Week 2

School: University of California, Irvine - Course: ACCOUNTING AUDITING - Subject: Accounting

Performing an audit could be administered in one of two ways; a "planned audit" and a "surprise audit". List at least five conditions / type of issues that may exist to justify each of the stated methods of auditing. Use examples to clarify your points from the auditee's and from the auditor's stand points. Top 5 reasons and issues for "planned audits" are: 1.It is done during a specified time so everyone involved with the books can and will be around. EX: the lead accountant happens to be on an annual vacation or trip. 2.All the necessary and proper documentation will be prepared and presented at once. EX: The company would push the accounting department to have everything prepared for the auditor and hope that it would be a smooth process. 3.The financial statements provided can be fixed or adjusted to look "good". EX: Financial statements can be "cooked" to meet the company's expectation when things are truly as great as the books. 4."Planned audits" can be viewed as auditor and auditee working together to achieve a common goal. EX: Both auditor and auditee are working together to meet the common goal. 5.With the groups working together "planned audits" can be more time efficient. Top 5 reasons and issues for "surprise audits" 1.Not everyone would be available to participate if they were unaware of the audit. 2.Since no one was aware of the audit and could not plan for it, the necessary financial statements and back up documentation can be missing. 3.Results from the audit would deemed as real or close to accurate since by theory the company should not have time to "cook" the books. 4.Auditors can be viewed as a threat or an enemy because the auditees could believe that auditors are there to only find issues and things that they are doing wrong. 5."Surprise Audits" can be extremely time consuming because people are already extremely busy with their day to day activities and when a wrench like this is thrown into your day or week, it could really put people behind or in a terrible mood. https://www.qualitydigest.com/inside/quality-insider-column/internal-audit-semantics.html# https://dubeconsulting.com/top-5-reasons-conduct-audit/

Does the audit method vary with the type of the auditee's organization? (Small or large, privately held or publicly held, productions versus services... etc.). The audit method does vary depending on the type of business. Each type of business has a different type of business model that it works with. Depending on the type of business there is a different auditing method. As stated in previous weeks, the point of an audit is to make sure that the right protocols and procedures are in place. Manufacturing business audits would differ greatly than audit's done in the food industry. Different types of industries require different types of protocols and procedure. One procedure may be essential to manufacturing, but is useless under the retail sector. Auditing method also varies between big and small companies. A big company can consist of many smaller companies integrated into one. The auditing for that type of business would be more extensive and different than a single entity small business. Larger companies may require both an internal and external audit done to ensure that everything is following the proper procedure and if not, the proper procedures can be put in place.