Question:

Discuss about the Auditing and Assurance Services.

Answer:

Introduction

The auditing is a standout amongst the most important assignments of the business association as it enhances the trust and accepts among the general population about the specific business association. The auditing can be of two sorts: internal auditing and external auditing. The internal auditing is indispensable for the business association that utilizations to be performed by the business association’s particular bookkeepers and auditors[1]. It helps in perceiving the quality and shortcoming of the business association and gives a concise perspective of the business procedure and operation of the business association and in this manner bolster in distinguishing the upsides of the business operation and furthermore the downside of the business identified by internal auditing. It underpins in distinguishing the monetary commitment of the business association and additionally the sum receivable aides in knowing the present resources of the organization. The account receivable is considered as the benefit of the organization. It helps in checking the accounting report of the organization that gives sufficient information about the advantages and liabilities of the organization[2]. The other financial reports like income statements and income articulations are additionally imperative for the business association as these likewise give helpful data about the money related position of the business association. The consequences of internal audit help in settling on successful administration selection and planning proficient systems in this way it is most vital for the business association[3]. Like internal auditing, the external auditing is as well important, and it is most fundamental for the organization as it aids in enhancing the trust of the clients of the financial reports and other individuals who utilize the money related articulations keeping in mind the end goal to settle on any necessary budgetary choice. The external audit primarily, comprising of examination of the money related articulations of the business association[4]. The records of the three financial reports, for example, balance sheet report, income statement, and cash flow statement have been explored by the external auditing, and it helps in enhancing the reputation of the organization.

Main body

Auditing issues

The worldwide Financial emergency in 2008 evident that most of the dominant financial organizations, which are internationally prestigious are reduced into the liquidation also bankruptcy. The mishap of the Lehman Brothers amidst the global financial emergency is considered as one of the greatest fiascos to hit the United Sates Financial industry. The important investment bank in the US faces enormous misfortunes inside the time of September month. The stock costs of the Lehman Brothers dropped by 73% from the estimation of its stock amid the first 50% of the September and by the middle of the September 2008. It lost the organization’s $3.9 billion with a specific end goal to attempt to discard a large segment of the offers in one of the backup organization of the business association[5]. The examination learns about the reason for the distress of the organization uncovered that there were various variables running from the suspicious bookkeeping practices, untrustworthy practices of the administration of the business association, and so on. Other than this, it was uncovered that the organization had done for investment in the speculation, which was unsafe and additionally unsecured[6]. Aside from this, the inadequacies in the segment of the consistency likewise were one of the compelling reason for which the organization was the distress. The outside reviewing, and additionally the action of the external auditors, likewise assumed the crucial part in the disappointment of the business association. The external auditors did not identify the acts of neglect inside the financial statements of the organization, which was performed by the administrators of the US organization[7]. The financial reports like the balance sheet or financial record or positioning proclamation are essential as it gives the data about the benefits and liabilities of the organization amid the specific budgetary year. It helps in perceiving the position of the business association. The acts of neglect by the chief had changed a few imperative records of the budgetary explanations that prompted deceive the clients of the monetary articulations, and they settled on dishonourable speculation choices that drove them to acquire the immense measure of misfortunes[8]. The income statement of the organization uses to give the data about the earnings amid the embraced budgetary years. Notwithstanding that, it additionally gives the data about the misfortunes brought about by the business association. Thus, the income statement has regularly alluded as the benefit and misfortune proclamations. The financial statements of an association are imperative for the clients as it gives the appropriate learning about the monetary position of the business association and additionally help in anticipating the future budgetary exhibitions of the organizations and therefore assist in taking critical speculation choices by the financial specialists and the shareholders of the organization[9]. The acts of neglect by the administrators of the Lehman Brothers spread unseemly data to the clients of the money related explanations that drove them to take uncalled for speculations choice. The income statements of the organization help in perceiving the money inflow, and the outpouring of the organization[10]. The uncalled for financial reports of the organization drove the financial specialists and the shareholders in settling on wrong speculation choices that drove them to great misfortunes, and this is the fundamental purpose for the fall of the Lehman Brothers.

