Every organisation like Syarikat Alpha must hold hearer in their organisation. The hearer has their ain responsibility and place in that company. Hearers play an built-in portion in a company as the companys fiscal standing. Sing on instance survey, Syarikat Alpha need to heighten the effectivity of the company ‘s purchase and stock direction systems. Hearers need to acknowledge their responsibility, position and besides the liability in the company such as Syarikat Alpha.
1.1 Three Duties of the hearer Syarikat Alpha
Duty is besides can name as duty. Auditor ‘s duty are observing stuff misstatements in the fiscal statements and besides placing stuff failing in internal control. There are three responsibilities of the statutory hearer in the Syarikat Alpha. The responsibilities are studies to members, inclusion of farther information and besides studies in prospectuses.
Report to Members
The most of import responsibility of each hearer in the organisation is to describe to the members under subdivision 236 of the Act. The study on the histories of a limited company that make by each hearers must province that, the balance sheet gives a true and just position of the province of the company ‘s personal businesss at the balance sheet day of the month, the net income and loss history gives a true and just position of the net income or loss for the period ended on that day of the month, and besides the histories have been decently prepared in conformity with the commissariats of the Companies Act 1985.
Inclusion of farther Information
There are five demands on revelation of information in published histories are all supported by a judicial admission which requires the information specified to be given in the hearers study. The five demands are manager ‘s emoluments, emoluments of the president, entire managers ‘ emoluments waived, employee ‘s emoluments, and besides loans and quasi-loans to officers, recognition dealing and managers ‘ involvements in contracts.
Reports in Prospectuss
Following responsibility is report in prospectuses. If a company makes an issue of portions to the populace, a study must be placed in the prospectus by the company ‘s hearers. The hearers of that company must giving inside informations on the study. The inside informations are the net incomes and losingss originating in each of the old five old ages, rates of dividend in each of the old five old ages, and besides all the assets and liabilities as at the latest balance sheet day of the month.
Three Status of the hearer of Syarikat Alpha
There are many positions or places of the hearer in the Syarikat Alpha. Auditor occupies a statutory place because he is appointed purely in conformity with the commissariats of the Companies Act. Furthermore, hearer maps in assorted capacities. The positions of an hearer are can be as an agent of the members, as an officer of the company and non as surety of the company.
As an Agent of the Members
Auditor is appointed by its stockholders. An hearer is representatives of the stockholder and it is his statutory responsibility to safeguard their involvement. Besides that, an hearer acts as an agent of the stockholders and performs the responsibilities in the Companies Act 1956 and besides scrutinize understanding between him as an hearer and the client.
As an Officer of the Syarikat Alpha
An hearer is deemed to be an officer of the company for the some intents such as in the subdivision 633, power of the tribunal to allow alleviation to officer in proceedings for carelessness, default, breach of responsibility, and etc. Following intent is in the subdivision 539, which is punishment for the harm of books of the company. Besides that, hearer can be as an officer of the company in the subdivision 478, where there is the power of the tribunal to order public scrutiny of individual guilty of fraud of the company.
Not as surety
The hearer of a Syarikat Alpha does non give warrant that the fiscal statements of the company demo the true place or accurate harmonizing to the books. Rather his responsibility is to determine and attest to the stockholders the true fiscal place of the company at the clip of the audit.
Liabilitiess of the hearer of Syarikat Alpha
There are many liabilities or jobs of the hearer that Syarikat Alpha holding. Liability of hearers is liability for pure economic loss. It proposes liability for unpatriotic and gross negligent behaviour if a incorrect audit cause amendss in the secondary market. Besides that, an hearer has to render his services with attention, accomplishment and diligence and harmonizing to GAAP, criterions of public presentation. The hearers may be field apt for any careless act done by him
As a decision, an hearer has the functions and duties towards company that they work in. Besides that, an hearer besides has their ain place in the company such as Syarikat Alpha. They besides can non get away if they liable on some liability of the Syarikat Alpha. There are many responsibilities of hearers except that I already stated at supra. The responsibilities of hearer are examine loans and progresss, examine entries, examine investings and besides examine disbursals.
