Category: Auditing

Introduction to the service and environmental scan of the target country

Introduction

The modern age is characterized by a great rivalry. That is why it is vital for every company, which is going to start a new business or open its new department in a new country, aiming to introduce a new product or service, to analyze every aspect of this process. It is important to take into account the peculiarities of the culture of people who comprise the targeted audience of a new service. Moreover, the activity of a company should be organized in accordance with laws and ethical business norms which exist in the country where a new department is going to be opened. With this in mind, the necessity of a good analysis of peculiarities of the market is obvious.

Resting on this fact, deep and precise analysis of the main conditions of the market in the United Arab Emirates is made, and some main suggestions connected with the promotion of a new service are outlined.

Overview of the country

Economy

From the very beginning of the analysis, it should be said that the UAE seems to be one of the best possible choices for the promotion of a new service, especially connected with digital devices. There are several reasons for this statement. The UAE takes seventh place among the worlds richest states (Richest Countries in the World n.d.). It means that people who live there can afford almost any purchase, and the only thing is to create a good marketing strategy. Moreover, the majority of citizens of the UAE have a high yearly income, that is why they have to organize the distribution of their funds in order to obtain benefits. With this in mind, a service which we are going to introduce to this market will meet a great demand.

Culture

First of all, it should be said that the UAE is an Arab state. It means that it has an absolutely different culture, which might seem strange and confusing for representatives of the Western world. Obviously, it can influence sales and demand for a service or product greatly. If it does not take into account traditional gender roles peculiar for Arabic states, a product is doomed to failure. Moreover, it can evoke protests, which can lead to the collapse of a company. That is why a new good should first of all be aimed at men, as they are usually the main buyers in the Arab world. Moreover, a new service should take into account the religiosity of people in the UAE. It is vital not to hurt the religious feeling of a targeted audience.

Policy

Moreover, there is one more factor which should be minded while planning a new marketing strategy. Peculiarities of the legislative system of a country are also of great importance. A state can regulate the market in order to promote the development of its own manufacturers and business. Under these conditions, some additional taxes can be provided. That is why the UAE can be called an ideal place for the development of a new business project. The UAEs economy is steadily expanding, and new investments are appreciated (Doing business in The United Arab Emirates n.d.). There are seven Emirates with a developed infrastructure that are interested in foreign investments and companies. Abu Dhabi is usually considered to be the best place for the business as it has a well-developed infrastructure and provides a great number of opportunities.

Market audit, preliminary marketing strategy, and plan for the service

Market audit

The first important thing which should be taken into account is the local market. It is obvious that the more companies suggest the same services, the lower the chances a new one has. That is why it is vital to investigate the demand for a good and the number of existing providers of the service. Resting on this fact, it is possible to say that the UAEs market is not overfilled with the suggestions of the same service as we are going to introduce (Why Start a Business in the UAE? n.d.). That is why it seems to be the best place for the further development of a service.

Description of a service

The project we are going to introduce to the new market is called Square Register. It is the perfect point-of-sale system, available in the App Store and Google Play. Its designed to run on a smartphone or tablet, on your counter or on the go (Square Register n.d., para. 1). Moreover, this software provides different ways of managing all the finances of the owner. It can be a very convenient application for people who have to work with money and their distribution. This service also takes care of digital receipts, inventory, and sales reports and provides valuable analytics and feedback (Square Register n.d.). With this in mind, it is possible to say that it can be very convenient for business owners.

Main steps

There are several possible steps to make this product popular. First of all, it is obvious that a good advertising company is absolutely necessary. Taking into account a great number of different digital devices which citizen of the UAE have, the Internet and applications for mobile devices seem to be the best choice for it. It is possible to add already existing advertising movies to some popular websites. Moreover, the accent should be made on the onliness of this service and its innovational character for customers to feel as proud owners of something unique. Furthermore, taking into account peculiarities of the culture of the UAE, it is possible to say that the idea of the unique character of service will be rather beneficial.

Another important step is to guarantee its availability and ease of use. It should be understandable enough for people to be able to use it under different conditions. The next step in the plan should be a bright presentation of the software in some trading center with a perfect demonstration of its possibilities and benefits. Moreover, some limited versions can be distributed free of charge for people to understand the advantages of their usage. Having used it for several days, potential buyers will have to buy the full version, which will provide even more possibilities for managing their business and saving time and efforts.

