Auditing Essay Example | Topics and Well Written Essays - 1000 words - 8

Auditing - Essay Example The following are the five main areas of high audit risk that face Havelock Europa Plc. The Company is said to provide equal opportunities to all employees for growth, training and career development regardless of age, sex, ethnic background or religion. They also consider the disadvantaged in the society and give them opportunities where they fit. In case an employee is disabled on course of duty, the company makes reasonable adjustments to accommodate such a member of staff. However, this information cannot be proved. According to the financial statements issued, it is hard to establish whether employees are remunerated fairly. Consolidated accounts make it difficult to establish whether employees from various subsidiaries are compensated fairly. The total number of employees for both 2012 and 2011 are given as 649 and 731 respectively, but the exact month when the new employees joined is hard to establish (Havelock Europa Plc 2012, P. 63). It is not sensible to assume all the new employees joined at the beginning of the year. Wages and salaries for the whole year ar e given, but auditors will be unable to determine the numbers of hours worked overtime that is usually not fixed. There is also likelihood that some of the employees being compensated exist only in books, the auditors may be unable to meet all employees especially those who do not work in the parent company (Porter et al 2008, p. 90). The financial statements presented show the values of noncurrent assets and inventory for both years (2011 and 2012). Non- current assets are reported on their deemed cost because any other value can only be an estimation (Havelock Europa Plc 2012, p. 82). The cost of the asset is then adjusted for depreciation every year using a specified formula. The risk arises in that the formula is only estimation and the auditor cannot be certain about those values. The notes to the financial statements also reveal the expected lives of both the tangible and intangible assets

Pitfalls Essay Example | Topics and Well Written Essays - 250 words

Pitfalls - Essay Example This primarily happens due to the selection of wrong statistical methods or wrong size of survey population or both. It is highly expensive to select a large survey population and conduct interviews/form fill-ups extensively. So samples are smaller than the target population. However, sophisticated methods like purposive sampling may help, but still it is important to accommodate as many respondents as possible in a given survey population. 2. Making conclusions from non random samples too can prove to be a dangerous tendency. Samples must me random. Suppose, a woolen garment manufacturer conducts a survey only in the colder countries of northern Europe. In this way, they will calculate high demands existing in the global market, if they don’t randomize. In order to randomize, they will have to interview customers in temperate regions (e.g. southern Europe) and arid regions (e.g. Sub Saharan Africa). Then only a realistic view of market demand for woolen garments can be obtained. Hence, randomization is necessary to prevent biasing, especially in the case we need globally applicable inferences. 3. Attaching importance to rare observations is a clever strategy but risky practice. If rare observations are given as much importance as random observations, general behavior of the majority of the target population may be interpreted wrongly. It is a far better idea to mark rare observations as exceptions so that they can be studied separately by the means of statistical segregation in a more controlled business environment. 4. Using poor survey methods is the worse mistake. Survey methods are crucial. For example, when research involves exploration of natural resources, data has to be collected with the help of researchers who have trekking/exploration/fieldwork expertise. In the case of intellectual property research, we would need researchers who can research on databases and patent archives. That will involve extensive Internet/library research expertise. In