Undertaking 2 ( LOC 3 / AC 2 )
Describe the relationship between internal and external hearers of Syarikat Alpha.
There are two types of hearers in Syarikat Alpha which are internal hearers and external hearers. Harmonizing to Woolf ( 1986 ) , internal hearers are employed by companies to make both fiscal and operational auditing and study to the direction. Internal hearers are expected to supply value to the organisation such as Syarikat Alpha through improved operational effectivity on purchase and stock direction system. Many internal hearers are involved in operational auditing or have expertise in rating computing machine system. To run efficaciously, an internal hearer must be independent of the line map in an organisation, but he can non be independent of the entity every bit long as an employer-employee relationship exists. Internal hearers provide direction with valuable information for doing determinations refering effectual operations on the concern.
Whereas, harmonizing to Tanna ( 1986 ) , external hearers are known as Certified Public Accounting Firms ( CA Firms ) are responsible for scrutinizing the published historical fiscal statements of all widely traded companies, most other moderately big companies, and many smaller companies and non-commercial organisation. External hearer is besides known as independent hearer. The function of external hearers are placing operational jobs and doing recommendation that may profit the audit client. They must supply utile information and giving operational recommendation. Sing on the instance survey, Mr Daniel made specific recommendation on how to heighten the purchases and stock direction system by put ining efficient computing machine system for the ageless records for stock direction towards Syarikat Alpha.
Three Relationships between Internal and External Auditor of Syarikat Alpha
There are many relationships between internal hearer and external hearer in the organisation such as Syarikat Alpha. There are has many similarities and differences between them. Internal and external hearers have a common involvement in accounting that there are an effectual system of internal cheque to forestall or observe mistakes or fraud and that is runing satisfactorily and adequate accounting system to supply the information for fixing true and just fiscal statements. Following similarity is both of the internal and external hearers must be competent as hearers and remain nonsubjective in executing their work and besides describing their consequence. Besides that, internal and external hearer usage audit hazard theoretical account and materiality in make up one’s minding the extent of their trials and measure the consequences and besides they verification of assets and liabilities of the company.
Besides similarities between internal and external hearer, there is besides has differences between of them. There is difference in the range of the work. The extent of the work that undertake by the internal hearer is determined by the direction, whereas the independent or external hearer arises from the duties placed on him or her by statue which are president and stockholder. Other than that, the difference is approach by internal and external hearer. Internal hearer attack is with a position to guaranting that the accounting system is efficient, so that the accounting information presented to direction is more accurate and discloses material facts. However, external hearer attack is governed by his responsibility to fulfill himself that the histories to be presented to stockholders show a true and just position of the net income or loss for the fiscal of the company personal businesss at the terminal of period.
Finally, the difference between of them is duty. The internal hearer ‘s duty is to the direction, whereas the external hearer is responsible straight to the stockholder of the company. It follows that the internal hearer being a retainer of the company, does non hold independency of position which the independent hearer possesses.
As a decision, internal hearer and external hearer has their ain duty in the organisation. There is besides has similarities and differences in responsibilities between of them. Wherever relationships which are the similarities and differences that has in their duty, there is for enhance or better the efficiency of the operating in the organisation or company which is Syarikat Alpha.
Undertaking 3 ( LOC 3 / AC 3 )
Plan an audit with mention to scope, materiality and hazard.
Harmonizing to Arens ( 1999 ) , be aftering stated that every each hearer should be after the audit work so that the audit will be performed in an effectual mode and audit program besides should be based on cognition of the client ‘s concern. There are three chief grounds why hearer should be after decently. The first ground is to enable the hearer to obtain sufficient competent grounds for the fortunes. Following ground is to avoid misconstruing with the client. And the concluding ground is to assist maintain audit cost sensible. In this undertaking, hearer demands to be after the audit with mention to scope, materiality and besides the hazard.