Reference List

Doing business in The United Arab Emirates n.d., Out-Law. 2015. Web.

Richest Countries in the World n.d. Web.

Square Register n.d. Web.

Why Start a Business in the UAE? n.d., Startupoerseas. Web.

Executive Summary

The Gap (Gap) is a well known name in the retailing world for clothing and related accessories for men, women and kids. Sold under the reputed brand names like Gap, banana republic, old navy and piperlime range of footwear. Primarily operating in North America, the company operates more than 3,100 stores worldwide, having stores in United States, Canada, the United Kingdom, France, Ireland and Japan¹.

Besides this, the company has an online presence as well, which makes it accessible to markets across the geographical boundaries. During the 53 weeks ended in February 2007, company recorded revenues worth $15,943 million, a decrease from the corresponding period in 2006². In fact the company saw similar downtrend in revenues during the FY ended January 2006, when the revenue figures came down by about 1.5% from the 2005 figures. The net profit figures also saw corresponding decline during this period. This is a testimony to the kind of competition the company has been facing during the last couple of years. This calls for some adjustments and reviews of the policies being adopted by the company.

Companys Purpose and Values

Gap Inc. takes pride in calling itself a brand-builder and creating emotional connections with customers around the world through inspiring product design, unique store experiences and compelling marketing.

• Companys purpose³ is, To make it easy for you to express your personal style throughout your life.
• Values guiding the companys business operations are; integrity, respect, open-mindedness, quality and balance.

With this purpose and value configuration the company offers a wide variety of products like Apparel, Shoes, Accessories, Intimate apparel and Personal care products with the availability of brands like Gap, GapKids, babyGap, GapBody, Banana Republic, Old Navy and Forth &Towne

Stakeholders

For any organisation to work, a number of stakeholders have to pool their efforts. Terry & Franklin (1994) define management as a distinct process consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human beings and other resources. Management therefore involves a coordinated approach taking care of all the factors affecting the business operations. Functioning of an organisation is mainly affected by two types of factors;

• Internal: These are the factors like the strengths of the organisation, in terms of its finances, human resources, management, strategies etc. These factors can be controlled well by the organisation.
• External: These are the factors on which an organisation may not be able to exert much of its control. These include, the legal and political scene prevailing within the state/ country of its operations, number and types of competitors, suppliers in the market, terms and conditions from financial institutions, alternative products available in the market, newer technological innovations etc.

For Gap Inc. the key internal stakeholders are the more than 150,000 employees around the world and its shareholders with the task of management being performed by a dedicated lead by Glenn K. Murphy, the Chairman and Chief Executive Officer. The executive team includes;

• Jack Calhoun  President, Banana Republic.
• John Ermatinger  President, Japan.
• Marka Hansen  President, Gap.
• Toby Lenk  President, Gap Inc. Direct.
• Art Peck  EVP, Strategy & Operations.
• Stan Raggio  SVP, Gap International Sourcing.
• Dawn Robertson  President, Old Navy.
• Eva Sage-Gavin  EVP, Human Resources.
• Lauri M. Shanahan  Chief Legal & Administrative Officer.
• Sabrina Simmons  EVP and Acting Chief Financial Officer.
• Stephen Sunnucks  President, Europe.
• Michael B. Tasooji  EVP and Chief Information Officer.
• Tom Wyatt  President, Gap Inc. Outlet.

Gap-SWOT analysis

• Strengths: Strong brand identity; wide network of stores; more than 40 years of experience in the business.
• Weaknesses: Declining profits in the recent past; Concentration in North America
• Opportunities: Growth in online business; lucrative markets of India and China; Launch of newer brands in the recent past.
• Threats: Increasing competition; availability of a number of other brands; counterfeit products

Strategies for Future

In view of the above analysis, it is quite clear that Gap has the strength to become a leading brand in the market, but it needs to set its house in order, by setting priorities for the immediate as well as for the long term future. Huge market potential in the South Asian region in general and in India and China in particular needs to be tapped by adopting appropriate market penetration strategies.

References

Terry, George R and Franklin, Stephen G. (1994). Principles of Management. Richard D Irwin Inc. USA.

Gap Inc (2008). Web.

Datamonitor (2006). Gap Inc  Company Profile. Datamonitor Americas, NY.

