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Key Topics
Requirement
A report on Challenges faced by Contemporary Auditors.
Solution
Introduction
In this present paper, we will discuss the impact of online purchases and sales on business operations. The paper also describes the risks faced by the business, identification of risk leads to fraud in the financial statements and the identification of fraud. Auditing is defined as the systematic identification of books of accounts, statutory records, financial statements, documents, and voucher to check the true disclosure in the financial and non-financial statements of an organization. The auditing also ensures the law and regulations followed in the books of accounts. The auditors applied the formulas and evaluate the financial reports of an organization. The auditing becomes unambiguous due to which the academics started identifying the audit society. The auditing helps to manage the risk through evaluating the financial and non-financial statements which enable to control the process.
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Impact of E-business on Business operations
The emergence of purchasing and selling of goods and service over the internet impacts on the business operations. The new online technologies and internet mobile service culture has seen a proliferation in the number of cloud based accounting software (Curtis et al., 2015). The small organizations needs to know about the drawbacks of self-administered accounting software but it also helps to maintain the healthy flow of an organization. Following are the five major impacts of purchasing and selling of goods on business operations:
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Multiple compliance audits management: The changes in the purchasing of goods and services over the internet has modifies the rules and regulations which impacts on the auditing by following the multiple compliance standards. It creates a challenge for Information technology department because the audit needs to follow the multiple compliance standards.
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Inefficient Budget: At the economic downturn, the cost cutting is become the major challenge for an organization. The information technology department requires more man power for rebooting the internet problem which requires more capital. So the information technology has no particular budget due to which it creates a problem in auditing.
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Higher priorities: The rapid increase of internet use leads to increase the compliance and dilute of data due to which it impacts on the need of auditing.
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Shortcomings of native auditing: The information technology department requires more budget for operating system and others. The native auditing is mainly done for solving the problem of troubleshooting and to maintain the essence the essence of native auditing is the challenge which is faced by the auditors at the time of auditing.
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Internal policies: The purchasing and selling of goods over the internet has impacted on the internal policies of an organization which are handed down from human resource department to all the levels of an organization. The information technology department is required to work according to the internal policies in an effective and efficient manner. The auditors need to face the challenge because of lacking gap between the policies and requirement of information technology department.
Risk faced by Business
The enormous challenges are faced by the auditors at the time of auditing due to size, information sharing, and others. The purchasing and selling of goods over the internet faced different challenges such as data security, hidden costs, failure of marketing and availability of website and others. The hidden costs include the cost of custom sites, hiring deliver boy and other cost related of online transactions. The data security includes the risk of disclosing sensitive information of an organization. The market failure is the major risk and challenge faced by an organization which leads to the loss of financial resources (Borit et al., 2014). The web-hosting is the big challenge for an organization which includes the risk of failure due to mismanagement. Following are the risks which are faced by an organization while purchasing and selling goods over internet and it creates a challenge for auditors:
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1. Inaccurate data
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2. Data and system confidentiality
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3. Access of system and data by un-authorizers
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4. Transactions non repudiation
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5. Service denial
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6. Difficulty in combining the IT in an organization
The biggest challenge faced by auditors in the purchasing and selling of goods over the internet is the electronic nature of audit evidence. The sales process is recorded electronically without producing physical output. The hard copies of all the statements are not taken for the auditing purpose which creates a challenge for auditors (Boritz et al., 2016). The online business leads to less manual control due to which the auditors have less available manual control. The controls need to be integrated into the applications of electronic business. The accessing of data and finding it is another challenge which is faced by auditors. The data analysis is also the challenge faced by auditors.
