Two accounting Discussions

Ebony Harris 

RE: Week 2 Discussion

Hello Professor/Classmates,

The first step in an audit is to decide to bid or accept/refuse a new or continuance of a current client.  In making such a decision, I would want to know what the company does.  Knowing the type of company and how it works would inform me if the firm is capable of performing audit procedures effectively. For example: Bidding on a new engagement for auditing work for a farming company may seem pleasant and profitable, but if the auditing staff has no experience or knowledge of farms, the firm has “bit off more than it can chew.”

Understanding the type of industry is a start, but I would also like to obtain some background information on the company.  Does the company tend to comply with legal and ethical requirements?  Does my firm have prior knowledge that the client lacks integrity? 

I would most definitely need to and want to gather proper and necessary information through communication from third parties (banks, lawyers), previous auditors, client’s industry peers, personnel, and even articles found in social media, magazines, and newspapers about the company.  Information gathered by such communication (written or oral) from prior auditors would inform of past disagreements of accounting policies, conversations with those charged with governance regarding fraud and noncompliance, client integrity, and the priors auditor’s understanding of change of auditors.  Gathering such information would give a good view of management before operations, attitudes toward different actions involved in their business, and their overall outlook for the company and compliance.

 

Reference

Johnson, R., & Wiley, L. (2019). Auditing: A practical approach with data analytics

(1st ed.). Hoboken, New Jersey:  Wiley. 

Claudia Jones 

RE: Week 2 Discussion

ACC 562 Discussion Week 2

To Bid or not to Bid

Public companies are required by law to perform an audit yearly. Audits performed for these firms can be very time consuming depending on the industry and the amount of money that was earned during the prior year. Before bidding on a contract to win an audit with such a business the auditor must carefully check all aspects required and then decide if the firm will accept the job or decline it. In order to bid on the audit first determine what industry the company does business in. For instance, if your audit fir usually is well prepared and known for an expert in manufacturing firms than a software company has different operating procedures and the auditors may not have the needed knowhow for this particular industry. It is important to check that auditors in the firm have the expertise to perform the service or have access to specialists that can assist in the audit. before bidding the audit, firm should retrieve the financial statements of prior years. This can give important insight to the client’s financial situation such as bankruptcies or fraud that could be found as misstatements. Another source to consider are auditors that handled the financial statements before. Contacting a previously used firm and find out vital information can help to avoid problems when the audit is conducted. Audit risk is especially important to conceptualize. Testing the integrity of the management, directors, and key stakeholders. Checking to see if management has adequate internal controls. These are all factors to consider before bidding on a n audit. The audit process can be lucrative but not every client should be automatically be taken just because the check written for the job has a lot of zeros. If the risks out way the benefit of the audit such as fraud and misstatements if taking a new client, it can compromise the entire firm and also the integrity of the audit profession.