Unqualified opinion before its collapse

The procedure of auditing was not correct which prompts the illegal formation of the financial statement. The principle reason disappointment of the organization was the wrong administration of the operations and also untrustworthy moves made by the administration group[11]. There was the distortion of the financial statement of the organization which misinformed the partners. The accountings and auditors are in charge of the deception of the report as there was not proper accountings and auditing process. The outcomes influenced the operations of the organization, and the administration likewise did not take after the moral standards and rules[12]. The organization utilized various exploitative components, corporate administration and inadequate accounting systems and practices. The report of the auditors did not likewise incorporate the financial data that ought to be given to the partners. The financial statements unmistakably portrayed mistakes, oversights, and misrepresentation which influenced the premiums of the speculators[13]. The organization confronted various troubles and furthermore confronted insolvency. The deception of the money related articulation is considered as an unauthorized demonstration. The dangers for the organization were expanded, and the bookkeepers and auditors were mainly accountable as they didn’t take after the moral tenets and rules[14]. The administrators were additionally in charge of the disappointment of the organization.

The organization was not able to meet the transient commitments, and regardless of a high base of advantages, the organization encounters big liquidity issues. The organization was not ready to pay the commitments, and the financial statement or monetary proclamations obviously demonstrate the abnormal state of obligations[15]. The liabilities of the organization were high as there was the deception that influenced the aggregate estimation of the organization. The organization loses the offers in the market, and the financial consultants lose their cash. The organization is broken down influencing the interests of numerous partners[16]. The administration group portrayed poor administration of all the procedure of the association.

New auditing standard ISA 701 Communicating the Key Audit Matters in the Independent Auditor’s Report

The strategy producers like the International Accounting Standard Board (IASB) which has brought the new bookkeeping revealing measures, International Financial Reporting Standard (IFRS), Security and Exchange Commission (Sec) and the base Accord ought to start to create and execute strict bookkeeping approaches keeping in mind the end goal to address the disappointment of the organization like Lehman Brothers to deflect any this sorts of future event[17]. The arrangement producers need to make stringent approaches so as to limit the administrators or bookkeeper of the business association in doing any control inside the budgetary articulations of the business association. Other than this, for the auditors likewise need to make compelling arrangement the drive them to play out their reviewing task adequately and genuinely[18]. The arrangement creators of the bookkeeping framework and revealing framework need to make strategies that constrain the business association to give correct budgetary data to the clients of their financial statement so the business association must not manage the records of the monetary articulations like record receivable and record payable that impact the speculators to take essential monetary decision for the organization as the acts of neglect can change the budgetary position of the business association.

The correspondence is being delineated to demonstrate the key review matters that are included on account of the review and furthermore the improvement of the review is being made by demonstrating the appropriate development of the procedure. The estimation is being made by demonstrating the free consideration of the benefits administration and furthermore the upgrade of the value of the market is let down. This is demonstrating the broad declaring of the market is clarified through demonstrating the procedure (Schroeder, Clark and Cathey, 2011). The procedure is considered for demonstrating the administration of the issues which is being clarified by demonstrating the Lehman Brothers which is being lead to the miscommunication between the Independent Auditor’s Reports[19].

The key auditors’ issues

The monster erroneous conclusion is being delineated as the type of the stock that appeared to be come to by demonstrating the arrangement of the technique which is being upgraded by demonstrating the improper market capitalization which is being built by demonstrating the proper administration of the work. The first quarter is portrayed to demonstrate the splits in the US housing which is being shown as the type of the worries which is being outlined as the obvious issues[20]. The splits of the lodging segment are being delineated to demonstrate the subprime contracts, and furthermore, the appropriate development is being made by demonstrating the proper upgrade of the work. The development of the seven-year incomes is the rose as the seven-year high types of the concerns which are identified with the rising defaults, and furthermore, it influences the Lehman’s benefit. It likewise demonstrates the appropriate improvement of the qualities which are represented as the type of the structure and furthermore it effortlessly outlines the revealing of the incomes which is being shown by demonstrating the recording of the incomes. The forcing of the dangers is portrayed by demonstrating the rising the home misconducts and furthermore the well contained little effect is being made by demonstrating the association’s profit. Consequently, the anticipating issues as the subprime advertise and furthermore the spreading of whatever is left of the lodging business sector are being made by the residence of the US economy.

