TECHNIQUES OF AUDITING

               First of all, audit technique is defined as ant technique used by auditors to determine deviations from actual accounting and controls. Auditing techniques can be used to uncover these issues in order to ensure ethical business practices. They are tools, methods or processes by means of which an auditor collects necessary evidence to support his opinion in respect of the assertions submitted by the client to him for his examination. the audit procedures are ways of applying techniques to a particular phase of an audit. Generally, the attainment of the audit objectives required the collection of the evidence to support a decision.

               

              Let me show some of the important techniques of audit. Firstly the techniques of audit is Examination of Record. This technique is commonly used by the auditors. The inspection of books and documents is made to verify the validity of data. Secondly, Inquiry is also the techniques of audit. The auditor can also use the technique of inquiry. He can get the information from resource persons inside or outside the enterprise. Furthermore, to check the sum of the accuracy of accounting record, the balancing accounts can be compared with the vouchers to test the reliability of data and this technique is called as Compliance. Besides that, one of the techniques is confirmation. This technique is to ensure the accuracy of the data. The auditor can collect the information from the debtor. Confirmation is a response to an inquiry to prove certain data recorded in the books. After the techniques of compliance and there is another technique called compliance test. These tests are designed to check the effectiveness and compliance of internal control. In obtaining the audit evidence, auditor is concerned with the existence of effective internal control.

               

               In addition, there are the large number of audit techniques like audit software, test packs and mapping which can be used by the auditor to test the accuracy of the data and the technique is called as Use of Computer Techniques. Therefore, the techniques of sampling are about the auditor can select few items from whole accounting information. This technique enables the auditor to obtain and evaluation the evidence of some characteristics of the whole class. It is helpful in forming the conclusion. Last but not least, the last techniques is Analytical  Review. It consists of studying significant ratios, trends and investigating different changes. This review procedure is based on the expectations of the relationship among the past and present data.

AUDITING HISTORY

               The Latin word audire is what an "audit" came from. The meaning of audire is "to hear". Accounting to Flint of 1988, audit is a social phenomenon which serves no purpose or value except if its practical usefulness and its existence are wholly utilitarian. Further explain groups who seek information about the performance of others in which they have an acknowledge. Next, there are some argues in Flint 1998 which is the audit exists. Why? It is because their interested are unable to obtain for themselves the information they require. Hence an audit function can be a means of control because it serves as a skill to monitor the performance and to enforce the accountability.

               Here is the remark in the foreword of The Accountability and Audit of Governments. "Without audit, no control; and if there is no control, where is the seat of power?"

               All of this, the audit function plays a critical role in maintaining the stability of the society. In addition, the review of the historical of auditing enables to understand, analyse and interpret of the evolution due to the changes in expectations of the society. The auditing that exists today was set up in the later part of the nineteenth century, born out the modern day of the business world. During the 18th century, industrial brought in large scale production, steam power, and better means of communication. This is the origin result from the organisations. The shareholders that who have invested their money would be interested in the financial position of the company; the shareholders formed a body known as the board of directors who present the account. Last but not least, their funds have been honestly managed arose as a problem of believing it. That is the need of the person who checks the accounts and reports back to the shareholders in the accuracy of the accounts and the safety of their investment.

               In the nutshell, it is important to have the concept of "audit" definted.

PROCESS OF AUDITING

          Firstly, what is process of auditing? The process of auditing are about the step taken and how was it performs. In process of auditing, we have to get the client acceptance, then requesting documents, preparing the audit plan, testing and evidence the true of the financial statement, evaluation and reporting it.

          Process of auditing firstly we have to get the client acceptance and it will be involves they want to get a new client or continue with an existing one. In client acceptance process of auditing, we can see the client background and the reason for the audit. During the client acceptance have to see whether the auditor is able to meet the ethical requirements or not.

          Furthermore, requesting documents will be prepare when notifying the organisation of the upcoming audit. The auditors have to prepare the copy of the previous audit report, the organisational charts, original bank statement, receipts and ledgers. After that, prepare to start the audit plan the auditors will look on the documents and plan out how it will be conducted.

          In additions, after prepare the audit plan auditors have to start testing and evidence the account to check it was performed true and fair view or not. For example, check every transaction , the details of balances and search whether it got any unrecorded liabilities.

