Assessment Task 3 a

Australian Financial Regulatory Framework

The main body that is responsible for making the framework is the Australian Prudential Regulation Authority. The element which has been introduced is on 1^st July 1988. The recommendations of the Financial System Inquiry consist of three agencies:

• Australian Prudential Regulation Authority (APRA)
• Australian Securities and Investments Commission (ASIC)
• Reserve Bank of Australia (RBA)

The Australian Prudential Regulation Authority is one of the main regulators that are responsible for making deposits in institutions which include banks, societies, unions, insurances, and superannuation (Arner, Barberis and Buckey 2016). Australian Prudential Regulation Authority has the power in developing the policies that will balance financial safety and efficiency, competition, etc. All the institutions that take deposits are regulated by the Australian Prudential Regulation Authority, which is under a single license regime (Gitman, Juchau and Flanagan 2015). The legislation gives the Australian Prudential Regulation Authority to power to act upon the depositor’s interest; it also has the authority to reject licenses and can also make standards or issue instructions (Joanna and Jenny 2016).

Auditor Independence

It is important for an auditor to be independent and also different with the entity of the organization of which the auditing is being done. The Authorized deposit-taking institution must hold the assets in Australia so that it can support the depositor’s interest (Armour et al. 2016). There is any form of guarantee of the depositor’s fund, and depositors have no recourse to the Australian Prudential Regulation Authority.

In the organizations, there is some financial weakness, and it has been seen mostly in the Authorized deposit-taking institution (ADI). Australian Prudential Regulation Authority (APRA) has the possibility to intervene, that can be seen in the administration of the troubled organization. In the situation of intervention, there is a public interest which is given by the Minister for Revenue and Assistant Treasurer. The members can compensate the members of the fund or losses; this can happen because of the fraudulent conduct or if there is theft in the public interest (Perera and Chand 2015). The assistance that is being required by the organization can be financed either from Consolidated Revenue or it can be levied form the other finds that are within the industry. Although, the members and the policyholder entitlement are not guaranteed either by the Australian Prudential Regulation Authority (APRA) or by the Government.  

Audit Quality

The Australian Securities and Investments Commission (ASIC) has been enforced a range of provisions regarding the legislative and is related to the financial market, the intermediaries related to the financial sectors, some of the financial products that include insurance, investments, superannuation and there is also deposit-taking activities but that is not related to lending. The aim of the Australian Securities and Investments Commission is to protect both the market and consumers from the unfair practices that include manipulation and deception (Davies 2015). The commission mainly focuses on promoting confident participation which is in the financial system by the investors and customers. Keeping all this situation in mind, Australian Securities and Investments Commission emphasis on promoting honesty and fairness related to the affairs in the organization; and there is timely disclosure of the market information that is done in the securities and futures markets. In addition to all this, the Australian Securities and Investments Commission has also developed some of the policies and provide guidance related to the law that it administrators. It also has the license and can monitor acquiescence by participants who are in the financial system. The committee has also provided a piece of accurate and comprehensive information upon the organizations and on corporate activity. The provision of Financial Services Reform Act 2001 (FSR Act) has been implemented by the Australian Securities and Investments Commission, and through this, it has introduced streamlined regulatory regime which will be for the market reliability and also for the consumer protection across the financial services industry. All this decision making has been done, and it has been executed in the period of 11^th March 2002.  

Assessment Task 3 b

Internal Control 

Internal Control has been important for any organization as it does protect from any bad impacts. One of the major factor that has been important for any successful institution to have effective internal control (DeFond and Lennox 2017). The procedure that is being done at the time of auditing helps in identifying risks, frauds and errors by making the inquiries. It also helps in testing the internal controls in the organization, and through this, there will be betterment that will be resulted in the future.

Internal control helps the organization to put in place the right kind of internal measures so that the organizations have the opportunity to capitalize and the threats for that entity becomes less (Haislip, Peters and Richardson 2016). Through the implication of the internal control, the organization have the ability to assume the risk that will affect the performance in future and after recognizing the risk, they can able to manage in the long term (Vovchenko et al. 2017). The management and governing body have the ability to counter the risk if they recognize it and will take the full advantage of opportunities so that they can achieve the objective of the organization.