Development of new auditing standard ASA 701.

The Lehman is portrayed to demonstrate the high level of the leverage which is delineating the apportion of the aggregate assets for the shareholder’s equity value. According to the standard, the upgrade of the structure is being made by demonstrating the suitable improvement of the work and furthermore the selling of the securities are properly portrayed by demonstrating the change and furthermore the clarification is being given to be helpless in nature. In this way, the securities are portrayed to demonstrate the upgrade of the review and furthermore the second biggest among the supported securities. Subsequently, the utilizing is additionally distinguished to demonstrate the crumple of the shares and furthermore the clarification of the review is being made by demonstrating the fall of the shares by 48%. According to the ASA701, the development is being made by demonstrating the proper clarification which made the lessening of the cost. The clarification is demonstrating the unseemly evaluation of the Lehman’s selling portfolio.

Recommendations

The fall appeared to be excessively had rolled the worldwide market for a couple of weeks, and furthermore, the bankruptcy is being made by demonstrating the improvement of the work. Along these lines, the freedom can be effectively outlined by demonstrating the unseemly review report and furthermore the crumple is being delineated as the administration choices. The fall is as a rule appropriately delineated by demonstrating the surveys of the present credit accomplices, and furthermore, the appraisals are portrayed to be built by demonstrating the coming up short at the time. The improper Audit administration is portrayed to had driven the administration to make the defeat of the organization and furthermore it proclaimed the liquidation by demonstrating the offices which will be assumed control by the procedure of the work. It is delineated to consider the proper procedure which is demonstrating the handling of the support with the end goal of bearing streams. The market qualities are delineated to be wiped out which is demonstrating the fall of the organization by proclaiming the extent of the specialist. Along these lines, the crumple is being portrayed by demonstrating the serving of the motivation and furthermore the administration is being shown to be a piece of the review as represented for this situation (Weirich, Pearson and Churyk, 2014). This likewise demonstrates the improper management of the agenda as it is being trailed by demonstrating the upgrade of the work. Along these lines, the proper administration of the clarification can be effortlessly shown by demonstrating the appropriate clarification of the purpose for the distress of the Lehman.

Conclusion

The auditing is important for the business association and also for the financial specialists, investors, and shareholders of the business associations. The auditing expands the reputation and trust of the organizations as the external auditors review the business associations and their financial statement. The financial statement of the business associations gives the data about the fiscal position of the organization. On account of the producers of the financial statement do any manipulation with the money related articulations then the financial statement is winding up noticeably wrong and give the wrong data to the clients of the financial statement that drove them to take an improper money related choice, and subsequently they bring an about the considerable measure of misfortunes. The wrongdoers in the money related articulations can convey ultimate effect to the speculators and shareholders and the financial position. In this matter, the case of the Lehman Brothers can be given the supervisors of the organization had controlled with the records of the money related explanations of the organization that prompted the crumple of the organization, and besides the substantial quantities of financial specialists and shareholders of the organization need to confront the serious outcome.

References

Andrikopoulos, A, M Bekiaris, C Vadasi, & S Zounta, “International Collaboration in Auditing Research: A Note”. in International Journal of Auditing, 20, 2015, 66-71.

Arena, M, & G Sarens, “Editorial: Internal Auditing: Creating Stepping Stones for the Future”. in International Journal of Auditing, 19, 2015, 131-133.

Cosserat, G, & N Rodda, Modern auditing. in , Chichester [u.a.], Wiley, 2009.

Dassen, R, A Schilder, & P Wallage, Principles of Auditing. in , Pearson Education UK, 2005.

Dauber, N, 2006 Auditing standards. in , Canada, Thomson, 2005.

Duska, R, & B Duska, Accounting ethics. in , Malden, MA [u.a.], Blackwell, 2005.

Gupta, J, & S Sharma, Handbook of research on information security and assurance. in , Hershey, PA, Information Science Reference, 2009.

Hasan, M, S Maijoor, T Mock, P Roebuck, R Simnett, & A Vanstraelen, “The Different Types of Assurance Services and Levels of Assurance Provided”. in International Journal of Auditing, 9, 2005, 91-102.

Hay, D, “Auditing, International Auditing and the International Journal of Auditing: Editorial”. in International Journal of Auditing, 18, 2014, 1-1.

