Auditing and Assurance Services Business Risk

Question: Discuss about the Auditing and Assurance Services for Business Risk. Answer: Introduction Auditing Assurance Services play significant role in recognition of the inherent business risk within the organization. These particular services apply a business risk pproach and the standard audit practice has been incorporated with the both national as well as international auditing standard. Auditing and assurance services help the business organization to know their deficiencies in keeping record of their business transaction as well as presenting information from record of the economic events, which occurred throughout the year within the organization (A Forum on CSR and Assurance Services, 2015). Besides this, it helps in detecting the internal issue and operation deficiencies so that helps in improving the business activities of the organizations as well as it is beneficiary to the entire stakeholders. The key role of the Auditing Assurance Services is to check the financial statements produced by the business organization with the real data by the specific tools and techni ques, which use to verify the information within the financial statements (Arena and Sarens, 2015). After successfully verifying and analyzing the data and information auditors use to provide audit report about the financial situation of the organization which improves the trustworthy of the organization as basically the auditing services provided by the third party, thus it looks after the entire stakeholders side. The undertaken report is about the auditing report of one of the most successful Australian company, One. Tel, which is collapsed within the six years of its operation within the field of telecommunication. Here the about the factors, which play vital role in assessing the inherent risks are discussed (Botica Redmayne, 2011). Besides this, the inherent risk factors are discussed and their influences in auditing the firms financial statements are measured. Discussion on factors contributing to increased inherent risk assessment There are many significant factors that have important contribution to the increased risk assessment at the financial report level. Some of the vital factors are inadequate structure of the business organization, lack of professional ethics as well as deficiencies in the corporate governance strategy of the organization. The top level management of the company along with the key finance personals was corrupted (Dittenhofer, 2001). Besides this, the auditors appointed by the company are also lacking of ethics as they are lacking of integrity , objectivity , professional competency along with due care so that the role of the auditors, which perform audit of the One. Tel was heavily criticized and their actions are largely scrutinized as the company has been liquidated. The auditors of One. Tel BDO and Ernst Young both were lacking integrity and biased to the management and the key financial professional of the company (Hanim Fadzil, Haron and Jantan, 2005). Moreover, they hide the imp ortant financial information with the financial statement of the company so that there are many stakeholders of the company such as the investors, and shareholders of the company as well as the customers and frontline staffs of the company unaware of the financial position of the company and misguided by the financial information they got from the audited financial statement of the company and took inappropriate decision related to the company thus face huge loss (Botica Redmayne, 2012). Besides this, the auditors firms could not perform the auditing tasks independently so that reduces the efficiency and effectiveness of the auditing work. It can be assumed that during the strategic business risk assessment the factors like inappropriate structure of the business, lacking of professional ethics and deficiency in the corporate governess may be detected as all these are the main reason of the failure of One. Tell and cause of the liquidation of the company. Identification of recognized factors during strategic business risk assessment According to the financial statement of the company, it can be seen that in the balance sheet or financial position statement of the company that the liability of the company is consistently increasing, in the cash flow statement it is observed that the operating cost of the company is much greater than the operating profits in comparison to the receipts from the customers the payment to the suppliers and employees is much greater and cause of the loss in the operating of the business to the company (Dittenhofer, 2001). Besides this, it is also perceived that in the investing activities also the company has incurred losses means the company has to invest a lot for the payment of plant and equipment. Only in the cash flow from the financing activities provide positive results but it is negligible to cover the loss from the operating activities and investment activities. In the profit and loss statement or income statement of the company is also provides similar information, where the company was incurring loss during the financial year of 200 in spite of massive growth and development in the business. A company and the management staffs of that particular company must have the similar objectives for the future of the company (Imoniana and Perera, 2016). However, it cannot be perceived in all cases, it is often observed that the aims of the owners and management staffs of a company is differ from the objectives of the shareholders of the company and in these cases the problems arises. This particular