          Lastly, after testing and evidence the account of the organisation then have to evaluation and reporting it, which means issue an opinion after audit. Auditors will be review the financial statements and other report materials and prepare matters of attention and reports to the board of directors or shareholders.

       

INTERNAL AUDITOR AND EXTERNAL AUDITOR

          Firstly, what are the different between internal auditor and external auditor? Internal auditor is work within an organisations, which means they are apart of employee for the company. External auditor are independent of the organisations they are auditing, which means they are an outsider not an employee of the company.

          In additional, internal auditors they can be in a common accounting background but they also can came form another background. External auditors they are outside firm of accountants who are registered auditors. Besides that, responsibility between the internal auditors and external auditors. Internal auditors, they responsible for the company's management but external auditors they responsible for the owner of the company and the shareholders.

           Therefore, there are the different between internal auditor and external auditors when they are appointed. Internal auditors are appointed by the management or board of director, external auditors are appointed by the shareholders. Moreover, the purpose of the internal auditors and external auditors are internal auditors are helping the business manage its risk and external auditors are prepared the annual reports once a year with the legal requirements.

            Furthermore, there are the between who are the person auditor report to. Usually, internal auditors are report internally. They report to the board of director or the audit committee. External auditors they report to the shareholders only.

          Lastly, internal auditors performs a variety of review and assessments, providing the important information about the operation of the business. External auditors are providing the independent opinion on the company's financial statements.

GENERALLY ACCEPTED AUDITING STANDARDS (GAAS)

   The Generally Accepted Auditing Standards (GAAS) is the standard using in auditing in private company. Generally Accepted Auditing Standards have three categories is general standard, standard of fieldwork and standard of reporting. 

    Generally Accepted Auditing Standard(GAAS) are the minimum standard you use for auditing private companies In Additionally Auditing standards are not same with auditing procedure. Auditing standard are performed with the quality of the work assume to the objective to use to procedures.

   Firstly, we are talking General Standards: The three Generally Accepted Auditing Standard that address your Generally Accepted Auditing Standards qualification to be an auditor and the minimum standards for your work product. In auditing, the examination must be performed and the report must be prepared by an auditor who having adequate technical training and proficiency. The auditor must exercise due professional care and with an objective state of mind in the performance of the audit and preparation of the report. The auditor must maintain independence in mental attitude in all matters relating to the audit.

   Moreover, Standard of Field Works: The auditor must be performed adequately planned the work and the report prepared executed, all assistants are properly supervised. Besides that, the auditor must gain an understanding of the client and its environment, including internal controls, to assess the risk of material misstatement in the financial statements whether error or fraud, with the degree of reliance placed or determining the nature extent and the timing of further audit procedures.

    Furthermore, Standards of reporting the last four GAAS concern information you must consider prior to issuing your audit report. As an auditor must state in the report whether the financial statements are presented in accordance with Generally Accepted Accounting Principles (GAAP). The important is the report should contain with the expression of opinion on the financial statement or this principles have not been consistently observed. In this cases, the reason therefor should be stated.  Other that then, Auditor have to make sure that informative disclosures are not reasonably adequate with any additional information and auditor need to explain the number on the financial statement are provided. 

TOSHIBA - A CASE OF INTERNAL AUDIT FAILURE

This case was happened in a company name called Toshiba. In July 2015, Toshiba Corporate president Hisao Tanaka and his two predecessors quit after investigators found that the company inflated earnings by at least $1.2 billion during the period 2009-2014.

The investigators committee found out, the corporate audit division of Toshiba in reality is provided consultation services for the management being carried out at each of the companies, and it rarely conducted any services from the perspective of an accounting audit into whether or not an accounting treatment was appropriate.

In Toshiba, the compensation of executive officers comprises a base compensation based on title and role compensation based on work content. 40% to 45% of the role compensation is based on performance of the overall company or business department. Besides, the top management used to set targets that are unachievable. There was excessive pressure from the top management to achieve those targets. The challenges to achieve the unachievable targets and performance-based pay provide enough motivation for employees to commit fraud. Therefore, internal audit should focus on this area.

