Auditing for Organizational Research Methods-myassignmenthelp

Question: Discuss about theAuditing for Organizational Research Methods. Answer: The fundamental principles which every auditor and accountant should comply are integrity, honesty, objectivity, professional competence, confidentiality and due care and the professional behavior. The two threats to compliance are intimidation threats and familiarity threats. Intimidation threats are the result of deterring the professional accountant or the auditor from acting independently, objectively and with professional behavior by the organizations management or the other stakeholders of the company. In the above-mentioned case the chief executive officer of the bolts ltd. Is asking the audit to focus more on the areas of profitability and sales in place of cash flow reporting which is a case of directly affecting the objectivity of the auditor. The CFO is trying to influence the auditor in the auditing process and as he is on the top among the officials, he can create a significant influence on the decisions of the auditor regarding their audit plans. Limiting the work of th e auditor to only profitability and sales are considered as directly limiting the scope of work of auditor (Quick, et. al., 2007). As the auditor of the bolts ltd., I should not accept any advice from the CFO and other management authorities which directly influences the audit exercise or the scope of audit exercise. On the other hand, familiarity threats are those threats which occurred because of the direct or indirect interest of the auditor with the companys management. Familiarity threats arise because of the close relationship of the auditor with the client company. In the above case, the CFO is asking for the sympathetic treatment which can favor the management of the company as a whole. He is asking the auditor to focus on some specific areas of treatments while ignoring others. Requesting the auditor to focus on some specific areas of sales and profitability, while leaving out the cash flow statement is the direct indication that the chief financial officer does not want the auditor to conduct the audit of the cash flows as it may reveal the fraud and error which is committed in that statement. One of the fundamental principles of the audit is that the auditor should collect the necessary and helpful evidence from the audit investigation and it has been breached because the chief financial officer is giving the directives as to what should be used by the auditor as the audit evidence. The American accounting association decision-making model provides the framework within which the individual and the organization can make an ethical decision while preserving the workplace professional integrity. As per the American association ethical decision-making model, there are seven stages which help in determining the decision regarding the concerned assignment. Given below are the seven stages which should be concerned with the Luke regarding his ethical dilemma. Establishment of the case facts This is the first stage in the decision-making model. The case facts are stated without any ambiguity and by considering what is supposed to be put. The facts of the above case are including the following: Both zane and luke are on the same level of employment with the similar experience and skills Zane is single, however, Luke is married which means he has more responsibilities in comparison to zane. Both zane and Luke are in consideration for the promotion to the audit supervisor position. On a particular job, zane is replaced by Luke. And Luke has realized that zane has done the recommendable job on the assigned project. Identification of the ethical issues in the case In the second the examination and inspection of the facts of the case have been done and those ethical issues which have been arising from this matter have been determined. We have identified that Luke has comparatively more responsibility than Zane as he is married and Luke is clearly aware of the zane good performance in the past work. The dilemma in front of Luke is that whether he should information the manager about this information or not. This is the major question which arises in the above matter as keeping quite can help Luke in getting a promotion to the post of the audit supervisor. identification of norms, principles, and values which are related to the case In this stage, the social expectation and the professional ethics code are translated into the norms, values, and principles and the case is categorized into the professional behavior, ethical framework or social framework. In this situation, the case lies in the ethical context of the professionalism. Integrity and objectivity are the major code of conduct which is required to be considered by the professionals. It is important that he should be honest in their field of work and should reveal the truth among the stakeholders of the company. In the above case, Luke knows the truth regarding the project situation, thus he should reveal the truth. Identification of every alternative course of action The fourth stage is the identification of every alternative course of action. There are two major alternatives which are in front of Luke which is revealing the truth about the relationship of client and zane and the effective work done by zane or just ignoring the above facts and does not mention about it to anyone. In case, luke reveal the truth then the auditing manager can take required and appropriate actions for investigating the matter which also involves determining the reason of bad relationship of zane with the client. He can even end the contract with the client if it has been revealed that client lied to the manager. At the same time if it has been revealed that zane made mistakes then auditor can decide the appropriate punishment for him. Matching the principles, norms, and values of options In this stage, the norms and values which are identified in the third stage are matched with the alternative options identified in stage four. In this stage, one can identify the options