Computerization of accounting systems

To process the financial information, that is being done in the organization is being done with an objective of the accounting function. There are many advantages which benefit the organization in various ways. It does help in working more fast and accurate. It also keeps all the data very safe and well organized (Adamyk, Adamyk and Khorunzhak 2018). All the information and data are kept in the system, and it is easy at the time of finding any data. Thus, at the time of looking for any financial information, it is easy for them to find it form the system of the organization. The error that can be seen is less as all the accounting entry is needed for each and every transaction (Al, M and Abu 2017). All the accounting records are being updated automatically, and all the accounting balances are up to date every time.

The computer-based system is the combination of the principles related to accounting and concepts and also the combination of concept of an information system to process, record, analyze and also make financial information so that it will help in taking the economic decisions. If the organization use a computerized accounting system, it will help to save both time and money (Amuna, Al and Naser 2017). All the transactions that have been entered into the system are being processed in the system automatically, and the transactions are posted accordingly. It will also help the organization in cost-cutting as there is less requirement of the employee and also help in the reduction of the audit expenses as all the transactions and the posting are being done by the computerized accounting system (Hla and Teru 2015). It will also help in the better use of the resources and the time and will help in the improvement of a better collection of debt and controlling of inventory. Lastly and most importantly, it will be beneficial for the organization as the system presents the financial report and will also help in the making decisions the process for the external users.

Computerization of auditing processes

The auditing has been done on the basis of the financial statements of the organization, and it is done by a certified accountant. The process contains examining and scrutinizing the financial statements that are being prepared by the financial officer of the organization (Mustapha and Lai 2017). The steps that the audit has to follow at the time of auditing is that at first, it will examine the records that have been entered by the accountant, then there will be verification of the assets, and lastly there will be questioning about the information if there is any mistake in the information done intentionally or unintentionally (Elefterie and Badea 2016).

The process of auditing that has been done through a computerized way has involved in five steps. All the steps are mentioned below:

• Conducting the initial review, i.e. planning the audit.
• Reviewing and accessing the internal controls.
• Compliance testing, i.e. testing the internal controls.
• Substantive testing, i.e. verification of the detailed data.
• Reporting, i.e. providing the conclusions and findings.

Assessment Task 3 c

Audit evidence

The information and the data that has been used by the auditors at the time of auditing and to conclude the opinion of the financial statements that have been prepared in all the material aspect is known as Audit evidence. There are certain procedures which the auditor has to maintain in obtaining the audit evidence is stated with the audit enquiry. In this step, the auditor will inquire all the information and data from the management of that organization, and then the auditor will obtain an understanding upon that transactions and will confirm all the related assertion (Askary, Arnaout and Abughazaleh 2018). After the inquiry, there will be audit observation; here, the duty of the auditor is to observe all the ways and controls that are related to financial reporting. After the audit inspection is being done, there will be audit inspection. In the audit inspection, the auditor will have to inspect all the documents that are produced by the accountant and which are related to the financial transaction or any particular event. After inspecting all the data and the documents, there will be an analytical procedure which is to be followed by the auditor so that they can access transactions or the amounts that have been in the financial statements through all the financial data and also the non-financial data (Saha and Roy 2016). If there are some changes needed at the time of auditing, then there will be recalculation that will be done by the auditor. For example, if there are some expenses of depreciation and it has to be adjusted, then the auditor needs to make certain changes based on the recalculation. Lastly, the task of auditor sometimes needs to re-perform the bank reconciliation statement that has been prepared by the client.

Three types of Audit evidence are:

• Physical examination
• Confirmations
• Documentation

The Audit evidence is explained below:

1. Physical Examination: In this category, there will be inspection or count, which is done by the auditor upon a tangible asset. There will be different examination, not just of the documents but also for the inherent value of the assets.
2. Confirmations: As the receipts are being received for the third party, there is a client request in which the third party is being responded directly to the auditor (Niktaba and Aslani 2015). The confirmations that are taken by the auditor are from consumers, vendors, financial institutions, attorney and inventory agents.
3. Documentation: There are three steps in the documentation. First, type of documents, second, document vouching and lastly document tracking. In the document types, both the internal and external documents are being examined. In document vouching, there is verification of all the documents that have been recorded in the transactions (Gupta and Paswan, 2016). All the testing that has been done is on the basis of the recorded item. Lastly, there is document tracing where some tests have been done of the unrecorded items for the complete assertion.