Introduction

Fraud is one of the major problems faced by organizations and financial institutions. The main aim of financial institutions and other companies is to make profit with minimum cost. However, there are some instances where most companies have done projects at higher cost than they anticipated and therefore the projects have resulted in losses rather than profits (Carey, Tanewski and Simnett, 2000). Likewise, most financial institutions have collapsed due to lack of funds or experiencing losses rather than profits. Studies have shown that losses that most financial institutions and other companies have incurred have been caused by fraud. Some development projects have also stalled around the world because of fraud. To prevent further losses in financial companies, government institutions and other organizations, financial auditing should be considered (Subramaniam and Ching, 2006).

Description of fraud and auditing

Financial audits are very useful because they ensure credibility of companies and organizations where money is involved. Audit reports can make investors know whether their investments are safe or not. At the same time, stakeholders in any business venture can know the state of their investment after auditing has been done. Any person who may want to commit financial crime can be afraid of the action that might be taken if an audit report reveals that funds have been misused.

Auditing can simply be described a process of checking financial statements to ascertain their credibility (Dunn, 2004). If any fraud has been committed within an organization then it can be detected through auditing and an audit report made public to relevant people. Fraud is a way in which an individual or a group of individuals can dishonestly benefit from value of money or any other property that is intended for a particular purpose. Fraud can further be described to cover explanations of the actions of corruption and misappropriation of funds. For example, when a construction of an infrastructure such as a road or a dam is being funded by public funds it is usually a big project which must involve a lot of funds. Some engineers involved in such projects may estimate the prices of construction materials to be more than the real market prices of the construction materials and even go ahead to make quotations using the inflated prices. Such engineers can then find a way of benefiting from the extra funds they quoted. This is a typical example of misappropriation of funds or basically fraud. Such vices can only be detected and controlled through auditing.

Roles of internal and external auditors

It is therefore very important to study auditing because as an auditor, a person is able to appropriately advice investors depending on how the funds have been used within the investment. If bad reports have been received from auditors, investors can decide on which actions to take so as to avoid further losses that may occur within the investment. Credibility of financial institutions can be known by the public and thus any person who wants to make investment can choose a credible institution that has been audited (Gramling, Maletta and Schneider, 2004). On the other hand, medical profession is also a good one because medical practitioners usually save some of the lives that could have otherwise been lost. In a free market economy (a market where individuals are free to set prices of their goods and services), a private medical practitioner may decide the amount of money to charge patients. In most medical organizations and public hospitals there are standard payments depending on the type of services offered. Such medical organizations and hospitals require auditors so that funds are not misused. This implies that both auditing and medical professions are important and anyone willing to study any of them should be encouraged to do so.

Organizations should have internal auditors to keep on checking and detecting frauds within the organizations. This can ensure that funds within organizations are only used for the intended purposes (Holtfreter, 2004). An auditor is an independent individual who counterchecks financial statements of an organization or a business entity to verify whether the financial status represented in the financial statements are true or false. A big business can set up a team of auditors to work as an independent unit. Most finance companies in New Zealand have their internal auditors (Holtfreter, 2004). There is high likelihood that the finance companies in which the parents had their investments had internal auditors. The finance companies may have collapsed because the independency of the internal auditors was compromised. Auditors should be allowed to be independent when carrying out an audit and when writing audit reports (Gay and Simnett, 2009). If any individual influences the audit process within a company, the work of auditors can not reflect the real financial situation of the company and thus a company may collapse.

The fact that some audited finance companies collapsed in New Zealand and many people lost their investments should not worry people to an extent of losing trust in auditors. Auditing is a profession that should be practiced in environments that allow independency of auditors so as to preserve the integrity of auditing processes and be trusted by investors. Internal audit units are very important in companies because they are used to oversee the activities of top management teams in companies. For example, in a company such as a finance company in New Zealand Chief Executive Officer (C.E.O) is usually the top management team. An audit unit is usually a department that reports to the board of directors but should be under C.E.O. This means that audit unit should be independent so as to oversee the activities of every department including the financial activities of the Chief Executive Officer in a company.

Apart from internal auditors, companies and organizations should hire services of external auditors to conduct auditing (Dunn, 2004). This should happen once in a while so that reports of external auditors can be compared with those of internal auditors. In New Zealand there are private auditing firms that can be hired by companies and organizations so as to carry out financial auditing (Holtfreter, 2004). External auditors should also be allowed to carry out their activities without any influence from the company or organization that is supposed to be audited. An audit report should be made available to the stakeholders of a company so as to know the financial state of their investments. This is a sure way of ensuring that investors do not lose their investments due to fraudulent deals.