Apart from that, they are three external audit committees had no knowledge of finance and accounting. An ex-Chief Financial Officer, who was the CFO during the timeframe when accounting irregularities occurred, was the only whole time member of the audit committee. Therefore, the internal audit was not independent of the management. Refers to GAAS, audit committee would not a part of management, because they will take the benefits for himself and he can make changes to the source documents.

According to Generally Accepted Auditing Standards, the role of internal audit is to provide independent assurance that an organization’s risk management, governance and internal control processes are operating effectively and not providing consultant service for the management. Besides, variable pay and pressure from top management to achieve those targets cause employees to being fraud. Internal audit should pay attention on this and change the internal management system. According to GAAS, auditors should be independence, adequate technical training and proficiency. But in Toshiba, there are three external audit committees had no knowledge about finance and accounting, they should be punished for their responsibility.

Every organization should be learnt a lesson on this case, even Toshiba is a world leading Multinational Conglomerate Company, they still made mistakes. This or similar cases will lead to a serious legal responsibility and I strongly believe similar scenario will happen in many company too. I suggest the top management of every company should do their best to not let similar case happen again.

REFERENCE:http://www.business-standard.com/article/opinion/toshiba-a-case-of-internal-audit-failure-115080900760_1.html

PRINCIPLE OF AUDITING

Auditing is concerned with the verification of accounting data with determining the reliability of accounting statement and reports. The “Principles of Auditing”, states that management systems auditing relies on six principles: Integrity; Fair presentation; Due professional care; Confidentiality; Independence; and the Evidence-based approach. Besides that, if the auditor assume to these principles, the resulting audit should provide the organization being audited with the kind of information that helps improve its performance.

First and foremost, we talk about integrity. As an auditors should be an honest, diligent, and responsible manner person. They should know that, and comply with, any legal requirements that apply to be an auditee, its business type, or its location. Auditors should show that they are competent to perform the particular kind of audit. They need to be impartial and they also need to be aware of any attempt to affect their judgment.

Moreover, As an auditors, they are obliged to report on the results of our audits truthfully and accurately. Any time auditors should inform the auditee, their communication needs to be as timely, clear, complete, and objective as possible.

In addition, auditors required to report any “significant” obstacle what their encounter while their conducting the ISO audit and any unresolved differences of opinion between the auditee and themselves.

Furthemore, As auditors, they are expected to use sound judgment and exercise due care while auditing a client’s management system. “Due care” is said to vary according to the “importance of the task auditors perform and the confidence placed in them. Besides that, confidence is very important if you are an auditor. Every organization has the right to protect and secure its information, to prevent other parties from using its information to gain an unfair advantage. As an auditor, they must go through a lot of process data in detail in order to help identify weaknesses in those processes and determine where there are opportunities for improvement. They must have very confidence to overcome every issue when they encounter.

In addition, as an independent auditor, their purpose is to identify potential and actual problems in the client’s management system (for instance, production data aren’t being recorded or their records are incomplete, or they’re not using the information to drive improvements) and explain precisely why they are.

Last but not least, the Evidence-based approach mean that what ensures objectivity and fairness and the idea that when you, as an auditor, believe you have identified a nonconformity, you can’t go forward with only a belief that “something’s just not right”, When you write up a nonconformity, you have to describe it. Clearly and concisely describe the problem so the auditee understands it and can identify it for themselves. You have to indicate where and when you identified the problem, how you identified the problem.

AUDIT EVIDENCE

Audit evidence usually looks back to the information collected for reviewing the financial transactions of a company to their internal control practices and for the other essential factors that required for certification of their financial statements. The type and amount of the consideration auditing evidence varies significantly on the basis of the type of company being audited to the required scope of the audit. The audit evidence is important to be collected by an auditor during the process of his auditing work.

The first objective of every audit is to find the compliance of a company’s financial statements with the GAAP standards to the jurisdiction of entity. The publicly traded companies are usually had to present full audited financial statements to shareholders at regular intervals.

Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries and confirmation. First of all, inspection is the easiest method of obtain the audit evidence. It refers to checking all documents, records, and physical assets. The reliability of these documents and records depends upon the nature and effectiveness of internal control.

