Audit Planning and the Effects of Inappropriate Audit

Introduction

The challenges that are presented in globalization is not only in the issue of competitiveness but also the ability of the organization, as well as the individuals, to cope with the impact of changes. Accordingly, the increase in competitiveness manifests in the performance of people in the corporate world. Entering in the door of auditors, there is a significant progress and development that entirely affects the relationship of auditors towards their respective clients. The main function that auditors deliver is the idea of non-biased audit report.

Background and Problem Statement

It is important that the auditors took responsibility in their action which is founded by their education, training, and professionalism. The qualities of auditor’s are often taken to their experience and standards in professionalism. In addition, the planning stage in auditing is one of the most essential elements that might derive in the ability of the auditors in executing professionalism in their field. The importance of planning represents the appropriate action that an auditor can create, which is not solely relying in the basic knowledge but also through the organizational standards. However, what would be consequences can be drawn by the inappropriate auditing, and what would be the effective audit plan to avoid such consequences?

Research Aim and Objectives

The main aim of the study is to build a strong idea and definition regarding the audit planning. In addition, the study aims to deliver the appropriate ways in audit planning by scoping the various effects of inappropriate audit. To support the smooth investigation of the study, there are three important objectives that will play essential roles. First is to give a deeper approach regarding the internal auditing. Second is to emphasize the techniques or standards being applied in audit planning. And third is to assess the various consequences that an auditor can meet during the auditing process.

Literature Review

Auditing or internal auditing is considered to be one of the most stressful works in the corporate world. Many auditors are placed under the series of workloads, deadlines, and pressures. In this, the production of quality work can be a sinister. Added to that is the existence of changing roles which considered as placing the auditor is a disadvantage situation. The stress and pressure felt by the auditors might be the cause of sub-standard work outcomes. Auditors, albeit had a professional record and credentials should work according to the provision of policies and procedures. This is settled in order to follow the standard, and one of the practices applied in the audit planning. Audit planning is created to use the resources in an efficient way, follow the organizational objectives, and have a control over the auditing process. The continuous implementation of audit planning establishes the growth and improvement of the auditor’s performance. In addition, the audit planning can reduce the fraudulent activities that might pose threat not only in the organization but also in the integrity and credibility of the profession. Although defined as a stressful job, auditor’s still adhere on the audit planning and their related activities to align the management and control towards the organizational goals. The audit processes are created to secure the interest of the client or the organization and thus, this very same reason should be on the top priority of the auditor in audit planning. The audit planning might start in accepting and performing the initial audit through touring in client’s plants and offices. It is important that the auditor understand the nature of client’s business in order to review the different reports such as the key ratios with their competitors, and management controls and procedure implemented. The next step is to assess the business risk by identifying the various engagements of the business and the parties involve. In performing the analytical procedures, it is more likely appropriate to consult the accounting principles used by the organization and suggests other accounting techniques to derive in the most desirable financial statements.

Methodology

The suggested method in the study is the use of comparative case studies. The use of the said method will definitely give rise to various issues involved in auditing process. Moreover, the presentation of the case studies that are based on the experience of the professionalism suggests that there is an appropriate management and techniques that can be utilized towards the effective auditing process. The birth of the audit planning is believed to be brought by various conflicts of interest, contradicting goals, and auditing issues. And through the aim of the auditors in putting a standard approach in their practice, the creation of audit planning has been implemented.

References:

APB, (2009) “APB Ethical Standards Consultation on Audit Firms Providing Non-Audit Services to Listed Companies that they Audit”, The Auditing Practices Board, Accessed 18 June 2010, from http://www.frc.org.uk/images/uploaded/documents/APB%20ES%20NAS%20Consultation%20%28October%202009%29.pdf

Bedard, J., & Jackson, C., (2003) “Information Systems Risk Factors, Risk Assessments, and Audit Planning Decisions”, Accessed 18 June 2010, from http://aaahq.org/audit/midyear/03midyear/papers/Systems%20Risk%20Factors%20and%20Audit%20Planning%2009-18.pdf

Chenok, P., (1995) “Raising the Profession’s Performance, Fifteen Years of Meeting the Challenges”, Journal of Accountancy, Accessed 18 June 2010, from http://www.allbusiness.com/accounting/508214-1.html

IRS, (2003) “A Cooperative Effort of the Large and Mid-Size Business Division of the Internal Revenue Service and the Tax Executive Institute”, Internal Revenue Service, Accessed 18 June 2010, from http://www.irs.gov/pub/irs-utl/09-17-03_joint_audit_planning_process_with_cover.pdf

Jiambalvo, J., & Kennedy, J., (2002) “Analytical Procedures and Audit Planning Decisions”, Journal of Accountancy, 191(2)

Larson, L.L., (2004) “Internal Auditors and Job Stress”, Managerial Auditing Journal, 19(9): 119-120.

Ramamoorti, S., & Weidenmier, M., (2004) “The Pervasive Impact of Information Technology on Internal Auditing”, The Institute of Internal Auditors Research Foundation, Accessed 18 June 2010, from www.theiia.org/iia/download.cfm?file=1750