The topic deals with the impact of actual and perceived independence and the professional standards and regulations related to the aspect. Apart from this topic also tells about the ethical, legal and other factors related to the auditing. The internal control is an important aspect of the auditing. Hence the study also discusses about the weakness of the internal control system. The measurements of the internal control system are also been discussed in this in order to implement them within the company successfully. Lastly the audit testing process has been described in this segment with a suitable conclusion at the end to support this topic.

Part a

Actual independence

Hence this concept point out the interest from parties of which the results are harmed by the company auditors. Specific internal management issue inadequate risk management, inadequate internal control, and poor governance. Hence the charter of audit and the reporting to an audit committee generally provides the independence of the management, the code of ethics of the company helps them to provide the guidance relating to the independence from the suppliers, clients, third parties etc (Chang et al .,2014).

Perceived independence

These are essential to achieve the goals of independence. More specifically it depict the mind of the auditor is in and how the auditor acts and deals with any specific situation (Khlif and Samaha 2014).

Importance: The primary purpose of actual and perceived independence is to provide the company shareholders with an expert, independent opinion as to whether the annual accounts of the company reflect the true and fair view of the financial position of the company. And whether they can perform the objective task (Pizzini , Lin, and Ziegenfuss 2014.). Hence the auditor needs to be independent from the client company, so that the audit option can be fulfilled by any relationships between them. The auditors are expected to give an unbiased and honest professional opinion on the company financial statements. Considering an example of Enron Company and the relationships with the auditors the company had received $27 million for non-profit services and $25 million for audit services. However after the demise of this company the accounting firm had been accused of not acting independently and suggestions were made that they were gone along with the accounting practises to retain their work. Thus the auditor independence plays an import role in the business prospective (Choi et al., 2013).

Part b

Since Bob is an audit person in an university hence it is his responsibility to conduct the audit of the financial statements presented to him at the end of each financial year and prepare a quality report on the outcomes he had received by cross checking all then values of the audit report. But instead of doing the audit work independently the person copied the report from somewhere else and pest the same. This is an illegal action taken by the auditor and he could have been penalized by the authority. In this case bob have breached the professional standards .
Since Wendy was an engagement partner of ace audit limited for the past six years. since the long standing company secretory had retired and Wendy had to step into that shoe hence it is not considered as independent because in this case she had to manage both of the jobs at the same time .Perhaps the company could have given Wendy some more time to get ready for it. Here Wendy did not breech any professional stranded.
Since Leo is the son of the firms one of the leading audit worker, and he is assigned to audit an important valuation of a machinery, hence it is up to him to conduct the audit work properly. Thus the audit independency is a major prospect to follow in this case. Here no independency have been followed up and hence the professional standard have been breached by the person as per the company act.
Since the company did not paid the appropriate audit fee to Company for the past months and the auditor of the company had threatened to resign. Hence the company had tried to bribe the auditor by providing him 25% share of the company, hence it goes against the auditor independence and it is actually against the company rules and regulations (Alzeban and Gwilliam2014.). Thus the professional standards have not been made properly.

Answer to question 2:

The auditors must follow guidelines promoting ethical standards. For the financial statement auditors have established the code of conduct which is commonly known as the code of ethics. Hence these have two sections namely professional and legal. These standards are as follows-

Responsibilities: In carrying out the professional standards the games limited should exercise the moral judgements relating to all the activities.
Public interest: the company should act in the way that they will serve the public interest, honour the public trust and demonstrate commitment to professionalism.
Objectivity: it is important that the company maintains the objectivity and be free of conflicts of interest in the performance of the professionalisms while providing the auditing and assurance services.
Due care: the games limited while doing the auditing for the company must know about all the technical and mechanical know how’s , strive continually to improve competence and the quality of services , discharge the professional standards to the best of their ability.
Integrity: in order to maintain and improving the public confidence, the company needs to perform their professional duties with the highest sense of priority.

Steps to appoint auditors: when a person other than a retiring auditor is proposed to be appointed as an auditor of a particular company or where it is proposed that the retiring auditor will not be reappointed, in those cases a special notice is provided to the as per section 115 of the companies act 2013 by proposing a given resolution which would be moved in the next annual general meeting of the company. Hence the purpose of the special notice of the company are as follows-

If the auditor makes a representation in writing to the company ad request for a notification to the members, the company shall-
State the fact that the representation in any notice regarding the resolution.
The copy of the representation has to be sent to those members by the company in meeting is sent, whether before or after representation.
Such representation should be in a reasonable length and not too long.
The special notice should not be received by the company to read out the representation in the meeting if it is so notified to the members due to being late and because of companies default. Thus if the tribunal is satisfied that the rights are being abused by the auditor based on the application on either of the company and any other aggrieved person then the copy of the representation maybe sent and the representation need to be read out in the company meeting. Hence it is important that the games limited company utilizes all these procedures related to the auditing techniques and implement the same in their own business also in order to fulfil the company requirements. Hence the audit partner should accept the appointment since it is appointed by law. (Abbott et al., 2016).

Answer to question 3

Strong internal controls are critical in order to help to the risk reduction in a business which will fall victim to the fraudulence and abuse.. Hence the internal control weaknesses expose a business to any number of preventive risks. Hence the auditing risks it as an internal controll and they did not take to reduce the risk to a level where they can be easily detected by the employees performing the daily assigned tasks. While the weakness in the internal control in the cash receipts and book keeping are very serious cause.