References

Adamyk, O., Adamyk, B. and Khorunzhak, N., 2018. Auditing of the Software of Computer Accounting System.

Al Shobaki, M.J. and Abu-Naser, S.S., 2017. The Requirements of Computerized Management Information Systems and Their Role in Improving the Quality of Administrative Decisions in the Palestinian Ministry of Education and Higher Education.

Alzeban, A. and Sawan, N., 2015. The impact of audit committee characteristics on the implementation of internal audit recommendations. Journal of International Accounting, Auditing and Taxation, 24, pp.61-71.

Amuna, Y.M.A., Al Shobaki, M.J. and Naser, S.S.A., 2017. The Role of Knowledge-Based Computerized Management Information Systems in the Administrative Decision-Making Process.

Armour, J., Awrey, D., Davies, P.L., Enriques, L., Gordon, J.N., Mayer, C.P. and Payne, J., 2016. Principles of financial regulation. Oxford University Press.

Arner, D.W., Barberis, J. and Buckey, R.P., 2016. FinTech, RegTech, and the reconceptualization of financial regulation. Nw. J. Int’l L. & Bus., 37, p.371.

Askary, S., Arnaout, J.P.M. and Abughazaleh, N.M., 2018. Audit evidences and modelling audit risk using goal programming. International Journal of Applied Decision Sciences, 11(1), pp.18-35.

Bentley-Goode, K.A., Newton, N.J. and Thompson, A.M., 2017. Business strategy, internal control over financial reporting, and audit reporting quality. Auditing: A Journal of Practice & Theory, 36(4), pp.49-69.

Davies, P., 2015. Towards a framework for financial literacy in the context of democracy. Journal of curriculum studies, 47(2), pp.300-316.

DeFond, M.L. and Lennox, C.S., 2017. Do PCAOB inspections improve the quality of internal control audits?. Journal of Accounting Research, 55(3), pp.591-627.

Donelson, D.C., Ege, M.S. and McInnis, J.M., 2016. Internal control weaknesses and financial reporting fraud. Auditing: A Journal of Practice & Theory, 36(3), pp.45-69.

Elefterie, L. and Badea, G., 2016. The impact of information technology on the audit process. Economics, Management and Financial Markets, 11(1), p.303.

Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.

Gupta, R. and Paswan, A.K., 2016. Audit Quality, Auditor’s Independence and Other Parties. AAYAM: AKGIM Journal of Management, 6(2), p.16.

Haislip, J.Z., Peters, G.F. and Richardson, V.J., 2016. The effect of auditor IT expertise on internal controls. International Journal of Accounting Information Systems, 20, pp.1-15.

Hla, D. and Teru, S.P., 2015. Efficiency of Accounting Information System and Performance Measures–. Int. J. of Multidisciplinary and Current research, 3.

Ibey, A.A., King, D., Hsieh, T., Hutnan, T., Dixon, J. and Soet, R., 2015. Implementing a computerized maintenance management system for a consolidated program. Journal of Clinical Engineering, 40(4), pp.202-209.

Joanna, G. and Jenny, H., 2016. Implementing Financial Regulation-Theory and Practice.

Mustapha, M. and Lai, S.J., 2017. Information Technology in Audit Processes: An Empirical Evidence from Malaysian Audit Firms. International Review of Management and Marketing, 7(2), pp.53-59.

Niktaba, A. and Aslani, A., 2015. The Effect of Audit Evidence on the Auditor’s Report. International Journal of Accounting Research, 42(2177), pp.1-5.

Perera, D. and Chand, P., 2015. Issues in the adoption of international financial reporting standards (IFRS) for small and medium-sized enterprises (SMES). Advances in accounting, 31(1), pp.165-178.

Saha, S. and Roy, M., 2016. Regulatory Framework Governing Audit Activities: A Comparison among Select Countries. Journal of Developing Country Studies, 6(5), pp.109-116.

Sun, Y., 2016. Internal control weakness disclosure and firm investment. Journal of Accounting, Auditing & Finance, 31(2), pp.277-307.

Vovchenko, N.G., Holina, M.G., 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.