Reasons for inviting external auditors

The importance of external auditors is that they can bring to light fraudulent deals that have been covered by internal auditors. I strongly feel that if the parents could have invested in finance companies that had internal auditors and also allowed external auditors within their premises then the parents could not have lost their investments. The three companies might have been earlier audited as it was claimed but the auditors could have been internal auditors who were also involved in extorting money from other investors within the three financial companies. A report by Ramsey showed internal auditors who did not do their work professionally also led to corporate collapses outside Australia. Internal auditors contributed to collapse of companies in New Zealand and corporate collapses overseas (Gay and Simnett, 2009).

Findings of survey conducted by KPMG

A survey conducted in the year 2004 by a popular auditing firm KPMG revealed that most citizens in New Zealand prefer auditing to be done by registered external auditing firms but not internal auditors within organizations or companies. The survey also revealed that there was a general perception that internal auditors were in most cases involved in fraudulent deals with top managements of most companies (Carey, Tanewski and Simnett, 2000). It is therefore necessary to have internal auditors but at the same time hire services of credible auditing firm so as to build trust of investors in finance companies.

Conclusion

Auditing firms should have staff members that have good knowledge of business operations. Staff members should be able to carry out their duties professionally and even present their reports in an objective manner so that they can earn more trust from business individuals and the public at large. This implies that staff members of any auditing firm should have high degree of integrity, honesty and even professional competence because these are the values which can make their findings to be trusted by relevant authorities and individuals (Gay and Simnett, 2009). It is therefore very important to do auditing in any company and organization where money is involved so as to protect investors from losing their investments due to fraudulent deals that could have been detected and appropriate measures taken. It is on this basis that I am encouraging investors to trust services offered by credible auditing firms and respond appropriately to reports by auditors.

Reference List

Carey, P., Tanewski, G. and Simnett, R. (2000). Voluntary demand for internal and auditing literature and directions for future research. Journal of Accounting 19 (supplement): 37-51.

Dunn, P. (2004). The impact of insider power on fraudulent financial reporting. Journal of Management 30 (3): 397-412.

Gay, G. and Simnett, R. (2009). Auditing and assurance service in Australia, 4^th Edition. Sydney: McGraw-Hill.

Gramling, A., Maletta, J. and Schneider, B. (2004). The role of the external auditing by family businesses. Auditing: A Journal of Practice & Theory Literature 23: 194- 244.

Holtfreter, K. (2004). Fraud in US organizations: An examination of control mechanisms.

internal audit function in corporate governance: A synthesis of the extant internal Journal of Financial Crime 12 (1): 88-95.

Subramaniam, P. and Ching, (2006). Internal audit outsourcing in Australia. Accounting and Finance 46 (1): 11-30.

Inherit risk is set for audit objectives for segments rather than for overall audit because of misstatements at the objectives levels. This type of risk means that the reports have material misstatements regardless of the internal controls in place (Inherent risk vs. control risk: Whats the difference?, 2020). Misstatements happen at the objective level within a segment, and therefore, it is necessary to determine the risks for individual segments rather than for the entire audit. Notably, inherit risks are unavoidable, and therefore, the auditor must ensure that they are detected, and sufficient evidence is accumulated to illustrate the problem (Examples of inherent risk, 2019). Therefore, the auditor needs to examine each segment separately to determine if there was an inherent error or not since the characteristics of the segments and the complexity of operations in each vary.

When the inherent risk changes from medium to high for an audit objective, the amount of evidence that the auditor must collect increases. This is necessary to ensure that the auditor has enough evidence to show that the misstatements actually occurred (Tuovila, 2020). Moreover, the ability to set risk at different levels for different segments allows the auditor to determine the amount of evidence they will need to collect at each level. For example, when a financial statement is complex, the inherent risk happens due to factors other than those related to an error of control. This can be an omission or a mistake that is linked to the complexity of this statement. More specifically, if the company states that its debt risk is below 60%, it is placed in a medium risk category, and the amount of evidence needed to examine the financial situation is limited. However, if the auditor discovers that, in fact, the risk is at 75%, which is a high-risk situation, the amount of evidence needed will be much higher.

References

Examples of inherent risk. (2019). Web.

Inherent risk vs. control risk: Whats the difference? (2020). Web.

Tuovila, A. (2020). Inherent risk. Investopedia. Web.

