Auditing Essay Example | Topics and Well Written Essays - 2500 words

Auditing - Essay ExampleThe employee had been steeling for years and covert her tracks by dividing the amount into very small amounts in the various accounts.Risks are more prevalent at the end of the year when there is a incase of an unusual transactions, when the companies performance is declining for no apparent reason, ghost change in business councillors and auditors, where there is a complex corporate structure and inadequate equilibrize of financial accounts.Audit chances include sexual risks, wangle risks and analytical procedure risks. Inherent risk is associated with auditors discernment of material misstatement, it is associated with wrong information given on financial status of the various accounts. Accounts with low inherent risks include fixed assets accounts which are easy to observe and securities traded in the stock market whose price take aim is easily observed.Control risks are the risk that which misstatement is not easily observed and cannot be prevente d or let outed. The internal control system cannot detect these humbugs. The assessment of control risks detects the effectiveness of the internal control to prevent and detect such misstatement.Analytical procedure risks is the risk associated with the auditor, it is a measure of the willingness of an auditor to accept the misstatement of financial statements. This risk will cause unqualified opinions on the current status of a company. The auditor can unhorse these risks by making sure that financial statements are not materially misstated. Both the inherent and the control risks are referred to as the risk of material misstatement.(http//www.aicpa.org/pubs/jofa/sep2000/prac_aud.htm)The analysis of railroad line PLC Financial statements.According to the audited financial statements of line PLC the risks can be analyzed as followsThe profit and loss account for Railway PLC has two parts, the Railway and the River financial statements. This combination is not appropriate and th e two sectors should be analyzed separately. In my previous treatment on the possible of the occurrence of frauds and errors, when an organization has a complex corporate structure then the risks of fraud are high. Therefore the two should be analyzed separately to reduce the occurrence of frauds and to determine their someone contribution to profits.The direct costs, depreciation and other expenses in the profit and loss account should be cleave into individual expenses so as to enable proper auditing in detection of any frauds. These accounts individual accounts should in any case be audited. Direct costs should contain fuel expenses and other accounts associated with cost of providing services. Depreciation should also be analyzed according to individual assets and this accounts forwarded for auditing.Another risk factor is the indication of revenues and expenses in thousand pounds. severally single cent should be accounted for and this is evident in the above case where an employee committed frauds through the partition of a large sum of money