applied research

Research Background

Accounting standard are used in the process of financial reporting and they always take the form of practicing some form of authority with their primary in accordance with the General Accepted Accounting Principles. Accounting standards always give the specific instructions on how transactions should be carried out and how other financially related events should be carried out in response to the financial statement given out to cater for them. Therefore, the major goal of such a standard is to provide the financial information to the investors who intend to spend their resources on a particular business, lenders and contributors on how to allocate their resources. In addition to this, there is an International Accounting that governs all the Accounting standard agencies around the world. The international Accounting standards were formed by the International Accounting standards Council which was responsible for the endorsement of the IASB.

Research Questions and Research Objectives

1) To identify the various rules that should always be followed in order to obtain a conclusive and transparent financial audit.

2) To enumerate the significance of having a proper accounting and financial audits to a business or organization.

List of keywords used for Literature Review

· Financial statements

· Financial ratios

· Accounting standards

· Balanced scorecard approach

Publication Details of Relevant Articles For Literature Review

In the Australian Government, the Accounting standards are always set by the Australian Accounting Standards Board which exists as an independent entity. The accounting standard issued by the board is the one that governs and makes specific modifications to accommodate the economy of the country and the legislative body of the government (Godfrey, Hodgson, Tarca, Hamilton, and Holmes, 2010). The accounting board is the one that gives the Accounting reports, the required publications which is done annually, it also governs the other minor accounting bodies and gives certification on the accounting Auditing one to various firm in the country.

Use of financial rations in Corporate Accounting

The financial information obtained could be used in accounting rations. Accounting rations are basically the groups of numbers and financial report information obtained from a company that could help with the measure of the company efficiency and the level of profitability (Kothari, Ramanna, and Skinner, 2010). Other than the accounting ratios a company could also use the multidimensional performance measurement using the balanced scorecard to evaluate the company on terms of decision making by involving managers and the employees or the use of balanced scorecard which uses a set of financial, customer or the client and the operational metrics that the organizations is often involved in.

Ethical Consideration

There are various accounting ethics that exist across all the accounting boards and these are set of rules that govern all the individuals responsible for the handling of financial related information since without the rules they could lead to abuse of the information leading to discrepancies due to manipulation of certain numbers or even loss of certain information (Larcker, and Rusticus, 2010). Ethics and the various set of rules are also required to initiate the processes of auditing and without meeting the standards or the potential requirements could lead to stopping of the auditing process.

Among the various rules that govern the auditing firm’s ethics and ethical behavior is a key factor that spells out the general principles that the auditing personnel should always abide to for a professional code of conduct (Jin, Kanagaretnam, and Lobo, 2011). The rules set by different Audit governing bodies may differ across all the countries but most of the rules are universal while some may be unique in their own way.

The core rule of audit is that of independence since this is the major rule that if found broken would impair the whole auditing process. The rule states that there should not be an existing relationship between the auditing company and the client under auditing. Therefore, should there be a mutual relationship the whole process is stopped, and a different auditing company takes over the process. There are two major types of independence in this case that is the factual independence and the appearance independence.

Types of Independence

The factual independence is in relation to the whether the client and the auditing company owns any shares or share a joint investment company, and these are often easy to know since they are made available through company registration. On the other hand, appearance independence majorly lies on the fact that the auditor or the client sharing a luxurious event at one point and maybe there is the awarding of gift which could result to tolerance during the process of auditing and breach the whole process.

Therefore, in both cases of factual and appearance independence the process of auditing is nullified, and other auditing companies are registered for the process. Moreover, there could be other forms of threats such as family threats which are majorly influenced by the long familiarity ties between the auditor and the client hence influencing some favor, the auditor may also intimidate the client by introducing a different financial statement if for example the client request to change the auditor (Kothari, Ramanna, and Skinner, 2010). There could also be a self-review threat in the case where the auditor is in charge of the bookkeeping and the auditing service hence may breach the transparency of the process. And finally, there may be the self-interest threat in the case where the auditor has a direct financial connection either in the form of owning shares with the client or has an outstanding fee from the client.

In addition to the independence rules of auditing and the client’s ethics there are also additional rules that should be adhered to by both the client and the auditing company. The client and the auditor should not at any point be engaged in the exchange of contingent fees and these are always monitored by the bank activities such as looking at the income their recent financial statements, the audit work should be done as stipulated buy the audit rules in a thoroughly manner and with no fear or favor (Larcker, and Rusticus, 2010). The auditor must also be professional in his work while showing some form of professional competence. This greatly relies on the knowledge and the level of experience the auditor has. During the process of auditing, there might be a breach of rule among the persons conducting the audits and this should always be reported with immediate effect as soon as a fellow CPA observer notices the breach. Lastly the audit must be done with highest level of confidentiality with no disclosure of any information relating to the client’s activities to the outside competitors.

Conclusion

In summary, it is always imperative to involve the organization the financial auditing at free operational business activities and whenever there is an occurrence of discrepancies of nationwide scandals that may require auditing of the company. During the process of auditing the set of rules should always be adhered to in order to come up with a transparent report after the audit.