Introduction

A coding audit is the process of official examination and validation of the medical record documentation and coding that is conducted regularly. It is necessary for ensuring compliance of the system with established standards and is considered to be a good quality assurance activity intended to improve accuracy. A coding audit plan is a set of milestones that are to be implemented before, during, and after the audit. It consists of the steps outlined below that comprise the complete process of auditing.

Identification of ones responsible for coding audit conducting that can be external or internal staff. Development of the scope of the coding audit, which includes its setting, such as inpatient, outpatient, or physician office, and determination of an audit size expressed in the volume of records. Per OIG recommendations, five to ten random charts per physician and up to 20 charts per audited time is the appropriate size (Bryant, 2020).

It is also possible to use the rule of thumb for the percentage of charts that indicates the necessity to review 10% of the eligible charts. At this stage, the frequency of audits or time frame is also determined and can be quarterly, monthly, or other. A coding variance or error should also be determined, the proposed value for which is usually 95% (Bryant, 2020). In the third stage, auditing resources and tools should be determined. The instances are codebooks, OIG work plan, ICD-10-CM/PCS guidance, and others.

Then, an auditing function that is chart review is performed while documenting findings on an audit worksheet for further explanation and justification. In the next step, an audit summary is created that includes patterns, trends, recommendations, and the date of the next coding audit planned. It also should include a verbal presentation of findings and a narrative report. Coding staff should be provided time for generating input and response to the audit. The purpose of a coding audit is to improve the coding process. Therefore, corrective action and resolution of variances should be implemented along with defining systemic patterns or trends for future consideration and the following audits. Finally, the employees concerned, such as CDI staff and physicians, should be educated and supported based on the results of the audit.

The Use of Office of Inspector General Work Plan

The Office of Inspectors Generas (OIG) work plan is intended to set projects such as audits and evaluations during the fiscal year. It presents processes conducted by the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection (Work Plan, n.d.). Web-based work plan issued quarterly, ensuring that it is aligned with the work planning process. Newly initiated items are added, based on mandatory requirements for OIG reviews, such as laws and regulations.

There are three categories for projects: initiated which implies that a project is expected to be completed, in development, which means a determination of a projects scope, and planned which indicates that the project is identified (Work Plan, n.d.). It is necessary to review the work plan regularly to ensure compliance with the latest standards, as projects can be added, updated, canceled, or terminated at any time.

The use of the OIG work plan is explained by the need for quality assurance specialists to be familiar with the federal; governments perspective as they determine how the auditing process is to be conducted. The work plan also outlines expectations for upcoming management and performance challenges. It implies that this resource is important as a referential one for healthcare compliance programs. The other resources that should be implemented during coding audit plan preparations are the coding Clinic, the ICD-10-CM/PCS Official Guidelines for Coding and Reporting, AMAs CPT Assistant, and many others (Medicare Web, 2018).

They provide an insight into updated code conditions and procedures. Without familiarising with such resources, an auditor cant identify the core issues and mistakes made by coders. Therefore, a work plan and other resources are to be utilized while preparing an auditing plan for compliance with the latest standards and best practices.

Policies and Procedures to Monitor Abuse or Fraudulent Trends

It is possible to determine the phenomena of abuse and fraudulent trend and explain how it is related to an audit. Medical fraud is referred to as tendencies to submit false claims, receive or pay remuneration, and make prohibited referrals. For instance, ordering medically unnecessary items for patients is a fraud (Medicare Learning Network, 2021). Simultaneously, Medicare abuse describes practices that result in unnecessary costs to Medicare programs and does not meet professionally recognized standards of care. There are the following sets of policies and rules to prevent abuse and fraud and be considered during audit plan development and implementation. False Claims Act, Anti-Kickback Statute, Physician Self0Referral Law, Social Security Act, and the United States Criminal Code are the federal laws utilized while ensure accurate coding and billing (Medicare Learning Network, 2021, p. 8). Consideration of these laws is a key to fraud and abuse prevention.

In addition, the following contractor efforts are intended to prevent adverse trends: Recovery Audit Program, Comprehensive Error Rate Testing, Unified Program Integrity, Medicare Drug Integrity, and others (Medicare Learning Network, 2021, p. 18). The control of documentation done by auditors is a necessary part of verifying compliance with those requirements. In the above-mentioned coding audit plan, the necessity to educate healthcare staff is outlined. It is a part of the auditing to train personnel about the law and policies.

