Auditing and Professional Practice Operational Policies

Question: Discuss about the Auditing and Professional Practice Operational Policies. Answer: Introduction: The cash flow position of the firm states the exact inflow as well as the outflow of cash from the firm. Pitt (2014) mentioned that the development of the cash flow analysis shall provide the management of the organization to determine the financial position of the business enterprise. As such, it shall be necessary for the business entity to develop the operational policies as well as the financial policies of the business entity after the acquisition. Porter et al. (2014) mentioned that the cash flow position is an important part of the financial statements of the business enterprise. As such, Chandler and Edwards (2014) noted that it is necessary to gather data from the financial statements of the business enterprise during the acquisition process of Steel to assist the business enterprise in achieving financial sustainability. The following are the threats that can affect the financial position of the business enterprise. Embezzlement of funds- Events (2014) mentioned that discrepancies in the preparation of the financial statements can lead to the embezzlement of funds for the business organization. In this regard, it can be said that the cash flow statement shall enable the business entity to acquire the details regarding the cash flow as well as the cash outflow of the firm. Disregarding the cash flow statement during the acquisition process can lead to dishonesty, biasness and lack of authenticity regarding the preparation of the financial statements of the organization. This can lead to the embezzlement of funds in the organization and shall have an impact on the operational policies of the organization. Reporting to the stakeholder and financial decision-making - The stakeholders of the organization shall have be adversely affected if the cash flow of is not considered in developing the financial statements of the organization. Kidron et al. (2016) mentioned that the investments decisions in the organization would not be possible if the financial statements in the organization are not prepared authentically and do not reflect the full financial condition of the business entity The financial decision making process shall also be influenced if an authentic structure is not followed in the organization. The reporting of the stakeholders in the organization Inaccuracies in the preparation of the financial statements - Siebert and Costley (2013) mentioned that In the acquisition of Steel Pty Ltd the cash flow statement of the organization in the year ended financial reports shall play an important role in determining the amount of cash flow of the organization. As such, this shall lead the business entity in developing ineffective financial statements that do not represent the true and fair condition of the business entity. The fundamental principles at the risk It can be noted that the professional accountants shall have to adhere in their daily practice shall include the following. Integrity - Rupys and StaÄ iokas (2015) mentioned that the professional accountant shall have to be straightforward as well as honest in developing professional as well as personal business relationships. As such, it is necessary to determine the operational policies of the business enterprise Objectivity- The objectivity refers to preventing bias, conflict of interest are the factors that can have an impact on the professional work as well as business judgement in practice, techniques as well as the legislations Professional competence- To develop the professional knowledge as well as professional skill shall help the business enterprise to adhere to the financial statements of the business enterprise. Confidentiality The aspect of confidentiality refers to prevent disclosing of confidential financial information relating to various companies. Chandler and Edwards (2014) mentioned that such information can only be disclosed if there is a legal duty on the part of the accountants, or in the case of a discrepancy. Professional behavior - The professional behavior shall relate to the compliance with the relevant accounting laws and regulations to prevent any disregarding to the profession. Unprofessional behavior can lead to distrust and lack of faith among the accounting professionals. Kumar and Sharma (2015) mentioned that professional behavior is one of the core components of the accounting profession, which shall assist the professional to prepare the authentic reports that adheres to the required framework and the guidelines that would be necessary to the investors to make authentic financial decisions. As per the American accounting, decision model there is a seven-step process to the decision making, which considers the ethical issues in into account. Lenz and Sarens (2012) stated that The American accounting model should enable the business entity to determine the accounting procedures in the business organization. This is especially helpful in solving ethical dilemmas in the market place. The management of the business organization shall have to play the guiding role in developing coordinations among the various departments in the organization. As such, this shall assist the business enterprise in handling business crisis. This shall help the business entity in the decision-making procedures in the organization that shall help the organization in its growth. From the case study, it has been inferred that the client has misled the manager and gave a negative perception about Zane inspite of its benefit efforts. Thus, the American accounting decision making process the following s teps can be taken to serve the purpose of the organization. Facts of the case The facts of the case would have to be stated in an appropriate manner to assist the business enterprise in developing the goals and the objectives of the business enterprise. Enqvist et al. (2014) stated that the facts of the case here relates to the discontinuation of service in the context of the operational procedures in the organization. As such, the facts of the case shall refer to the intrinsic details of client audit service, thereby, leading the organization to growth. Presence of any ethical issues- The ethical issues in the organization shall be dealt in an appropriate manner to prevent any undue advantage to any party in the organization. In the case of Zane, it