Public Open Space Desktop Auditing Tool

Question: Discuss about the Public Open Space Desktop Auditing Tool. Answer: Introduction: The overall study mainly helps in depicting the auditing process, which might be used by the auditors for conducting the audit report on Nirvana Produce Pty Ltd. Moreover, the study also helps in depicting and indentifying the relative audit risk, which might encircle the audit process of the company. Furthermore, the novice effectively depicts the impact of the weakness on the financial ascertain report of Nirvana Produce Pty Ltd. In addition, the overall study effectively provides relevant suggestions, which might help in reducing the audit risk that might hinder the authenticity of its financial report. Lastly, the novice effectively provides relevant information regarding the two computerised accounting software, which might be used in the audit engagement for effectively reducing the overall audit risk. Identifying the implications that might be conducted in the audit process of Nirvana Produce Pty Ltd and effectively provide relevant steps to reduce audit risk: The depicted ratios after comparing with the additional information might have a certain risk, which might negatively affect the audit process of Nirvana Pty ltd. Carey, Knechel and Tanewski (2013) stated that AASB has effectively depicted the audit steps, which might be used by the auditors to reduce the overall audit risk, which might negatively affect its financial report. In addition, the following ratios that might have implications on the audit process are as follows. Inventory turnover ratio: The additional information that is presented in the case study of Nirvana Pty ltd mainly depicts that the inventory system is not maintained automatically and purchases are conducted on cash basis without any receipt. This situation might mainly increase the overall material misstatement occurrence in the books of Nirvana Pty ltd. Furthermore, it is also stated in the additional information that the sales representative is able to add more products in the original invoice and the company generates no additional invoice. This type of system might mainly increase the chance of misstatement that might be conducted by the employees. Mygind et al. (2016) stated that identification of material misstatement mainly help the auditors to reduce the audit risk, which might negatively affect its financial performance. In addition, the wrong depiction of inventory might mainly affect its current ratio, which might in turn increase its inherited risk. The company could effectively use obsolete inv entory system to reduce the overall audit risk of Nirvana Pty ltd. Current ratio: The overall ratios that is been represented in the case of Nirvana Produce Pty Ltd mainly states that the companys audited current ratio is higher than the unaudited value and is higher than the industry benchmark. This inflammation main helps in depicting the higher current assets of the company. Lye et al. (2014) argued that the inclusion of inventory in the current assets mainly decreases the overall ability of the investors to evaluate the adequate financial condition of the company. On the other hand, Legge et al. (2016) stated that investors with the help of ratios are able to detect companys ability to pay its short-term obligations by selling its noncurrent assets. In addition, the error of omission and clerical error could be identified in the current ratio. Days in receivables: In addition, the overall data is been presented in the ratio for days in receivable is clashing with the additional information provided in the case study. Moreover, the additional information mainly states that the client have to lay the purchase amount within 7 days of the invoice day. However, in the ratio it is depicted that day in receivables is mainly at 8, which is majorly contradicting with additional information and might increase audit risk. Moreover, Days in receivables might be having errors in omission, which might in turn increase audit risk (Hui et al. 2014). Identifying the strength and weakness in the internal controls system of Nirvana Produce Pty Ltd: The major strengths of the overall internal control system of Nirvana Produce Pty Ltd are effectively depicted below. Use of computerised system: Nirvana Produce Pty Ltd effectively uses the computerized system, which in turn helps in recoding the transaction that is been conducted by the company with sales and purchases. In addition, the system also helps in recording the payment that is being received by the company directly from the bank statement. Edwards et al. (2013) stated that effective accounting system mainly helps in improving the overall recoding keeping of the company, which might reduce risk of audit. Strict access rules: The strict access that is needed for the software mainly helps in improving the internal control, which is needed to reduce the audit risk. In addition, the reduced accesses to the computerised services mainly help in limiting the material misstatement, which might pose audit risk. Singh et al. (2014) mentioned that strict access rule in accounting software mainly helps in reducing the unethical practises that might be conducted by the employee to increase their personal income. Adequate accepting for holiday pay, paid sick leave and overtime system: In addition, the holiday pay, paid sick leave and overtime payroll system of the company is adequate, which might help in depicting the adequate pay of its employee. Moreover, the