which match or do not match with the norms. Consideration of the consequences of the outcome The possible consequences of revealing the truth are that it will tighten the friendship of him and zane and audit manager will be able to find out the cause of conflict among the client and zane (Nerandzic, et. al., 2012). Zane will further be punished in case he found guilty or the manager could end the contract with the client. On the other hand, a possible consequence of staying quiet is getting a promotion. However, if manager later come to know that Luke intentionally does not provide this information then it could have negative consequences for him taking a decision Luke should inform the manager regarding the conflict between the client and zane. In the Mary guy decision-making model, the guy identifies the values of the honesty, responsible citizenship and excellence as valid for the societal setting. As per our case, this model will not change the decision (Rossouw, et. al., 2010). The major assertions in relation to the accounts payable are; completeness and existence. Completeness assertion involves that the accounts books balances contain all the transaction and information of the period. The actions which can be taken by the auditor to check completeness includes purchase cutoff test, analytical procedures, tracking of subsequent payment to the recorded payables, cash disbursement cutoff test and reconciliation of account of control with the payable ledger. There are several reasons for variation in the control ledger and the ledger account records which includes the pricing differences, settlement of discount allowed and amount requested for credits. Purchase cutoff test is the method of evaluating whether the goods whose title has passed and did not pass are properly accounted in books for and the cash disbursement cut off test inspects the last cheque written and also trace it to the accounts payable subsidiary ledger. In addition to this to the complete ness of transactions, the auditor also searches for those payables which have not been included in the vouchers. With the above-mentioned assertion, the major evaluation is whether the account payable which is recorded represents the valid liability of the financial statement position of the company. The audit can achieve this through confirmation, where the small balances are sampled alongside the large samples (Arens, et. al., 2009). At the time of placing the order with the vendors, the in-charge officer should send the confirmation about it to the companys vendor without considering the yearend balance amount into consideration. For example, in the above case, the auditor used the large supplier of the company in order to make the conclusion on the reasons behind holding the invoice. In such case, the auditor can possibly make a wrong decision which can further influence the audit report type which might be written by him. The account payable is significant for the auditor as it provides the evidence for the important items of the company. Accounts payable which is also known as trade payable arises out of the resale or acquisition of manufacturing goods. The purchases which made out of the accounts payable can further be reported as the gross method or the net method. While auditing the accounts payable, the assertions regarding the purchases and the cost of goods sold are taken into the consideration (Ghose Koliadis, 2007). The organization clients undergo the audit procedures confirms the assertions which are made in the accounts payable data. In the occurrence test, the third party customer can confirm the order of sale which is recorded correctly in the financial statement of the company and that they actually did occur. The provided invoices can further support the audit evidence which is needed while carrying out the audit procedure. Substantive test of detail to obtain sufficient appropriate audit evidence The purchase cycle examination is among the substantive test which can be used by the auditor in order to keep up with the existence assertion. The purchase cycle further involves authorizing and initiating the purchases and paying and recording accounts payable and ordering the services and goods. In order to initiate the effective internal control system over the purchase cycle, the management of the organization is required to set different departments for the accounting, receiving and purchasing of the transaction (Louwers, et. al., 2008). These will easier the process of recording the purchases which are received for the accountant. The major substantive test for the completeness assertion is the documents inspection which includes the determination of appropriate valuation of the accounts payable which can be carried out by the auditor during the audit procedures. The substantive test also involves the determination that the disclosure and the presentation of the purchases are done in the right manner (Lance, et. al., 2010). References Arens, A. A., Best, P., Shailer, G., Fiedler, B. (2009).Essentials of auditing, assurance services and ethics in Australia: an integrated approach. Pearson Education Australia. Ghose, A., Koliadis, G. (2007, September). Auditing business process compliance. InInternational Conference on Service-Oriented Computing(pp. 169-180). Springer, Berlin, Heidelberg. Lance, C. E., Dawson, B., Birkelbach, D., Hoffman, B. J. (2010). Method effects, measurement error, and substantive conclusions.Organizational Research Methods,13(3), 435-455. Louwers, T. J., Ramsay, R. J., Sinason, D. H., Strawser, J. R., Thibodeau, J. C. (2008). Auditing assurance services. Nerandzic, B., Perovicy, V., Zivkov, E. (2012). Personality and moral character traits and acknowledging the principles of management ethics, auditing and accounting ethics.Economic research-Ekonomska istraÃ… ¾ivanja,25(sup1), 288-312. Quick, R., Turley, S., Willekens, M. (Eds.). (2007).Auditing, trust and governance: Developing regulation in Europe. Routledge. Rossouw, D., Prozesky, M., du Plessis, C., Prinsloo, F. (2010). Ethics for Accountants Auditors.OUP Catalogue.