Audit Assignment Sample
Q1:
Answer :Q.1 Ans. Financial auditing is a subject that helps students with financial statements. It helps to understand the financial position of the organisation. It helps to increase stakeholder reliability and generate financial reports for the organisation. It helps to ensure the organisation and regulatory body that all compliances are being followed by the organisation correctly. There are various objectives of financial auditing. Some of these are as follows:
Verifying that the records of organisational transactions are accurate.
It helps to ensure that financial reports are formed with proper frameworks like GAAP principles.
Assessing the financial records the chances for errors and frauds are significantly reduced.
It helps to enhance the stakeholders' trust and gain more resources.
With proper financial auditing investors, creditors and other stakeholders foster trust in the organisation.
Financial statements help to ensure that organisational working is fair and reliable.
A well-formed financial report helps organisations to manage their resources well and enhance productivity.
Q.2 Ans. Risk-based financial audits are focused on organisational areas which have a high likelihood of any error or mistake. It is very useful for creating audits with complete effectiveness and allocating proper resources for areas for maximum profitability.
Understanding the risks of business and working according to the financial audits helps the organisation to identify operational or financial risks and correct them before any major issue occurs. For example - If cash flow issues and risk are detected risk-based audits will find errors in revenue statements.
With risk-based auditing, organisations can detect fraudulent activities. It increases the chances of finding errors in statements and controls any irrelevant cost that is being made. It helps to keep the resources under check and minimise financial fraud.
High-risk activities can be monitored with risk-based audits. It helps to tailor the process of auditing for such risky areas. It helps to get more detailed reports for a clear record of transactions and manage the risk.
Q.3 Ans. Materiality in auditing is a key subject that deals with the importance of materialistic values in financial misstatements. Auditors understand that nature, timing and level of materiality are highly effective for organisational procedures. Any misstatement is considered material if it affects the working capacity of the organisation and influences organisational financial statements.
Audit planning is highly materialistic. High materiality reduces the scope of detailed testing in audits while low materiality needs a better and more detailed process. Materiality helps to keep checking the alignment of the audit needs with the needs of stakeholders while working on significant risks to the productivity of the organisation.
For example - If a company has a revenue of $10 million. There might be an eros of $1000 in the statements which will not affect the materiality of the organisation. But, if there is an error of $10,000, it will be highly material to the organisation affecting their productivity.