Sustainability Governance Characteristics †MyAssignmenthelp.com

Question: Discuss about the Sustainability Governance Characteristics and Assurance. Answer: Introduction: It is the duty of the auditors to comply with all kind rules, regulations, principles and standards of auditing at the time of carrying on the audit operation. In this regard, the auditors of the companies needs to follow the principles of generally accepted standards of auditing profession. In this case, auditors independent is an important aspect (Arens, Elder and Beasley 2014). According to the standards and principles of auditors independence, the auditors of the companies should not have any kind of monetary or non-monetary interests in the properties of the audit clients. In addition, there must be honesty and integrity in the behaviors of the auditors. It is expected that the auditors must not be biased at the time of publishing the auditors report. In the First Situation: There are some instances where it can be seen that the auditors have provided some additional services to the audit clients apart from the audit services. These types of services are called the Non-audit services (Arruada 2013). Different kinds of non-audit services are there like tax related services, management related services, promotion of the business related service and many others. These kinds of services are provided to the clients in exchange of some monetary or non-monetary benefits. However, it can be seen that the providence of non-audit services leads to the threat of auditors independence. In this regard, one of the major facts that cannot be ignored is the impact of non-audit service on the audit profession. In this way, the quality of audit is compromised. Audit quality is one of the major dimensions that receive criticism from the stakeholders of the companies along with the audit regulators. Apart from this, advocacy threat another major aspe ct in the profession of auditing. All the auditors need to take into consideration the advocacy threat (Ojo 2013). The threat of advocacy arises when the users of the financial statements of the organizations consider that the quality of the audit report is compromised. In this regard, value, ethics and integrity are also considered with the effect of advocacy threat (Svanstrm 2013). In the Second Situation: The independence of the auditors fell into danger when the auditors of the business organizations take different kinds of financial or non-financial benefits from the audit clients that are not mentioned in the audit agreement (Blay and Geiger 2013). These kinds of benefits are not prescribed in the audit fee structure. The auditors may take different kinds of financial or non-financial benefits that are not mentioned in the audit agreement. As per the provided case study, the audit client has offered a holiday package to the audits of the company. If the auditors of the company receive the benefit of the holiday package, technically, the auditor will receive non-monetary benefit and hence, the auditors independence will be in deep danger. In case the auditor continues to take these kinds of non-monetary benefits from the audit client, the threat to the auditors independence will be starting to increase (Tepalagul and Lin 2015). In the Third Situation: According to the standards and principles of auditing, auditors cannot have any of his/her relatives employed or involved in the same business organization. As per the particular situation, the auditor has many relatives and they are spouse, children, parents, siblings and others relatives. In addition, there are various dimensions of the financial interests and they are debt guarantee, short-term securities, long-term securities, ownership of the companies and many others. As per the provided case study, it can be seen that the proposed accountant has his father holding the position of financial controller in the particular business. In this case, it is desired that the accountant will not accept the offer. However, in case the accountant accepts the particular offer, he will endanger the auditors independence. The threat of auditors independence is a major threat in the audit profession (Holland and Lane 2012). In the Fourth Situation: As per the particular situation, it can be observed that there is a strong relation or strong bonding among the clients, employees, officers, managers and directors of the business. The main bonding factor is the risk factors of the business that influences all the business members and this process align the business environment with the clients of the organization. Apart from this, most of the cases, the auditors are being accused of being too much sympathetic with the audit clients. In this case, it needs to be mentioned that the close relationship between the auditors and the audit clients helps to build a bonding of trusts between these two parties so that all the financial data and information can be fairly presented. Moreover, it can be happened that the auditors of the companies already know the information about the business clients. The auditors are highly responsible for the making of accounting entries after the calculation of the taxes. Hence, in this case, it is not convenient that the auditors do audit their own job (Arya and Glover 2014). Identification of Safeguards to the above-mentioned threats The auditors of the business organizations provide different kinds of monetary or non-monetary services to the audit clients. This process is compromising the independence of the auditors. The various safeguards from the threat of auditors independence are discussed below: Rotation of the audit partners or the staffs is one of the major ways to keep the auditors independence safe. The rotation of the audit staffs eliminates the threat of danger of knowledge and it eliminates the threat of self-centeredness. Furthermore, this process will encourage the auditors independence without any cost. On the other hand, this process will make the institutional and historical knowledge available among the audit team members. On the other hand, this will increase the quality of the audit process (Peters and Romi 2014). The next safeguard is to form an effective audit committee in the business organizations. This process will bring transparency in the total audit process. This process will work as an effective tool in the process of maintaining the auditors independence in the most appropriate way. In this regard, it is essential that the audit committee is well experienced and well qualified and they have all the necessary resources for the conduction of the audit operations. This process will help in achieving the audit objectives (Marques, Santos and Santos 2013). It is the