can be stated that he was unduly removed from his job in the organization. As such, there should be a proper assessment of the situation, which led to the removal of Zane from the organization. It is the primarily the responsibility of the situation of the auditing manager of the organization to take the necessary steps that this does not recurr again. Grazlano et al. (2012) stated that it can be stated that there is a personality conflict between the members of the organization. Thus, the presence of ethical issues in the organization shall assist the business entity to develop the goals and the objectives of the business enterprise. Norms and values related to the case- The norms and the values in the case shall have to be adhered to the rules and the accounting procedures in the organization. According to 12.Michalski (2012), the norms and the values in this case shall have to conform to the accounting framework in the organization. As such, this shall enable the business entity to facilitate organizational growth Alternative courses of action - There must be alternative courses of action shall assist the growth and the development of the organization. According to Hui et al. (2014), the alternative courses of action shall aid in the development and overcome the pertinent threats that are present in the organization. As such, the daily business functionalities of the organization shall have to be re-innovated and alternative courses of action shall be developed so that there is a level of continuity in the daily business functionalities of the organization. Messier Jr (2016) stated that the management of the organization has to ensure that the business entity ensures authenticity as well as transparency in the accountant statements prepared in the business entity. It can be stated that Luke has continued the work of Zane in the auditing assignment. As such, the work of Zane in the assignment has to be critically analyzed to address the issues of the client. Choosing the best course of action Hayes et al. (2014) stated that the best course of action has to be selected to address the issues of the client. In the case study, it is stated that Zane have provided an excellent audit work to the client. However, the client rejected the work due to personality issues that has been affecting the business entity. As such, this is necessary for the business enterprise to aid organizational growth and Impact of each action The impact of each action on the organization shall have to be evaluated in the context of the operational policies of the business. Such, interpersonal conflicts with the client shall have to be avoided at any cost. Therefore, the big 4 accounting firm in the organization shall have to be provide behavioral skills to the employees of the organization to enable the business entity to facilitate organization growth. According to Furnham and Gunter (2015), each action must be chosen accordingly to help in the growth and the sustainability of the business entity. In the current scenario, Luke shall have to inform the audit manager about the performance of Zane as well as the interpersonal conflict with the manager of the organization. In this regard, it can be said that the manager of the organization shall have to be informed of the existing scenario to ensure that Zane is not unduly transferred from its job. Simunic (2014) stated that the Mary-Guy decision-making model is less practical and is more subjective than the American Accounting decision-making model. As such, in using the Mary-Guy decision model the accounting firm shall get a broader perspective of the accounting statement implemented in the business organization. Arens et al (2012) mentioned that through the usage of the Mary Guy decision-making model Luke would take the following steps in ensuring smoother business operations. To reduce conflicts with clients shall be the primary objective of the Mary - Guy decision making model. In contrast to the American Accounting Decision model, Luke would take pro-active measures to alter the current philosophies and accounting practices in the organization. As such, the human resource department in consultation with the top management in the organization shall assist the business entity to rectify the existing policies of the organization. Abernathy et al. (2015) mentioned that the Mary Guy decision-making model shall consists of the following essential elements of the business entity. - Caring, honesty, accountability, promise keeping as well as the pursuit of excellence in the organization. Besides this, loyalty and integrity are an essential part of the Mary Guy decision-making model. This would assist the business organization in allocating work according to the expertise and the requirements of the business organization. This shall lead to an undue situation for any of the personels affecting the sustainability of the business entity. In this regard, it can be said that this would have a negative impact on the morale of the employees. Besides this Messier Jr (2016) noted that the Mary-Guy model shall have an in- depth analysis of the existing financial as well as non-financial constituents of the business entity. Therefore, Luke would have to be responding appropriately to assist the business entity in developing better auditing services to the clients. Pitt (2014) stated that the accounts payable reflects the ability of the organization to pay-off the short-term loans of the organization. In the balance sheet of the organization the accounts payable appears under the current liabilities of the organization. The accounts payable statements shall enable the business enterprise in making authentic payments to the suppliers as well as the creditors. The following are the two assertions to risk in the development of the accounts payable statements in a business enterprise. Lenz and Sarens (2012) mentioned that the failure to develop the accounts payable can have an adverse impact on the business functionalities of the company relating to the execution of the orders on a timely basis as well as developing payment terms with the suppliers. This shall be due to the improper preparation of the accounts management of the organization, which shall lead the organization to growth and prosperity. Kumar and Sharma (2015) mentioned that the increase in the production cost of the company should also be one of the risks if the operational costs of the company is not managed in an