Moreover, observation is another important method of obtaining audit evidence. This method involves the auditor to look at some steps of procedure being exam by others. This method could be exemplified by the auditors’ presence at the clients’ physical stock count. Apart from that, inquiries and confirmation include looking about the info from a knowledgeable person inside or outside the company, and responding to every inquiry to substantiate information in the accounting records. These responses could provide the auditor with info which is not previously possessed by them or even with corroborative evidence.

Refers to Generally Accepted Audit Standards (GAAS), the third standard of field work requires auditor to seek competent evidentiary matter. The evidence must be competence and sufficiency, both of these determine the persuasiveness of evidence. There are some factors affecting competence. Audit evidence must be relevance to the audit objective. Besides, the information received from outside the entity and the evidence from a client whose internal controls are effective is more trustworthy. Other than that, data prepared by someone inside the organization will not be reliable than the data discovered by the auditor. Quality of the individuals that provide information will be an important too because we have to make sure that information received is trusted and reliable and the person who delivered the information is qualified. Also, degree of objective makes the evidence persuasive because objective evidence is more reliable than evidence that is subjective. Lastly, timeliness, not all the data is useful in that period of time, audit report must be submitted on time, if not then it is useless.

In conclusion, audit evidences are important because it used to reach the audit opinion about the company’s financial statement. An audit engagement is carried out an opinion to a third-party, who interested in the company such as banks and investors. They rely on the audit opinion to make investment decisions in relation to the company. They trust the audit opinion because auditor giving out an assurance and quality work.

BENEFITS OF AUDITING TO BUSINESS

According to Company Law 1965, each and every company (public or private) is compulsory to be audited. It is a process to a business as it goes through of an analysis to determine the business condition. Auditing will be performed once of a financial year by an internal or external auditor.

 Auditing helps to identify the business’s weaknesses in the accounting systems as some errors might occur. It suggest improvements to businesses to perform better in the future too.

Moreover, performing an audit can help to detect any fraudulent activities in the business. Some fraudulent activities that is run by the business might not be obvious to show sometimes but it can be easily found by performing an audit.

Other than the social gaining confident from the product or service of a particular company, having to know that the company’s audit report is being unqualified will help them build more trust and confident to the company as the company is being audited by an professional and independent auditor with GAAS (Generally Accepted Auditing Standard).

Furthermore, the most considerable thing to all the shareholders is the return and the condition of the company. By performing an audit, it can show a true and fair view to the company as to provide assurance to the shareholders about the figures in all the accounts.

Not just that, auditing can detect any risk in the company such as inherent risk, control risk, and detection risk. These risks reflects to the internal control of a company as it is the main core control of how the business is carried out. Hence, the company can correct the mistakes and perform better in the future.

            Performing an audit is a process that is mainly to provide security and assurance of the financial condition to the company in order to make decisions. Thus, the management can use this information to evaluate and measure the necessary to meet their objectives.

INTRODUCTION

➼ 𝐽𝑂𝐴𝑁𝑁𝐸 𝐶𝐻𝑂𝑂𝑁𝐺

            I was a grade D student in mathematics during my secondary school time. I did not have any idea of what was going on with the subject and my mind went blank when it came to mathematics exercises and examinations. I admired my friends who can do mathematics and I felt lost and useless of myself in the same time for not knowing how to do so. Not just that, I would still be lazy to learn to do or calculate even if I knew calculators exists.

         When I stepped into the first year of Form 4, I had to take accounting as it is a compulsory subject for me according to my PMR result. I was so bad at it. It felt like I was a baby learning how to walk all over again after forgetting how to do so. There are so many formats and calculation methods to learn and memorize. It is so frustrating and impatient to do accounting. However, I got to know accounting better as I practiced through many exercises.

            According to what I have learn so far, auditing is a procedure that every company must go through during the financial period. The auditor will review the financial statement that is prepared by the client and judge whether it is prepared accordingly to GAAP (Generally Accepted Accounting Principles) accounting standards. Therefore, an audit report will be prepared by the auditor on whether the client get qualified or unqualified opinion from the outcome of audit process.



➼ 𝑳𝑰𝑴 𝑲𝑨𝑯 𝑴𝑼𝑵

            My name is Lim Kah Mun from Diploma in Accountancy students. Why I’m choosing diploma in Accounting after my SPM graduated. In my opinion ‘account’ is very important to every company whatever small company or big company. Hence, I also can apply this to any company, in any field, industry and sector. On top of that, accounting is one of the best careers available today. Professional accountants are forever required in any business and the fields or professions that I can select from are vast. In other words, I have a lot of career selection to choose from.  

