Modern Social Auditing and Assurance Services

Question: Discuss about the Modern Social Auditing and Assurance Services. Answer: Introduction The overall motive behind the development of this paper is getting to understand the effects of internet in the sale/purchase of products. Therefore, in this paper we will show the challenges emerging as a result of internet usage leading to risks in businesses. When risk develops managers tend to commit misstatements in financial statements to hide the companys reputation. Therefore, this paper will aim at developing ways in which an auditor can identify such risks. Usage of internet in purchase/selling of goods The usage of internet in business has paved the way for several pathway breaking innovations in daily business operations. Therefore, through internet business have been able to purchase and sell goods via a process known as e-commerce. Hence, E-commerce is perceived to be the use of electronic technology via the internet to conduct business operations (Boynton Johnson, 2006). Therefore, the internet is regarded as a good source where business can be conducted. Use f internet in purchase and sale of goods tends to have certain implications in business operations which are: The use of technology in the purchase of goods and services tends to increase the potential of small business operations reach new economic markets. Rather than the aspect of selling goods in the local market, small businesses are now able to reach the regional, national and international market which means the levels of growth and profits will increase (Cameron, 2007). The internet allows firms to develop their websites. Thus it becomes easy for customers to order online 24/7. Therefore, we could perceive that the internet provides ease advertisement of products increasing business market share. The Internet also tends to increase the productivity process of employees in daily business operation. This is viable as a result of computer programs and softwares which enhance purchase and selling of products. Hence, when purchasing and selling goods via the internet, it tends to reduce the amount of human capital that is needed in daily business operation, as the levels of efficiency among employees increases because of the availability of sufficient information. When purchasing/ selling goods via the internet there is the likelihood of insecurity issues emerging. At times online transactions tend to be risk inherent and there is no guarantee of security. Hence, shows that though there is success viability through internet usage. There is the likelihood of negative impacts emerging. We could, therefore, expect that through the internet there is the viability of effectiveness and efficiency in business or negative effects may emerge. Challenges/disadvantage of internet usage The Internet is regarded as an important tool that tends to enhance business operations. It has uniquely increased the viability of purchasing and selling goods via the online platform. Therefore, though we embrace the aspects of technology it also has certain aspects of negative disadvantages. Therefore, the risks businesses face when selling and purchasing products will be as discussed below. Firstly, when trying to sell and purchase products online, one needs adequate skills to keep check of the clients portals. Hence, this means that for a business with no adequate skills on how to run these systems, they quickly get filled up with chores and challenges as a result of the failed systems. Hence, this means that businesses will be unable to conduct their daily operations, in turn, the loss levels will escalate. Secondly, for the development of purchasing and selling portals for clients there needs to be adequate skilled personnel that can run the systems. It is noted that in such cases skilled personnel means expensive to pay for the human capital. Therefore, businesses suffer from high human capital needed so that there can be the viability of smooth running of the systems (Reding, 2007). Thirdly, the introduction of internet has eased the viability of purchase and sale of goods and services. From such a reason what becomes certain is that businesses have become productive. Hence, the increased levels of competitiveness mean that the level of competitiveness has been termed to be unfair because of internet advancement (Gay Simnett, 2012). This affects most businesses operations because they cant understand the best strategy to defeat their rivals. Lastly, when developing purchase and selling portals one requires to conduct an effective survey of the target market, hence this means that adequate planning is needed. Therefore, when businesses fail to properly plan there is the viability of failure in their business operations. Why risks develop fraud/misstatement in financial statements As outlined above businesses are vulnerable and whenever they suffer from a risk, the managers tend to fraud or embezzle the financial statements so as to make the company appear profitable which not the