Evaluation of the cash handling techniques: evaluation of the operating procedure to see that whether the business have clearly defined the procedures. For example the distinctive separate cash handling duties. It is not enough to simply create an overall cash handling policy even if it is published and distribute a copy of every employee. Hence proper cash handling techniques can include appointing one employee to prepare daily task bank deposits or approve the payment of invoices or another reconcile end of the month statements or write pay checks . Look to see whether the documents and such as receipts, blank cheques and purchase pre orders are numbered in the proper order (Arya and Glover 2014).
Review the oversight control: review manual and oversight control designed t safeguard the financial information and help to maintain the accuracy and integrity of the cash receipts and disbursement data. Look to see that the authorized to make the disbursement from the petty cash book and whether the disbursement slips and require the signature of the department supervisor. Hence computer accounting system and program permissions should grant access to the users based on the users are required to perform. Hence the programmes are required to allow unlimited access to anyone needing to create a cash receipt or dint require to enter into user notification for internal control.
Apart from this the look for supportive documentation requirement is also an important aspect for the company perspective and hence it can be termed as the internal control weakness for everyday suppliers limited.
Reviewing the steps for securing the cash related data are also another important factor and it is also been considered as the internal control weakness.
The company sales are not coded on the cash register types and lack of sales registration personnel who have an access over the cash receipts and those who make entries into the accounts receivable errors (Gul, Wu and Yang 2013).

Answer to question 4:

Internal control weakness of purchasing and accounts payable system:

Not independency checked with stock against the purchase registration which may result to overstocking.
Sequence of the orders is not accounted to the cancelled orders and not on order which my result to the misplaced orders and not to purchase any transaction occurs.
Suppliers are selected based on the past reputation and not on other important factors such as prices, terms and delivery date.
All incoming goods including the fixed assets not cleared through the goods, inwards md receiving department.
Any discrepancy between the order and the delivery docket approved by the goods inward manager. Hence there is no authorised approval to the absence of the market.
No independent check while purchasing and ordering. However in order to conduct the internal audit procedures there is no comparisons between he receiving records and the inspections report to no guarantee that all the items received were in good condition or not.

Accounts payable system:

One major trade creditor reconciles with the balance of $2000a re approved by the accounts manager.
Not regularly compared only twice a year and the creditor’s ledger and control accounts which could not showcase proper results for a long time without detection.
Not accounted in the department the sequence and cancelled dockets are resulted to no guarantee that all the deliveries have been received and accounts for and over or understanding the recordings of the creditor ledger. Hence the same process could be implemented by Retro pty limited in order to check and maintain the internal control weakness and accounting process.

Answer to question 5:

Strong internal controls are critical in order to help to the risk reduction in a business which will fall victim to the workplace fraud, waste and abuse. Hence the internal control weaknesses expose a business to any number of preventive risks. Hence the auditing risks defines the material control weakness as the internal control and they did not take to reduce the risk to a level where they can be easily detected by the employees performing the daily assigned tasks. Hence the ethical managerial and other factors of independence could play a major role in business.(Badara and Saidin 2013).

Evaluation of the cash handling techniques: evaluation of the operating procedure to see that whether the business have clearly defined the procedures. For example the distinctive separate cash handling duties. It is not enough to simply create an overall cash handling policy even if it is published and distribute a copy of every employee (Newton et al., 2015). Hence proper cash handling techniques can include appointing one employee to prepare daily task bank deposits or approve the payment of invoices or another reconcile end of the month statements or write pay checks . Look to see whether the documents and such as receipts, blank cheques and purchase pre orders are numbered in the proper order.
Review the oversight control: review manual and oversight control designed t safeguard the financial information and help to maintain the accuracy and integrity of the cash receipts and disbursement data. Look to see that the authorized to make the disbursement from the petty cash book and whether the disbursement slips and require the signature of the department supervisor. Hence computer accounting system and program permissions should grant access to the users based on the users are required to perform. Hence the programmes are required to allow unlimited access to anyone needing to create a cash receipt or dint require to enter into user notification for internal control.
Apart from this the look for supportive documentation requirement is also an important aspect for the company perspective and hence it can be termed as the internal control weakness for everyday suppliers limited.
Reviewing the steps for securing the cash related data are also another important factor and it is also been considered as the internal control weakness.
The company sales are not coded on the cash register types and lack of sales registration personnel who have an access over the cash receipts and those who make entries into the accounts receivable errors.

Internal audit control testing:

Separation of duties
Accounting system access control.

Similarly the company could also utilise then same audit control techniques within the company to maintain a perfect a perfect balance between the companies accounting and auditing procedures (Vovchenkoet al.,2017).

Conclusion

This it can be concluded that the accounting and audit procedures which are been implemented by the company in accounts payment department and the sales department are very crucial to the company. However the internal audit controls techniques assures better improvement to the company in future and promises a true and fair audit procedure. However it is important that the auditors independently perform the audit the audit works and generates outcome to the senior managers. This is the key for the audit company to survive as well as to maintain the profitability in the future. In this way they could operate the business quite well.

References:

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Newton, N.J., Persellin, J.S., Wang, D. and Wilkins, M.S., 2015. Internal control opinion shopping and audit market competition. The Accounting Review, 91(2), pp.603-623.

Vovchenko, N.G., Holina, G.M., Orobinskiy, A.S. and Sichev, R.A., 2017. Ensuring financial stability of companies on the basis of international experience in construction of risks maps, internal control and audit. European Research Studies Journal, 20(1), pp.350-368.

Khlif, H. and Samaha, K., 2014. Internal Control Quality, E gyptian Standards on Auditing and External Audit Delays: Evidence from the E gyptian Stock Exchange. International Journal of Auditing, 18(2), pp.139-154.

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Chang, S.I., Yen, D.C., Chang, I.C. and Jan, D., 2014. Internal control framework for a compliant ERP system. Information & Management, 51(2), pp.187-205.

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