Interrelationships Between the Providers and Payers in Audits

In audits, payers are the ones who set service rates, collect payments, and process and pay provider claims, while providers are the ones offering services, like clinics. During audits, it is necessary to verify that claims submitted have the required supporting documentation, such as invoices, records, and others. The absence of them may be an indicator of intentional fraud or abuse or an unintentional mistake.

Providers are audited to ensure that there are no overpayments and decrease the number of inappropriate Medicaid claims paid. The reason to examine a provider is to detect inadequate documentation, upcoding, inappropriate billing, coinsurance, deductibles, and other issues that must be addressed (Medicare Learning Network, 2021). For this purpose, different forms of audits are conducted, such as pre or post-payment ones. They enable to examine every stage of the prose of healthcare providing to prevent cases of fraud and abuse. Therefore, payers and providers have interrelationships based on the provision of paid medical services, which is a reason for fraud or abuse and should be prevented by auditing.

References

Bryant, G. (2020). Coding Audits: A Compliance Necessity. ICD10Monitor. Web.

Medicare Learning Network (2021). Medicare Fraud & Abuse: Prevent, Detect, Report. CMS. Web.

Medicare Web (2018). Q&A: First steps in preparing for a coding audit. RevenueCycleAdvisor. Web.

Work Plan. (n.d.). Web.

Leslie Fay discovered in 1992 that the companys corporate controller, along with some other employees, had committed a serious auditing fraud that showed inflated profits. When these irregularities were found, the company had already been knee-deep in debt as there were losses of around $81 million dollars. This led to the company filing bankruptcy to protect itself against creditors.

If the Sarbanes-Oxley Act (SOX) had been enacted during the Leslie Fays era it would have been able to discover the irregularities much sooner. First, SOX, which was enacted in 2002, requires CEOs and CFOs of public companies to take explicit responsibility for their companys financial statement and for establishing and maintaining internal control.

Therefore, if SOX has been around the major provision that executives and financial officers had to sign off on financial statements would mean that Polishan and Pomerantz could not argue that it was Kenia himself who perpetrated the fraud, as it would be their responsibility to vouch for the veracity of the financial statements. Additionally, the steeper penalties for committing such fraud could potentially have dissuaded Polishan from pursuing the fraud in the first place (as it is he was only fined $900 and sentenced to 9 years in prison).

Second, SOX has mandatory auditing practices of having an internal control system and independent auditors checking the presence of those controls. With internal controls such as random checking of transaction and running them through controls, irregularities such as the entries on the cost side that had been doctored to show profits can be detected. Also the requirement that large companies have their internal control policies regularly certified by an external auditor may have prevented the fraud. Further, the requirement of performing a Business Risk Assessment could also possibly have helped BDEO Seidman identify that Leslie Fay was a riskier client.

However, it must not be forgotten that this is how SOX is meant to work in theory, while how SOX actually fares in practice can only be seen after implementation of the law. The reason for this statement is because every company has a different culture and a different way of conducting business, which in some cases may actually affect proper implementation of SOX. Additionally, unethical behavior can occur at all levels and therefore some people may still be able to penetrate the many layers of auditing protection provided by SOX to doctor financial statements. Hence some people have argued that it is debatable whether accounting irregularities would be prevented or identified sooner with SOX.

There are 3 general types of audit test that would have capture the errors and the fraud: risk assessment procedures, test of controls, and substantive procedures. Since the main fraudulent activities was Leslie Fays overstating in inventory at the end of the period and Polishans forging of inventory tag for nonexistent products, increasing the number of dresses on hand, and fabricating bogus in-transit inventory to overstate inventory, the best way to find these irregularities is on sight inspection.

The auditors should have taken it upon themselves to personally verify that the inventory that was claimed to exist was actually in stock. Another issue is that Leslie Fay had been ignoring sales discount on outstanding receivables to boost revenues. Interviews of manufacturing personnel or even sales personnel would have help capture this error.

Finally, an overall analysis of Leslie Fays suspiciously healthy ratios and financials could have indicated to auditors that there would be significant misstatements. If the auditor were doing Lesley Fays ratios from multiple years, it would help detect the suspicious ratios such as the constant gross margins over the 5 year period (1987-1991) as well as the fact that low total asset turnover was recorded while still generating a high return on assets (ROA).

