issues if this section is included. Some of the major environmental issues, which needs disclosure comprises are: Issues regarding the availability of the water resources Issues regarding the Greenhouse gas emissions It is essential to attend the Annual General Meetings (AGMs) for the auditors and they should turn after five years. Disclosures on several facts associated with the non-auditable services will also be needed. As per the Act, the auditor required to maintain the independence and develop annual declaration on this fact i.e., the liberty or independence was maintained. This policy is protective to the employees and the contractors who have the chance to report some sort of breaches of the Corporation Act to ASIC (Samsonova-Taddei and Humphrey, 2015, pp.55-72). It should also include the level of knowledge and experience of the secretary of the company. The administrative details of the past three years of all the company listed in this program are essential in this context. According to this regulation, the details regarding the remuneration of the secretaries, directors and the general managers of the companies should also be disclosed. The environment of the corporate governance in Australia has been changed after getting this law effective in 2004. The program is helpful for balancing the corporate behavior of the organizations. Incorporation of the Audit Firms The auditors need flexibility regarding the restructuring the business models they are used for the business operations in order to get the most effective outcomes. The law firms are able to permit the auditors for assisting the services via a corporate structure, which may beneficial for them while the liabilities are limited (Carey, Knechel and Tanewski, 2013, pp.43-53). The audit firms can incorporate as company that may lead to a healthier competition among all the audit firms in the specific area by allowing an audit by the companies. Incorporation of the audit firms as the cost associate of the company; it can be directly passed to the customers or the clients of the companies. The companies should allow the audit firms to incorporate the new strategies. However, there must be some limitations regarding this. Professional Indemnity Insurance This is about the requirement of compulsory professional indemnity insurance for the holders and candidates of CPP (Cabral and Alexander, 2014). There are some limitation in the liabilities of the affiliated members and the entity members, depending on which the amount of break is decided or limited. Some important aspects of this regulation are as follows: In this regulation the meaning of member is a holder or candidate of a CPP or Affiliated membership. The meaning of principal associated with to the practice refers to a person who is a principal of the practice, trustee, a partner or a director of the firm which is carrying out an element of a practice. Related entity refers to a business organization performing practices. Each of the members should guarantee that each of the application has a proper contract regarding the insurance regulation that fulfills the minimum requirements. Parties insured: Principals The persons who were a principal or employee Related entity The persons is or ceases or becomes to be at the time period of the insurance Certification The insurance scheme must be certified according to the Insurance Act, 1973, or an Unauthorized Foreign Insurer (UFI) where: The broker or the agent who has made the agreement of the insurance, has proper license in Australia. The UFI should have minimum rating of A from the moody, AM Best and Standard and Poor rating agencies. The contract maintains the Australian Laws. All the legal systems of the domicile country are under Australian Laws. The insurance scheme should cover all types of services offered by the insured organization. The insurance company should provide a minimum cover up period of one year on the next expiry date for a period, where a common expiry date is required for all of the insurance. The indemnity level should be $1 million in case of having lack of an personal engagement fee higher than $100000. It should not be fewer than $500000 (Jackson, 2012). A cover up cost should exist for the expenses including the costs required for investigation, legal activities and the settlement of the Insurance claims. Conclusion In this report, the details regarding the liabilities of the auditors at the time of financial crisis have been critically analyzed. Different aspects of the CLERP 9 program with the details of its implementation or development have been discussed in this report. This regulation affected the whole area of the corporate governance majorly in Australia. Another major focus of this report is on the area of the liabilities of the insurance companies. The compiled regulations required to be carried out by the insurance companies have analyzed and understood in details. Various types of requirements and regulations associated with the professional indemnity insurance scheme have been discussed which may help to understand the way of using the insurance scheme efficiently. Reference Cabral, W. and Alexander, K., 2014. Auditor Liability and Legal Lacunae in relation to Risk Modelling Assumptions and Financial Institution Accounts in the context of the Financial Crisis.University of Zurich diss. Carey, P., Knechel, W.R. and Tanewski, G., 2013. Costs and Benefits of Mandatory Auditing of Forà ¢Ã¢â€š ¬Ã‚ profit Private and Notà ¢Ã¢â€š ¬Ã‚ forà ¢Ã¢â€š ¬Ã‚ profit Companies in Australia.Australian Accounting Review,23(1), pp.43-53. Carey, P.J., Monroe, G.S. and Shailer, G., 2014. Review of Postà ¢Ã¢â€š ¬Ã‚ CLERP 9 Australian Auditor Independence Research.Australian Accounting Review,24(4), pp.370-380. Couch, R. and Wu, W., 2016. The fair value option for liabilities and stock returns during the financial crisis.The Quarterly Review of Economics and Finance, 59, pp.83-98. Crockett, M. and Ali, M.J., 2015. Auditor independence and accounting conservatism: Evidence from Australia following the corporate law economic reform program.International Journal of Accounting Information Management,23(1), pp.80-104. Dorfman, M.S. and Cather, D.A., 2012.Introduction to risk management and insurance. Pearson Higher Ed. Gerrans, P., Faff, R. and Hartnett, N., 2015. Individual financial risk tolerance and the global financial crisis.Accounting Finance,55(1), pp.165-185. Holm, C., 2014. Civil and common law influences on the Danish auditor's responsibilities in relation to fraud.Accounting History Review, 24(1), pp.7-26. Houghton, K.A., Kend, M. and Jubb, C., 2013. The CLERP 9 audit reforms: Benefits and costs through the eyes of regulators, standard setters and audit service suppliers.Abacus,49(2), pp.139-160. Clout, V., Chapple, L. and Gandhi, N., 2013. The impact of auditor independence regulations on established and emerging firms.Accounting Research Journal,26(2), pp.88-108. Jackson, R.M., 2012.Jackson Powell on Professional Liability: First Supplement to the Seventh Edition: Up to Date to Novembre 2012. Sweet Maxwell. Kuan, K.T.C., 2014. Auditor independence: an analysis of the adequacy of selected provisions in CLERP 9. Samsonova-Taddei, A. and Humphrey, C., 2015. Risk and the construction of a European audit policy agenda: The case of auditor liability.Accounting, Organizations and Society,41, pp.55-72. Su, L., 2015. Do the auditors bear the consequences of corporate failures? The case of failed New Zealand finance companies. Symeonidou, N. and Bruneel, J., 2014. Liabilities of Foreignness and New Venture Internationalization.Academy of Management Proceedings, 2014(1), pp.16364-16364. Tarr, J.A. and Mack, J., 2013. Auditor obligations in an evolving legal landscape.Accounting, Auditing Accountability Journal,26(6), pp.1009-1026. Thomas, N.P., 2016.Professional Indemnity Claims: An Architect's Guide. Elsevier. Wright, A. and Wright, S., 2014. Modification of the Audit Report: Mitigating Investor Attribution by Disclosing the Auditor's Judgment Process.Behavioral Research in Accounting, 26(2), pp.35-50. Wu, W., Thibodeau, N. and Couch, R., 2016. An Option for Lemons? The Fair Value Option for Liabilities During the Financial Crisis.Journal of Accounting, Auditing Finance. Xu, Y., Carson, E., Fargher, N. and Jiang, L., 2013. Responses by Australian auditors to the global financial crisis.Accounting Finance,53(1), pp.301-338.