Planing Audited account
Planing the audit involve close connexion with the client company ‘s fiscal manager and his staff. Planning may take some clip to execute. So, external hearer should be in close with the internal audit staff in order to avoid unneeded convergence of work and besides guarantee that the elaborate audit processs are satisfactory completed. The figure below shows the stairss that I be aftering an audit due to get the better of the job that Syarikat Alpha holding which is the file that include all the records system about purchases and stock direction crushed due to a system plan bug.
Accept client and execute
initial audit planning
Understand the client ‘s
concern and industry
Assess client concern hazard
Set materiality and buttocks acceptable audit hazard and built-in hazard
Understand internal control and
buttocks control hazard
Gather information to
buttocks fraud hazard
Develop overall audit program
and audit plan
Beginning from: Auditing in Malaya: An Integrated Approach
The range that needs to be right in Syarikat Alpha is the manner to enter all the dealing in that company by computing machine based system. The audit should include an audit control file incorporating full inside informations of the system that include transcripts of all the signifiers which end product paperss might take, and inside informations of their subsequent sorting and checking. Besides that, it includes inside informations of physical control over beginning papers, and any control sums of Numberss, measures, including the names of the individual maintaining controls. It besides include the agreements for retaining beginning paperss for suited periods that required for retracing stored files in the event of the mistake. First of all, Syarikat Alpha needs to accept their clients and execute the initial audit planning. In this phase, hearers need to make up one’s mind whether to accept a new client or go on functioning the bing 1. This determination makes early in order to avoid any important cost that can non be recovered. The hearer identifies why the client wants or needs an audit. To avoid misinterpretation, the hearer obtains an apprehension with the client about the footings of the battle. Auditor besides develops an overall scheme for the audit, including engagement staffing and any needed audit specialized. Before accepting a new client, most CA house look into the company to find its acceptableness.
Following phase is understood the client ‘s concern and industry. The nature of the client ‘s concern and industry affects client concern hazard and the hazard of stuff misstatements in the fiscal statements. There have several factors that have to increase the importance of understanding the clients concern and industry. First factor is information engineering affects internal client procedures, bettering the quality and seasonableness of accounting information. Following factor is each hearer need a better apprehension of the client ‘s concern and industry to supply extra value-added service to the clients. For illustration, CA houses frequently provide confidence and consulting services related to information engineering and hazard direction services for nonpublic audit clients that require an extended cognition of the client ‘s industry. Besides that, the increased importance of human capital and other intangible assets has increased accounting complexness and the importance of direction judgements and estimations. For this phase of the planning audit, there are three grounds for obtaining a good apprehension of the client ‘s industry and external environment which are built-in hazards are typically common to all clients in certain industries. Following ground is hazard associated with specific industries may impact the hearer ‘s appraisal of client concern hazard and acceptable audit hazard and besides many industries such as Syarikat Alpha has alone accounting demands that hearers must understand to measure whether the client ‘s fiscal statements are in conformity with accounting rules.
Besides those ground, hearer must besides understand the client ‘s external environment such as economic status, extent of competition and regular demands. Hearers must understand their clients aims related to dependability of fiscal coverage, effectivity and efficiency of operations and besides conformity with jurisprudence and ordinance. In this phase besides, there are must hold the measuring and public presentation. A client ‘s public presentation measuring system includes cardinal public presentation that direction uses to mensurate plan or activities towards Syarikat Alpha aim. The cardinal public presentation are market portion, gross revenues per employee, unit gross revenues growing, web site visitants, same shop gross revenues and besides gross revenues per square pes for a retail merchant. This measuring includes ratio analysis and benchmarking against cardinal rivals.