appropriate manner. The improper development of the accounts payable statements shall have an impact on the assessment procedure of the existing financial position of the business enterprise. As such, the daily business functionalities of the business enterprise shall be affected if the accounts payable statement is not prepared and does not reflect the operational expenditures of the business enterprise. Siebert and Costley (2013) mentioned that the development of the effective financial policies shall not be possible if the existing production and the operational expenses of the business enterprise are not assessed . As such, this shall have an adverse impact on the business sustainability of the business enterprise. Thus , emphasis shall be provided in the maintenance of the account payable statements in the business entity . The increase in the production costs is one of the secondary risks in the preparation of the financial statements. Thus, in this regard, the failure in the development of the account payable statements in the business shall result in error-prone manual processes in product requisitions, supplier invoices as well as discrepancies in the issue of payments. Substantive testing of the audit procedure shall assist the business entity in evaluating the financial statements as well as the supporting documentation of the company. Enqvist et al. (2014) mentioned that substantive testing of the audit procedures should assist the business enterprise in facilitating authenticity as well as transparency to the auditing procedures in the organization. As such, this shall assist the business entity in strengthening the financial position of the organization. The substantive audit testing procedures shall provide the opportunity to the company to test the audit testing procedure. Evaluating the period end count of the inventory shall state the accounts payable statement of the business entity. As such, this shall give an indication of the sales revenue and the effectively of the production and the distribution process followed in the organization. In the case of assertion b, a bank confirmation can be conducted to ascertain the year ended cash balances of the organization. This shall assist the business organization to develop the operational policies of the business enterprise. Siebert and Costley (2013) mentioned that this bank statement should help the management of the business enterprise to identify the discrepancies in the production processes of the organization. In this regard, it can be said that the bank statement shall provide the details about the existing sales revenue of the organization and the efficacy of the daily business functionalities of the organization. Enqvist et al. (2014) mentioned that the cash balance should show the detailed expenditures and the revenues earned in a particular year. As such, this shall help the business enterprise in determining the operational processes of the organization. Therefore, the substantive test of detail shall assist the business entity in developing the accounts payable statements of the business enterprise. References Chandler, R.A. and Edwards, J.R., 2014. Recurring Issues in Auditing (RLE Accounting): Professional Debate 1875-1900. Routledge. Enqvist, J., Graham, M. and Nikkinen, J., 2014. The impact of working capital management on firm profitability in different business cycles: Evidence from Finland. Research in International Business and Finance, 32, pp.36-49. Evetts, J., 2014. The concept of professionalism: Professional work, professional practice and learning. In International Handbook of Research in Professional and Practice-based Learning (pp. 29-56). Springer Netherlands. Grazlano, R.J. and Litman, J., Credit Suisse Securities (Usa) Llc, 2012. System and method for identifying accounting anomalies to help investors better assess investment risks and opportunities. U.S. Patent 8,234,200. Hayes, R., Wallage, P. and Gortemaker, H., 2014. Principles of auditing: an introduction to international standards on auditing. Pearson Higher Ed. Hui, S., Ng, J., Santiano, N., Schmidt, H.M., Caldwell, J., Ryan, E. and Maley, M., 2014. Improving hand hygiene compliance: harnessing the effect of advertised auditing. Healthcare Infection, 19(3), pp.108-113. Kidron, A., Ofek, Y. and Cohen, H., 2016. New Perspective on the Black Box of Internal Auditing and Organisational Change. Managerial Auditing Journal, 31(8/9). Kumar, R. and Sharma, V., 2015. Auditing: Principles and Practice. PHI Learning Pvt. Ltd.. Lenz, R. and Sarens, G., 2012. Reflections on the internal auditing profession: what might have gone wrong?. Managerial Auditing Journal, 27(6), pp.532-549. Messier Jr, W., 2016. Auditing assurance services: A systematic approach. McGraw-Hill Higher Education. Michalski, G., 2012, September. Risk sensitivity indicator as correction factor for cost of capital rate. In 6th International Scientific Conference Managing and Modelling of Financial Risks, Ostrava. Pitt, S.A., 2014 International standards for the professional practice of internal auditing. Porter, B., Simon, J. and Hatherly, D., 2014. Principles of external auditing. John Wiley Sons. Rupys, R. and StaÄ iokas, R., 2015. Internal audit reporting relationships: the analysis of reporting lines. Engineering Economics, 43(3), pp.49-53. Siebert, S. and Costley, C., 2013. Conflicting values in reflection on professional practice. Higher Education, Skills and Work-based Learning, 3(3), pp.156-167. Furnham, A. and Gunter, B., 2015. Corporate Assessment (Routledge Revivals): Auditing a Company's Personality. Routledge. Simunic, D.A., 2014. The information clearly shows an excessively high concentration of auditing influence among the Big Eight firms. The degree of concentration in providing independent auditing services to major corporations is so great that it constitutes evidence of a serious lack of competition. In making this allegation, the Senate staff embraced the structure-conduct-performance paradigm. The Routledge Companion to Auditing, p.33. Arens, A.A., Elder, R.J. and Beasley, M.S., 2012. Auditing and assurance services: an integrated approach. Prentice Hall. Abernathy, J., Hackenbrack, K.E., Joe, J.R., Pevzner, M. and Wu, Y.J., 2015. Comments of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Staff Consultation Paper, Auditing Accounting Estimates and Fair Value Measurements: Participating Committee Members. Current Issues in Auditing, 9(1), pp.C1-C11.