company is able to depict the overtime of the employee, which needs to be paid by the company with the help of the computerised system (Barrington and Ho 2014). The major limitations of the overall internal control system of Nirvana Produce Pty Ltd are depicted as follows. Incompetent software: The software that is currently being used by the company is incompetent in many ways, which might in turn have drastic impact on the material misstatement. In addition, the software is able to provide the list of creditors, which might help in evaluating the payments received from debtors. In addition, the company uses two different types of softwares for purchase and reconciliation, which might in turn increase the chances of material misstatement. Yu et al. (2015) argued that use of different softwares might depict different balances and reduce efficiency of the accounting system. Additional adjustments: In addition, the employees are allowed to adjust the sales invoice as per the demand of the client, which might in turn increase the chances of material misstatement and unethical measures. In addition, there are many short payment that is been found, which only indicates that the employees are manipulating the system for personal use. These adjustments might mainly affect the audit report and post wrong financial statement of the company. Yu et al. (2015) stated that low monitoring in the accounting department mainly increases the unethical practices conducted by the employees to increase their personal gain. Cash purchases: In addition, George has been conducting cash purchases without any type of receipts and is recorded in a slip. Thus, there is high chance of error in recoding, which might be conducted by the accountant as there is not significant proof regarding the purchases of the projects. Peecher, Solomon and Trotman (2013) stated that auditors with the help of audit steps are able to reduce the risk and material misstatement from the transaction of the company. Limited financing workforce: In addition, the limited workforce that is being deployed by the company is mainly affecting the authenticity of its audit report. In addition, the company only has one accountant for recoding all the transaction there is no support or help, which is being provided to the accountant. Thus, the accountant might conduct material misstatement, as there is no supervision. In addition, the short payments from clients and duplicate payments to creditors mainly depict the misstatement, which is being conducted by the accountant in their financial books. Cohen et al. (2013) argued that companies use limited workforce to reduce the overall expenditure, which in turn increase the misstatements in their financial report. Duplicate payments: After the evaluation of additional information duplicate payments were found, which were mainly conducted to creditors providing 7 days of credit limit. In addition, the duplicate payments were increasing the overall misstatement, which might poses risk to the audit report and hamper companys creditability. Abbott et al. (2016) cited that duplicate payments made by employees could be effectively detected by following the exact audit rules. Depicting the impact of weakness in internal control, which might affect financial report assertion and audit of Nirvana Produce Pty Ltd: Internal control weakness Financial report assertions Incompetent software Existence assertion Additional adjustments Occurrence assertion Cash purchases Occurrence assertion Duplicate payments Occurrence and completeness assertion Table 1: Depicting the financial assertion faced by Nirvana Produce Pty Ltd (Source: as created by author) The overall table 1 mainly helped in depicting the financial assertion, which might be generated from the weakness of internal control system. Kinney, Martin and Shepardson (2013) mentioned that financial assertion mainly decreases the authenticity of the financial report and reduces trust of its investors. On the other hand, Griffith, Hammersley and Kadous (2015) argued that some auditors mainly help companies to hide their financial assertion by inflating their financial report. The financial assertion that is being faced by Nirvana Produce Pty Ltd is as follows. Existence assertion: The software that is being used by the company might increase the overall existence assertion, as the record keeping of the company was being hindered. Thus, the increased exposure of material misstatement might mainly reduce the authenticity of the assets and liabilities of the company. Ghosh and Tang (2015) cited that presence of existence assertion might mainly reduce the overall authenticity of the companys balance sheet. Occurrence assertion: In addition, the record keeping that is being conducted by the accountant for all the sales and purchases manually is mainly increasing the occurrence assertion. Moreover, record conducted for cash transaction is mainly depicting the wrong transaction, which might be recorded by the accountant. van et al. (2014) stated that occurrence assertion might take place due to wrong depiction of receipts in the balance sheet of the company. Completeness assertion: In addition, completeness assertion is also present in the company as the employees might manipulate the accounting software during readjustment. Moreover, duplicate payments that is been evaluated mainly depicts the seriousness of the completeness assertion present in the records of the company. Quadackers, Groot and Wright (2014) stated that identification