Fraud in financial statements
The access to analyze the data helps to identify the fraud in the financial statements. The auditors are required to access and analyze the data which is beyond traditional audit. The purpose of auditing helps to recalculate the entire amount on order file and detection of irregulars which helps to identify the frauds and misstatements in the financial data. The data analysis audit evaluates the access control lists and identifies the duplicate user IDs, workstation IDs which enable to identify the frauds through accessing the control. The auditors calculate the interest charge in which the recalculation of 100% of interest events is calculated to compare the interest which helps to identify the fraud and misstatements in financial statements (Laxman et al., 2014). The objective of auditors is to verify the accuracy of all the online orders which includes the receiving orders, captured and invoices that enable to identify the fraud easily over the online transitions. Another objective of auditing is to access control which helps in identification of frauds. The value added objectives of auditing includes analyzing the online orders, predication of lost consumers, sum of money charged on marketing activities of online business which helps to identify the frauds related to the use of fake IDs and orders. All the data source files such as order file, invoice file, web log and others are analyzed by the auditors which enable the identification of fraud and misstatements in the Identification of fraud
The data analysis technique allows the auditors to access to myriad sources. The careful planning is required for the integration of data analysis. The examination helps to avoid common pitfalls and successful planning. The formal report is able to represent the budget and cost of the business units which helps to identify the misstatements in the reports (Kotb et al., 2014). The team of auditors integrates the data analysis which helps to identify the frauds and misstatements in the financial statements. The software vendors allow assist during the whole process of auditing which enables them to suspect each and every financial aspects of an organization. Auditing helps to analyze the financial and non-financial statements of the company. It enables to see the clear view of the financial position of the company. The inspection of business units and IT helps to see regulations and rules followed in the books of accounts in an organization. The auditing helps to recognize the invaluable part of an organization which helps to see the screenshot of financial position of the company. The auditing helps to support the strategic importance of the whole process. The audit management helps to implement and integrate the data analysis which enables to improve the financial position of the company. The auditing helps to analyze the financial statements of the company which includes the vouchers, cash books, and other financial books which identifies the fraud and misstatements of data (Islam et al., 2014). The auditors help to analyze the web server traffic and irregularities in the block of the data which helps to see the misstatements and fraud such as fake IDs.
Conclusion
The auditing is used to suspect the financial and non-financial statements of an organization. It is the systematic identification of statutory records, books of accounts, documents, books of accounts and others. The auditors help to identify the fraud and misstatements through analyzing the books of accounts. The purchasing and selling over the internet impact on the business operations due to which challenges faced by the auditor. The five challenges faced by the auditors include multiple compliance audits management, inefficient budget, higher priorities, shortcomings of native auditing, and internal policies. The risk faced by an organization include inaccurate data, data and system confidentiality, access of system and data by un-authorizers, transactional non repudiation and service denial. The major challenge faced by auditors is the electronic nature of audit evidence. The hard copies are not taken out for the specific purpose of auditing due to which the auditors faced the difficulties in suspecting the books of accounts. The frauds are identifies in the financial statements through data analysis by the auditors which helps to see the clear view of financial and non-financial statements of an organization. The auditing helps to see the entire re-calculation of order file and detection of irregularities helps to identify the frauds and misstatements in the financial statements.
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Curtis, E., Humphrey, C., & Turley, S. (2015). Standards of Innovation in Auditing. Auditing: A Journal of Practice and Theory.
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Boritz, J. E., Robinson, L. A., Wong, C., & Kochetova-Kozloski, N. (2014). Auditors’ and specialists’ views about the use of specialists during an audit. Available at SSRN 2534506.
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Laxman, S., Randles, R., & Nair, A. (2014). The fight against fraud: internal auditors can use COSO components to develop and deliver an effective fraud mitigation program. Internal Auditor, 71(1), 49-54.
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Kotb, A., Sangster, A., & Henderson, D. (2014). E-business internal audit: the elephant is still in the room!. Journal of Applied Accounting Research, 15(1), 43-63.
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Islam, S., Weippl, E. R., & Krombholz, K. (2014, December). A decision framework model for migration into cloud: Business, application, security and privacy perspectives. In Proceedings of the 16th International Conference on Information Integration and Web-based Applications & Services (pp. 185-189). ACM.
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Boritz, J. E., & White, G. (2016). Business Models and Business Model Descriptions: A Research Synthesis. Available at SSRN 2715555.
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