Another phase in this audit planning is measuring client concern hazard. Harmonizing to Amran ( 2008 ) , client concern hazard is the hazard that client will neglect to accomplish its aim. It can originate from any of the factors impacting the client and its environment. The hearers merely concern the hazard of the stuff misstatements in the fiscal statement due to client concern hazard. There is relationship among the client ‘s concern and industry, client concern hazard and besides the hearer ‘s appraisal of the hazard of material fiscal statement misstatement. The hearer considers direction controls that may extenuate concern hazard, such as effectual hazard appraisal pattern and corporate administration. Client concern hazard is so evaluated to measure the hazard of material misstatement in the fiscal statement.
Other than that, execute preliminary analytical processs is a 4th phase in this audit planning. In this phase, comparing of client ratios to industry or rival benchmarks provides an indicant of the company ‘s public presentation. Analytic processs are besides of import portion of proving throughout the audit. There are five types of analytical processs in this phase that are comparing of the client with others. First type is compare client and industry informations. Next is compare client informations with similar anterior period informations. Other than that is comparing client informations with client determined expected consequences. Fourth type is compare client informations with hearer determined expected consequences. And eventually type is compare client informations with expected consequences, utilizing non-financial informations. In placing countries of specific hazard, the hearer needs to concentrate on the liquidness activity ratios.
Following phase is set materiality and assesses acceptable audit hazard and built-in hazard. Materiality and hazard are cardinal constructs that are of import to be aftering the audit and planing the audit attack. Materiality depends on the size of the point or mistake judged in the peculiar fortunes of misstatements. Reason for puting a preliminary judgement about materiality is to assist hearer program the appropriate grounds to roll up. Harmonizing to Isa ( 1997 ) , hazard in scrutinizing agencies that the hearer accepts some degree of certainty in executing the audit map. The hearer of Syarikat Alpha recognize that there is uncertainness about the competency of grounds, the effectivity of client ‘s internal control and besides whether the fiscal statement show true and just position when audit is completed. In this phase, built-in hazard is assessed by placing any facets of the client ‘s background that indicates of high likeliness of misstatements in the fiscal statements. Inherent hazard besides can be extended to single balance-related audit aims. An illustration, hearer may reason that there is a high hazard of bad histories receivable realizable value aim because of the inauspicious economic status in the client ‘s industry.
There is another three phases in this audit planning which is understand internal control and buttocks control hazard. There are three constructs under the survey of internal control and appraisal of control hazard which are direction ‘s duty, sensible confidence and besides built-in restrictions. In direction duty of Syarikat Alpha, they must keep the entity ‘s controls. This construct is consistent with the demand that responsible for the readying of fiscal statements. In sensible confidence, Syarikat Alpha should develop internal controls that provide sensible, confidence that fiscal statements show a true and just position. Internal controls are developed by direction after sing cost and benefits of the control. Finally is an built-in restriction. That internal control can ne’er be regarded as wholly effectual, irrespective of the attention followed in the design and execution. The effectivity depends on the competence and dependableness of the people utilizing it.
Second last measure is gather information to measure fraud hazard. Syarikat Alpha needs to roll up all the information about the company and fiscal statements in order to measure fraud hazard in that company. And the concluding phase is developing overall audit program and audit plan. In this measure, audit program and audit plan discussed in term of five types of audit trial. Besides that, the hearer must give attending on both the design and the operation of facets of internal control to efficaciously be after the audit. The intent of the processs is to obtain an apprehension and besides supply grounds to back up that apprehension.
As a decision, the hearer needs to understand internal control to finding the overall audit scheme. The hearer uses the apprehension of internal control to place factors that affect the hazard of stuff misstatements and designed the nature, timing and extent of farther audit processs. Besides that, the major intent of the audit planning is to supply information to help the hearer in measuring acceptable audit hazard and built-in hazard. These will impact the hearer ‘s client credence or continuation determination, audit fee, and the grounds determination. Another intent is to obtain information that requires by followup during the audit. By making that, it can obtain sufficient competent grounds.