         What is audit? For me, auditing is getting someone who is independent to check something. In addition, the auditor must be independent and fair to treat every company, the account must be fair. Besides that, the audit objective states what will be analysed in the audit.


➼ 𝑹𝑨𝑰𝑵𝑵𝒀 𝑳𝑰𝑨𝑵

        I am interested to accounting since secondary school, because I know that learning account could bring a lot of benefits to my personality and my future. Based on my PMR result, accounting is my compulsory subject. I'm glad to take this subject because accounting give me a great direction for my future. I know that, accountant has a very high level of demand in the market because all organizations, they require the information and administrations of an accountant and bookkeeper, so there is no deficiency of work. Besides, accountant is a high paid job, which consider a quite well paying salary in Malaysia.For all the information and advice from my family and lecturer, account related job will be my first choices of working job in my future. 

            
       When I am a beginner of accounting in secondary school, I don’t know anything about auditing. Then in Diploma in Accountancy, I learnt about auditing. An auditor is to provide an independent opinion to shareholders on the true and fair view of the financial statements. After audit a company, auditor should prepare an audit report, which write the opinion of the entity. The report must write in standard format, which accordingly to Generally Accepted Auditing Standards (GAAS). The user may rely upon the report as evidence that a knowledgeable third party has investigated and rendered an opinion on the financial statements. An audit report that contains a clean opinion is required by many lenders before they will loan funds to a business. Therefore, audit is important to a business.      


➼ 𝑺𝑯𝑰𝑹𝑳𝑬𝒀 𝑻𝑬𝑶𝑾

       I’m Diploma in Accountancy student. When I in secondary school I know accounting is important and one of the harder subject in Form 4 and Form 5. I feel very lucky is when I started my form 4 account is my compulsory subject. Form that time I start to learn account. Account is very important in our future because every company also need accountant make sure a business is set up properly and can help company pays its utility bills on time and  prepare a company to handle upcoming expenses. So I choose Account is my Diploma subject.

    What is auditing? Audit is view on the information presented in the financial report. Auditor must be professional and independent to every company. Because they must be fair to every business company. 

➼ 𝑳𝑬𝑬 𝑷𝑼𝑰 𝑺𝑯𝑨𝑹𝑵

          After graduate in secondary school i did not start Diploma immediately, because i have no direction. I'm the one who never learn about the subject accounting during secondary school time, but why i will choosing Diploma In Accountancy as my new level education in my life. Actually i really don't know why maybe i thought accounting is something similar as mathematics because i love mathematics much in primary and secondary school time. When i start taking Diploma In Accountancy then only realize it is a horrible subject, because it has many of theory lesson not only calculation.

         In first semester, when the lesson start i realize the subject accounting are a super brain subject. There are a lot of format need to remember. Now we are taking a subject Auditing in our last semester. I have no idea with this subject, in my mind Auditing is a form to Audit the account of the firm. Auditor must make sure the financial statement was present in true and fair view and they are independent on anything.



➼ RACHEL YEAU TZE ROU

           In my family, started work as an auditor is one of my cousin and my sister was started to study accounting in secondary school since I was small. When I during my secondary school my mum starting to ask me what should I do after SPM and she started to tell me how good to be as an accountant and auditor. After my PMR, based on my result I can choose account class but I choose Geography, Art and "Perdagangan" class and I add one more subject which is account. In last 2 year in secondary school which is form 4 and 5, I went outside tuition and also study myself because that time in my school did not have any class for addition subject students. I am glad that I get "A-" in SPM even though some time I felt hard in accounting subject.
              
           I continue to choose to study account is because I decide to be a banker and because my family especially my mum was wishing me to study further in future. Study Diploma in Accountancy not only study account, we also learn some of the business subjects and the import is audit. Audit that we learn is the examination of the financial report of an organisation which is presented in the annual report by someone independent. Auditors maintain independence from management and directors so that tests and judgments are made objectively. Thus, audit is hard to study but our lecturer told us that be as an auditor is fun.