situation is referred Principle Agent Problem. The company One. Tel face similar types of problem and it is the main cause of the collapse of the company, which was the 4th biggest telecommunication company in Australia and the company was initiating to penetrate into the global market and hold the UK, France, Netherland and Hong Kong market (Knechel et al., 2006). Discussion on inherent risk factors and their role in increased inherent risk assessment The bad corporate governance of the One Tell Company detected as the key reason of the bankruptcy of the company. The poor management structure of the company is also one of the vital reasons of its liquidation. It is observed that in 1998, the board of the Company was composed of only four members (Krishnan, 2007). Who were non executive director of the company. Among the four directors, three of them were subject to the every year election. Moreover, the 4th one was Jodee Rich, the CEO of One. Tel company, who was not take out by the shareholders of the company. Ending of the year 1998 the board of the company was extended to have eight members. Moreover, among the 8 board members three were the high school mate of the Jodee Rich the CEO of the company. The financial as well as the audit committee of One Tell comprised with 2 members who are very close of the CEO of the company (Knechel et al., 2006). The members of the financial committee were not the independent directors with th eir position in the company. In an investigation by ASIC along with the Institute of Chartered Accountants of Australia recognized that the company has deferred expenses of forty eight million AUD along with the loss of bigger than forty million AUD. The audit partner of the company along with the external auditors were accused for overstretching the Australian Accounting and Auditing standards and fined forty eight millions. It is observed that in spite of the huge remuneration of 2.3 million AUD and bonus of 82.5 million AUD for the 3 executive directors, the directors get payment of another bonus of 14.2 million AUD at the time when the company incurred loss of 292 million AUD in 2000. It is detected that that for concealing the information to the public theses bonuses were manifest as delayed expenses along with the set up cost of the company in Europe as the strategic plan of global expansion of the company (Millichamp, 2002). Assess the risks as high medium or low The company has high risks as well as low surrender strategy with kind incentives for the new consumers might not be continued in the small market of Australia, where there are 6 services providers of mobile phone and this the 2nd biggest number in comparison any other country across the world. Besides this, the expenditure of the company was beyond of its financial capacity (Moeller and Brink, 2009). The other telecom services of the country had offered the subscribers much lower rate in comparison to the rate offered by the company. The business strategy of the company was heavily depended on the big companies Telstra and Optus and the two companies are the competitors of the company One Tell. One Tell was trading excessive phone capacity, which are procured from Telstra and Optus and the company offered cheap packages to the customers. However, the two major companies Telstra and Optus have minimal operating cost as compared to the One Tell, the companies took decision about the rate of the rental (Munro and Stewart, 2011). There was not any access fee nor had do any minimal calls spend as well as the contract not any fixed term. Therefore, there was not any single way to ensure that the consumer would stay with the company One Tell as well as spend money on it. Identification of the influential factors for effective decision making The other influential factors that help in efficient decision making are subsequently billing system failure. It is obvious in the auditing process that the intentions of the senior IT workers at this company are extremely questionable. The development personnel were given bonuses on the basis of timely creation and establish of new programs along with the system. There was not any testing need or requirement to give the necessary documentation regarding the quality of the programs (Pickett and Pickett, 2003). One of the senior accountant revealed there was not any structure, not any accounting system, not any procedures as well as not any control within the billing system of the company. Initially the billing system of the company was perfect to handle the issues as there was little customer base. Afterwards, on the way the company earned excellent reputation in the market so that the company successfully able to increase the consumers base and increase the volume of the customers t o whom the company provides essential services. Moreover, with increment of the numbers of the customers the billing system of the company was obvious insufficient; thus, fail to meet its demand (Ruhnke and Lubitzsch, 2010). Therefore, the processing as well as delivery of the invoices to the consumers was delayed and thus the company was unable to track the receipts from the consumers. The billing system of the company was designed inadequately as well as not monitored for the long time. Conclusion It is obvious that the collapse of the Company One Tell cannot be pointed to any one of the parties. There was lacking of the structure of the company, deficiencies in the professional ethics along with the corporate governance, which can be blamed for the collapse of the company (Saxena et al., 2010). 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