Undertaking 4 ( LOC 4 / AC 1 )
Explain the intent and content of a statutory audit study.
Statutory audit is one of the nucleus concern activities in any companies in Malaysia. Harmonizing to BDO Malaysia, It is requirement under the Malayan Companies Act 1965, where company incorporated in Malaysia has to fix the fiscal statements in conformity with applicable sanctioned accounting criterions and besides has to be audited conformity with sanctioned criterions on scrutinizing in Malaysia. Statutory audit have their range determined by the regulating statute law. All limited companies which are public or private require a statutory audit. It is provides confidence on the world and equity of an organisation ‘s fiscal information. Besides that, statutory audit provides advice on controls and treating system failings. And in conclusion it is verification of accounting interventions on complex minutess.
Purpose and Content of Statutory Audit
Statutory audit study has content and aim in that study. There are much content that include in statutory audit. The content are clearly indicate the range of the statutory audit and in conformity with which scrutinizing criterions the statutory audit was conducted. Following content is whether the statutory audit consequences in an unqualified sentiment, a qualified sentiment, an inauspicious sentiment, or if statutory audit is unable to show an audit sentiment, in a disclaimer sentiment. Besides these two contents of statutory audit, there is other content which is the affairs to which the statutory hearers draws attending by manner of accent without measure uping the audit sentiment. Final content of statutory audit study is the fiscal coverage model in conformity with which the histories subject to the statutory audit are prepared.
The intent of statutory audit is to enable stockholders to reexamine the past direction of the company. Following intent is to exert their rights to act upon future direction in company which is Syarikat Alpha. Besides these two intents, there is another intent of statutory audit which is to vouch that no fraud is taking topographic point. The statutory audit is non set up chiefly to observe fraud, whereas the chief purpose is to guarantee that the histories in the company are true and just position.
As a decision, every company has statutory audit study that has own content and intent. All entities, including companies, limited liability partnerships and charities, that meet certain standards such as being above a certain size or of public involvement, are required by jurisprudence to hold their fiscal statements audited. Others for assorted grounds, including understanding with stockholders to carry through funding demands, may necessitate an audit.
Undertaking 5 ( LOC 4 / AC 2 )
Explain and exemplify the different types of making within an audit study.
There are many types of making within an audit study. These can be summarized as nature of fortunes, really material and permeant, and besides less material. In the types of nature of fortunes, there are holding restriction of range and dissension. Whereas in really material and permeant there are hold disclaimer and adverse. Last type is less material that has possible accommodation and except for.
Types of Qualification
Harmonizing to Millichamp ( 1996 ) , restriction of range is a restriction of range of the hearer ‘s work that prevents them from obtaining sufficient grounds to show an unqualified sentiment. Restrictions on the range of the hearer ‘s work arise on those occasions when the hearer is non able to obtain for any ground, all the information and accounts which consider necessary for audit. It would include inability to transport out an audit process considered necessary or proper paperss and accounting records. There are two classs of range restriction which are caused by limitation imposed by the client and besides caused by fortunes beyond either clients or hearer control. Disagreement means that hearer do non hold with the accounting intervention. The fiscal statements may hold an accounting policy when the hearer considers that more complex distribution is indispensable to the true and just position. Since true and just position is the primary aim in the readying of fiscal statements, it is overruling when in struggle with sanctioned accounting criterions.
A 2nd type of making is really material and permeant. This term applies when the possible consequence of the restriction of range is so material that the hearers are unable to show an sentiment on the fiscal statements. In this type, there are holding inauspicious sentiment and besides disclaimer of sentiment. Adverse sentiment is one where the hearers province that the fiscal statements do non give a true and just position. This inauspicious sentiment study can merely originate when the hearer has knowledge, after an equal probe, of the absence of conformance. Another sentiment is a disclaimer of sentiment. It occurs when the hearers conclude that they have non been able to obtain sufficient grounds to back up, unable to show and an sentiment on the fiscal statements. Both disclaimers and inauspicious sentiments are used merely when the status is extremely material and permeant.