Howard, L, Auditing. in , 1st ed., London, Pitman, 2010.

Imoniana, J, & L Perera, “The role of IS Auditing in assurance services”. in MANAGEMENT CONTROL, , 2016, 17-33.

Information Security for Global Information Infrastructures. in , Springer Verlag, 2013.

Leung, P, Modern auditing & assurance services. in , Milton, Qld., John Wiley & Sons Australia, 2009.

McKee, D, D Garner, & Y McKee, Offshore financial centers, accounting services, and the global economy. in , Westport, Conn., Quorum Books, 2000.

O’Regan, D, International Auditing. in , New York, NY, John Wiley & Sons, 2004.

Pickett, K, Auditing the risk management process. in , Hoboken, N.J, Wiley, 2005.

Robin J. Baik, “Substantive Consolidation in U.S. Bankruptcy Court – A case study of Lehman Brothers’ bankruptcy proceeding”. in SungKyunKwan Law Review, 24, 2012, 445-467.

Ruhnke, K, & K Lubitzsch, “Determinants of the Maximum Level of Assurance for Various Assurance Services”. in International Journal of Auditing, 14, 2010, 233-255.

Shapiro, J, & A Báldi, “Accurate accounting: How to balance ecosystem services and disservices”. in Ecosystem Services, 7, 2014, 201-202.

Subramaniam, N, & P Carey, “Risk management, governance and assurance”. in Managerial Auditing Journal, 26, 2011.

[1] A Andrikopoulos et al., “International Collaboration in Auditing Research: A Note”, in International Journal of Auditing, vol. 20, 2015, 66-71.

[2] M Arena & G Sarens, “Editorial: Internal Auditing: Creating Stepping Stones for the Future,” in International Journal of Auditing, vol. 19, 2015, 131-133.

[3] G Cosserat & N Rodda, Modern auditing, in, Chichester [u.a.], Wiley, 2009.

[4] R Dassen, A Schilder & P Wallage, Principles of Auditing, in, Pearson Education UK, 2005.

[5] N Dauber, 2006 Auditing standards, in, Canada, Thomson, 2005.

[6] R Duska & B Duska, Accounting ethics, in, Malden, MA [u.a.], Blackwell, 2005.

[7] J Gupta & S Sharma, Handbook of research on information security and assurance, in, Hershey, PA, Information Science Reference, 2009.

[8] M Hasan et al., “The Different Types of Assurance Services and Levels of Assurance Provided”, in International Journal of Auditing, vol. 9, 2005, 91-102.

[9] D Hay, “Auditing, International Auditing and the International Journal of Auditing: Editorial”, in International Journal of Auditing, vol. 18, 2014, 1-1.

[10] L Howard, Auditing, in, 1st ed., London, Pitman, 2010.

[11] J Imoniana & L Perera, “The role of IS Auditing in assurance services,” in management control,  2016, 17-33.

[12] Information Security for Global Information Infrastructures, in, Springer Verlag, 2013.

[13] P Leung, Modern auditing & assurance services, in, Milton, Qld., John Wiley & Sons Australia, 2009.

[14] D McKee, D Garner & Y McKee, Offshore financial centers, accounting services, and the global economy, in, Westport, Conn., Quorum Books, 2000.

[15] K Pickett, Auditing the risk management process, in, Hoboken, N.J, Wiley, 2005.

[16] Robin J. Baik, “Substantive Consolidation in U.S. Bankruptcy Court – A case study of Lehman Brothers’ bankruptcy proceeding”, in SungKyunKwan Law Review, vol. 24, 2012, 445-467.

[17] K Ruhnke & K Lubitzsch, “Determinants of the Maximum Level of Assurance for Various Assurance Services”, in International Journal of Auditing, vol. 14, 2010, 233-255.

[18] J Shapiro & A Báldi, “Accurate accounting: How to balance ecosystem services and disservices,” in Ecosystem Services, vol. 7, 2014, 201-202.

[19] N Subramaniam & P Carey, “Risk management, governance and assurance,” in Managerial Auditing Journal, vol. 26, 2011.

[20] D O’Regan, International Auditing, in, New York, NY, John Wiley & Sons, 2004.