case. Hence, on the basis of our above discussion we could consider the fact selling and purchasing has created some opportunities. Here, if a firm has a weak internal control system, poor security over the business property or little fear exposure and likelihood of detection or there could be even unclear policies which result in unexpected behaviour (Knechel, 2007). Therefore, the creation of opportunity by the internet and firms which such weak system employees are likely to take any chance of committing fraud. From, this it is likely that there may be fraud in the accounting systems as a result of opportunities brought about by the internet. When purchasing/selling goods via the internet employees or managers may feel the need of rationalising, by rationalisation, we mean that they commit an act of fraud or misstatements convincing themselves that they have earned the money. Hence, the act of plundering amounts as rewards via the internet systems tends to affect firms discretion and loyalty. Therefore, we are likely to experience misstatements in financial statements, as a result of the development of these internet systems. When selling/ purchasing goods via the internet and conducting an audit there may be the development of inherent limitations, therefore when inherent limitation emerges as an auditor, it becomes hard to offer reasonable assurance of truth and fairness of the financial statement. In this case, auditors are unable to know if there are misstatements in the financial systems because of difficulty in knowing if the provided data is the correct (Scott Jacka, 2006). Therefore, based on the above discussion it becomes evident that selling/purchasing goods via the internet might also be a risk factor. How to identify risk/misstatements as an auditor As an auditor, the unique way of identifying fraud as indicated in above is by assessing the material misstatements through prioritisation. The ISA 315 Act states that risk identified tends to be significant as it requires special audit consideration. Therefore, in the identification of misstatement, it is just a matter of judgement as to whether the risk constituted is significant and matters such as complexity of transactions are dealt with (Leung, 2011). Therefore, whether there is the risk of fraud the participation of related parties and whether the transaction is from the outside normal course, this should be greatly considered. It is also recommended that when significant risks are identified in financial statements, there is the need of understanding the relevant control accounts activities. Hence, auditors response to the identified risk then aims at dealing with the actions that should be enhanced in relation to the misstatements identified (Louwers, 2005). On the other hand, if auditor aims at identifying misstatements through controls he must ensure that there is adequate testing and substantive procedures should be undertaken in response to the misstatements at assertion level. Another fact that auditors must consider is that of being reasonably assured. It is often recommended that when conducting an audit procedure ensures that you obtain a reasonable assurance in the financial files for the purpose of detecting fraud and misstatements in financial records (Eilifsen et al, 2014). Such an act tends to reduce instances of inherent limitations on auditors. Thus we would expect that the levels of fraud detection are high. Conclusion This paper tends to provide key insights of internet usage in the purchase/sales of products. As an auditor, the paper shows the viability that exist in internet usage and the challenges that may arise when using the internet in conduction of transactions. The paper also shows that risk develop due to internet usage and through this paper, it tends to provide auditors with the procedures that could be helpful in the identification of the risk pertained. References Messier, W. (2013).Mp auditing assurance services + acl software cd-rom: a systematic approach. [Place of publication not identified], Irwin Mcgraw-Hill. Cameron, R. (2007).Modern auditing assurance services: study guide. Milton, Qld, John Wiley Sons. Scott, P. R., Jacka, J. M. (2011).Auditing social media: a governance and risk guide. Hoboken, N.J., Wiley. Boynton, W. C., Johnson, R. N. (2006).Modern auditing: assurance services and the integrity of financial reporting. Hoboken, NJ, Wiley. Knechel, W. R. (2007).Auditing: assurance risk. Mason, OH, Thomson/South-Western. Reding, K. F. (2007).Internal auditing: assurance consulting services. Altomonte Springs, Fla, Institute of Internal Auditors, Research Foundation. Gay, G. E., Simnett, R. (2012).Auditing and assurance services in Australia. North Ryde, N.S.W., McGraw-Hill Education. Leung, P. (2011).Modern auditing assurance services. Milton, Qld, John Wiley. Louwers, T. J. (2005).Auditing and assurance services. New York, McGraw-Hill. Eilifsen, A., Messier, J., William F., Glover, S. M., Prawitt, D. F. (2014).Auditing assurance services. London, McGraw-Hill.