Finally type of making within an audit study is less material. It means when the consequence of the restriction is non so material as to necessitate a disclaimer. There are possible accommodation and except for in this less material. Possible accommodation is the diction of the sentiment should bespeak that is the qualified as to the possible accommodations to the fiscal statements. Whereas except for is the sentiment that qualified by saying that the fiscal statements give a true and just position except for the effects of any accommodation.
As a decision, qualified studies are comparatively rare. Small companies such as Syarikat Alpha with small control particularly over hard currency dealing will frequently hold qualified studies. There are different types of making within an audit study. The ground given for qualified studies are restriction in the range of work of the hearer and dissension. The effects of some restriction of range are so material and permeant that a disclaimer of sentiment is required. The effects of some dissensions can be so material and permeant that the fiscal statements are so deceptive. An inauspicious sentiment is required. With other less material restriction of range a qualified sentiment should be given with the diction that the sentiment is qualified to the possible accommodation that might find if the restriction had non existed. With less stuff and permeant dissensions an except for making is required.
Undertaking 6 ( LOC 4 / AC 3 )
Draft a suited direction letters in relation to a statutory audit.
The President and Board of Directors
10G Jln Matahari A4U 5/AA
Sec. U5 Subang 2, 40300
Shah Alam, Selangor
twentieth April, 2010
Dear Sir / Madam,
Capable: Recommendation for Improvement to Management System of
Internal Control of Syarikat Alpha
During my interim audit, I examined the accounting records of your company and the system of the internal control over those records established in your company. This system was designed to guarantee accurate and dependable records and to safeguard the company ‘s assets.
I set out below the failings in the system which I found your company holding it with the recommendations for betterment the system in your company.
Misstatement of the bing stock direction system
Failure to acknowledge the being of disused stocks
Omission in purchase dealing due to inadequate internal controls
I recommend that your company usage computerized systems. Computer Assisted Audit Techniques ( CAATs ) have been developed to get the better of some of the jobs in your company and to catch some of the chances. The two rules techniques are usage of ‘test informations ‘ to prove the operation of the client ‘s plans and besides usage of audit package which is computing machine plans developed for audit intents to analyze the contents and do work on the contents of the client ‘s computing machine files.
The computerized system that your company used should include an audit control file that incorporating full inside informations of the system that include all the dealing in the purchase and stock direction in your company. The full inside informations of the system are:
Full descriptions of how the beginning paperss are to be converted into input media, and the checking and control processs.
Transcripts of all the signifiers which beginning paperss might take, and inside informations of the cheques that have been carried out to guarantee their truth.
Detailss of physical control over beginning paperss including figure, measures and names of the clients.
Agreements for retaining beginning paperss that may necessitate for retracing stored files in the event of mistake.
Detailss of all tapes and phonograph record in usage.
In computing machine systems, controls are tested of the grounds scrutiny that will include exclusion studies, rapprochement studies, edit studies and besides losing paperss studies.
Company need to implement the statutory audit that is one of the nucleus concern activities in any companies in Malaysia. Harmonizing to BDO Malaysia, It is requirement under the Malayan Companies Act 1965, where company incorporated in Malaysia has to fix the fiscal statements in conformity with applicable sanctioned accounting criterions and besides has to be audited conformity with sanctioned criterions on scrutinizing in Malaysia. Statutory audit have their range determined by the regulating statute law.
I wish to show my grasp for the cooperation and aid that I received from the functionaries and employees of Syarikat Alpha. I will reexamine the position of these remarks and help your company in implementing the recommendation.
NUR SHAIDATUL SHAFFIQAH SALLEHUDIN
Chartered Accountant ( 1357-2121S )