Accounting and Auditing Tests
Unlike the private sector, all governmental entities need to be responsive to their accounting activities. For an account to audit the governmental entity, they must have an outstanding organization of keeping figures, data, and official procedures in their day-to-day accounting activities. They need a system for easily locating the information they need in their line of duty. Governmental entity accountants need to organize their auditions to maximize productivity and allocate time for continuous research and examination (Dittenhofer, 2005). The aspect of career assessment is essential in understanding and interpreting all the values associated with the selected job, which also helps in career satisfaction.
Auditors are, therefore, obliged to perform their duties to benefit the public professionally. They, thus, should not get involved in activities that may affect their professionalism. Auditors should always be independent to retain their clients and practice ethical professionalism based on accounting procedures (Carcello, 2011). Another step that auditors should take is to maintain professional and independent ethics, hence reducing the risk of losing clients and enhancing success that tends to be sustainable.
An auditing test can be defined as the possibility that a substantial blunder within an entity may not be noticed by the internal control structure that is put in place within a certain organization. With such awareness, such an entity approaches an auditor who then performs what is known as the initial assessment of auditing risk. This assessment then confirms whether the internal auditing structure used by the entity is effective while at the same time detecting elements within the auditing structure that are not up to par. Before the auditor commences carrying out the initial assessment of auditing risk, they have to be familiar with the accounting system used by the entity as well as a good understanding of the control structure put in place (Francis, 2003). Most effective audit test can notice any financial action that defects from the recommended control structures present without necessarily having an accurate measure of the errors made in the entity’s accounting records.
For the auditor to have an accurate monetary measure of these errors, they have to carry out substantive tests, which are mostly based on their judgment from their study of the tests of controls. In their evaluation, the auditor heavily relies on the accounting records they have been provided with; thus, they have to make sure that they are reliable and accurate (Schneider, 2007). To determine this, the auditor proceeds to conduct substantive tests of transactions for cash disbursements, which they can determine by carrying out substantive tests of balances in cases where these transactions affect the balances they are reviewing. A good example is the case of account receivables and inventory balances.
References
Carcello, J. V., Hermanson, R. H., & McGrath, N. T. (2011). Audit quality attributes: The perceptions of audit partners, preparers, and financial statement users. Auditing, 11(1), 1.
Dittenhofer, M. A. (2005). Behavioral aspects of government financial management. Managerial Auditing Journal, 16(8), 451-457.
Francis, J. R., Khurana, I. K., & Pereira, R. (2003). The role of accounting and auditing in corporate governance and the development of financial markets around the world. Asia-Pacific Journal of Accounting & Economics, 10(1), 1-30
Schneider, A., & Wilner, N. (2007). A test of audit deterrent to financial reporting irregularities using the randomized response technique. Accounting Review, 668-681.
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Question 
Accounting and Auditing Tests
Instructions
Answer each question in one to two paragraphs. Site sources used. At the end of each ask a proposing question.
- What characteristics should an accountant or accounting firm possess in order to properly carry out an audit of a governmental entity?
Accounting and Auditing Tests
- Taking into consideration the Government Auditing Standards, why would an independent public accountant consider it their responsibility to report suspected fraud to any person(s) or entity during the audit of a state or local government?
- Discuss the applicability of various auditing tests in a general framework of auditing procedures and auditing tests that have a more specific and defined range of applicability? For example, tests of controls are performed when the auditor is planning to rely upon internal controls thereby enabling the auditor to perform limited or moderate substantive testing. If internal controls are weak or non-existent, tests of controls may not be appropriate and substantive testing would be significantly increased. What factors may cause variation from client to client and industry to industry with respect to auditing tests?
- Define and discuss the factors to be considered in designing a sample for audit testing. Explain how the auditor will know if the sample is representative.