responsibility of the auditors to contribute towards maintaining the audit quality and the independence of the auditors at the same time. In this regard, the efficient oversight of the auditors is needed in the audit process. The auditors must have the capacity to consider auditors independence from the perspective of political as well as social. On the other hand, the auditors of the organizations must bring transparency in the true and fair representation of the confidential financial data of the business organizations (Louwers et al. 2013). It is the utmost priority of the auditors to comply with all the ethical standard of the audit profession. In this regard, the auditors need to maintain the rules and regulations of Auditing Standards and the Code of Ethics. They also need to follow international high quality set of ethical auditing standards in order to avoid complexities in the audit profession (Junior, Best and Cotter 2014). Involvement of Risks with the Spare-Parts Inventory In this particular section, risk management is explained as an important element that is used to manage the inventory of the spare parts. However, it has been observed that most of the business organizations fail to manage the risks in an effective way. It can be seen that with the help of these risk management factors, the business organizations uses to reduce the risk factors to its minimum level. Some of the major risks in respect to the business organizations are commercial risks, reputational risks, health and safety risks and many others. One of the major risks is the downtime risk and due to this risk, the business organizations has to face a large amount of business risks. This types of risks happens as the business organizations fail to cope up with the technological changes in the business market and fails to manage the risks in the spare parts management. It can be seen that there are two major types of risks; they are Strategic Risks and Operational Risks. Strategic risks do not have any connection with the trade approaches of the business organizations and it does not decide that what is the right and wrong products in the market. The strategic risk has strong connection with the management of inventory of the spare parts as strategic risk helps to manage the inventory of the spare parts in the most effective way (Gates, Nicolas and Walker 2012). In this regard, the business organizations uses to select ad-hoc facilities and with the help of this strategic risk, the business organizations select that what products need to purchase from the market. In the process of strategic risk management, the business organizations use to appoint experienced managers who will provide his/her valuable judgment mainly in the issues of daily procedural. In order to manage the spare parts, the managers need to select important aspects so that the financial management processes can become standardized. At the same time, the business managers need to inv est more in the financial sectors in order to manage the spare part inventory of the businesses. On the other hand, operational risk has its connection with the aspect of operational downtime. In this aspect, operational risk is related with the selected approaches and the level of execution process of the risk management (Blunden and Thirlwell 2012). Some of the business organizations fail in this particular risk management process In this regard, the business organizations that fails to execute in the effective way, must adopt the policy of strategic management. In this regard, the business organizations needs to develop the strategy for stocking at the time of the process of decision making. It is the role of the business organizations to manage the operational risk of the business organizations. For this purpose, the business organizations need to assure it that all the business strategies are properly implemented. Hence, all the business organizations need to manage all the business risks that are strategic risks and operational risk. Audit risks and Its Impact on Account Balance In this particular section, inherent risk is associated with the associated risks. The main reason of the occurrence of the inherent risk is omission or error in the financial or accounting information of the financial statements (Knechel and Salterio 2016). These errors or omissions are done due to the lack of internal control of the business organizations. Another major reason behind the occurrence of inherent risk is the presence of complex business entries and the need for high level of experts judgments in some particulars position. Various types of risks involved in the businesses have different types of negative impacts on the account balances and the amount of receivables. In this case, it needs to be mentioned that there are some specific accounts that have significant connection with the inherent risk; example of such account is the management of stocks of the business. Therefore, it largely affects the account balances of the business organizations. Various kinds of associated risks involve two kinds of major risks; they are operational risks and detection risks. In this case, there is a possibility that the auditors will always not be able to detect misstated data and information in the financial statements. In this particular case, the business organizations use to analyze various aspects of the process of risk management along with some substantive test. In case of the detection risks, the auditors of the organizations conclude that there is not any kind of significant error in the financial statements of the business organizations. In this process, the auditors have to assess the accountants of the business organizations and they have to implement all the account balances. Hence, it can be said that most of the accountants in the business organization are susceptible and the inherent risk is associated with various accounts like revenue account, purchase account, inventory account, sales account and many others (Hopkin 2017) . References Arens, A., Elder, R. and Beasley, M., 2014. Auditing and assurance services-An integrated approach; includes coverage of international standards and global auditing issues, in addition to coverage of.Boston: Aufl. Arruada, B., 2013.The economics of audit quality: Private incentives and the regulation of audit and non-audit services. Springer Science Business Media. Arya, A. and Glover, J., 2014. Auditor independence revisited.Journal of accounting, auditing finance,29(2), pp.188-198. Blay, A.D. and Geiger, M.A., 2013. Auditor fees and auditor independence: Evidence from going concern reporting decisions.Contemporary Accounting Research,30(2), pp.579-606. 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