of completeness assertion is relatively difficult for auditors, if the company does not present adequate information. Depicting the additional steps that might be needed to reduce the audit risk of Nirvana Produce Pty Ltd: Financial report assertions Audit Procedure Existence assertion Physical examination and confirmation Occurrence assertion Test clerical accuracy Occurrence assertion Test clerical accuracy Occurrence and completeness assertion Test clerical accuracy and reconciliation of confirmed recorded balance at reporting date Table 2: Depicting the audit procedure to reduce the financial assertion (Source: as created by author) Table 2 mainly help in depicting the audit procedure, which might be used by auditors of Nirvana Produce Pty Ltd for reducing the overall financial assertion. In addition, with the help of available depicted audit procedure the audit risk could be effectively decreased and in turn increase viability of its financial report. Bentley, Omer and Sharp (2013) mentioned that audit procedure and steps mainly help in reducing the material risk, which might be included in the balance sheet of the company. Physical examination and confirmation: In addition, the existence assertion that is hindering the operations of the company might be reduced by using audit procedure. The use of physical examination and confirmation might mainly help the auditor to evaluate the actual stock the is current being used by the company. Carey, Knechel and Tanewski (2013) mentioned that physical examination mainly helps the auditors to reduce the material misstatement and in turn reduce the overall audit risk. Test clerical accuracy: In addition, to reduce the overall occurrence assertion the auditor could effectively test eh clerical accuracy by checking the entries after being conducted by the accountant. In addition, the test might be conducted on surprise visits after the accountant in the software has conducted the calculation and entries. Barrington and Ho (2014) cited that auditors with the help of testing accuracy mainly help in depicting the ethical conduct of the accountant. Reconciliation of confirmed recorded balance at reporting date: The auditor could effectively reduce the completeness assertion by using the reconciliation of confirmed recorded balance at reporting date. The audit procedure might mainly help the auditor to evaluate the misstatements, which are depicted in the statement of the company. Peecher, Solomon and Trotman (2013) argued that auditors with limited access could not effectively use the audit procedures for reducing the material misstatements. Depicting the audit approach that might be taken with the computerised accounting software: Figure 1: epicting the computerised accounting software audit approach (Source: as created by the author) Figure 1 mainly helps in depicting the computerised auditing procedure, which might be depicted for Nirvana Produce Pty Ltd. Moreover, the computerised accounting software might mainly help in reducing the overall assertion, which might be generated from accounting misstatement. Bierstaker, Janvrin and Lowe (2014) stated that companies mainly use computerised accounting system for reducing the overall misstatement in receipt recording. On the other hand, Boritz, Datardina and Boritz (2014) criticises that accounting software without adequate internal control might not fulfil the desired output for reducing the material misstatement. Furthermore, the audit approach might mainly help in reducing any type of assertion that might increase audit risk. Depicting and justifying two CAATs that might be used in the audit: Generalized Audit Software (GAS): The overall generalized audit software are mainly used by auditors to examine the entire computer files, which bras the recorded transactions of the company. This system is effectively used in depicting the substantive testing of transactions entered in the accounting software. In addition, GAS computer programming mainly helps the auditors in identifying the errors in reducing, which might be conducted during data input. Gambetta, Garca and Zorio (2016) mentioned that auditors with the help of auditing software are able to reduce excess burden during the auditing period. Test data: In addition, the test data software mainly helps in evaluating the accounting system, which is being used by the company. Moreover, any kind of internal control measures, which is being inputted in the accounting system, could be effectively depicted from this software. Smidt et al. (2014) mentioned that auditors with the help of test data are able to identify the weakness in internal control in using the accounting software. Conclusion: The study mainly helps in depicting the overall weakness of internal control system, which has encircled the operations of Nirvana Produce Pty Ltd. In addition, the main financial assertion that is hindering the operations of Nirvana Produce Pty Ltd is existence, occurrence and completeness assertion. This assertion could effectively be reduced by implementing certain audit procedures. Furthermore, the novice effectively depicted the audit procedures, which might be used by Nirvana Produce Pty Ltd for reducing the overall audit risk. In addition, the uses of generalized audit software (GAS) and test data might help in reducing the audit risk and improving the overall authenticity of the reported data. Reference: Abbott, L.J., Daugherty, B., Parker, S. and Peters, G.F., 2016. 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