Audit Planning and the components of audit plan

Audit planning involves coming up with the overall audit strategy to be used in carrying out the audit engagement. An audit strategy needs to be set where the firm will identify the scope and timing of the audit. This is done by referring to the terms of engagement. The plan includes the objectives of the audit. The audit plan should contain the audit procedures that will be used to assess the risk in the organisation. The nature, extent and timing of the procedures should be stated. They should also be sufficient and effective to assess the risk. It should also document further audit procedures to be carried out at the assertion level for the different material classes of transactions.

Thirdly it should include details on how the work of other auditors or experts. The plan should have information such the nature of the business and its operations. The auditors need to identify the risk areas. Any complex aspect of the business should also be highlighted. There will be a budget of the resources expected to be used for example staff, time and money for administrative purposes. Audit planning is important as it ensures that attention is paid to the critical areas (Collings, 2010).

The materiality level is set during the planning stage. The areas which are more prone to material misstatements are identified. The audit manager also determines the audit team that will handle the assignment. He will need the right number of people with the appropriate skills, experience and knowledge. The auditors also on how the review of the audit work of the audit staff will be carried out. The complexity of the audit and the risk in financial misstatements will determine the nature, timing and extent of the reviews. If the auditors have never audited the company before they will need to get an understanding of the entity and the environment in which the company operates in.

Planning also assists the team to create adequate time to work, coordinate and consult with the former auditors, internal auditors and experts in technical areas. The previous audit reports done will be analysed to see the key issues that emerged during the last audit. Where it is an initial audit for the auditors they will need to verify the opening balances of the financial statements. Overall the audit plan assists the audit team manage the audit assignment and do it in an effective and efficient manner. The audit plan and strategy is not static and may at times change due to unforeseen circumstances.

The Audit Risk Model

The audit risk refers to where an auditor states the financial statements are free from financial misstatements yet that is not true. It can also happen when the auditor rejects financial statements that are free from misstatements. The risk model however ignores this error though. It can happen due to auditor performing tests on an unrepresentative sample (Woodhead, 1997). The audit risk model includes three levels of risk.

There is control risk where in a company the misstatements in the financial statements will not be detected by the internal controls of the company. In planning the audit, the internal controls of the company will be assessed to see whether they are adequate and sufficient to prevent errors and frauds in the company. On determining level of assurance to place on internal controls may involve examining the documents used to perform transactions to see whether internal controls are being adhered to and recalculating various transactions to see whether the system is calculating them correctly. The management in setting internal controls should be performing continuous risk assessments on the company operations. This process should be credible and receive positive reviews from regulatory bodies (Busby & Hughes, 2009).

Can the internal controls be circumvented thru collusion or abused by management? Where there are indicators of fraud, it will have an impact on the audit planning and fraud risk assessment procedures (Graham & Bedard, 2003). There is detection risk which measures the probability that the auditor will not detect errors and misstatements in the financial statements when performing the audit. In planning, this will be tackled by the audit company ensuring that there is proper audit planning, collection of sufficient audit evidence and having proper working papers. There is also inherent risk which is the probability of material misstatements in financial statements due to the nature of the company operations and its environment.

This involves looking at the nature of business and factors affecting it for example technology, complexity, economic and competitive factors and any undue pressure on management. The formulae for the audit risk model is the multiplicative model of Detection Risk *Control Risk*Inherent risk (Pine, 2008)

Risk Assessment and Audit Procedures

In auditing the Tutti Fruity Limited I will identify the risk areas and the factors that highlight these areas as critical. There are audit activities that will be carried out in these areas as follows:

References

Busby, G. & Hughes, E. (2009). Credibility in Risk Assessment: A Normative Approach. International Journal of Accounting, Auditing and Performance Management, vol 6, no 4, pg 508-527.

Collings, S. (2010). The Importance of Audit Planning (Online). Accountancy Students. Web.

Graham, L. & Bedard J. (2003). Fraud Risk and Audit Planning. International Journal of Auditing, volume 7, issue 1, pg 55-70.

Pine, B. (2008) A Risk-Based Approach to Auditing Financial Statements. Acca. Web.

Woodhead, A. (1997). The Other Audit Risk: Impact of False Rejection on Audit Planning. Managerial Auditing Journal, vol. 12, issue 1, pg 4-8.

Introduction

External audit is a strategic management tool that aims at understanding features affecting a business but an individual business cannot control. In an external audit, the focus is on factors that affect a business but the business has nothing much it can do regarding their effects.

External factors include among others political stability/instability in a county, technological developments, computer invention, population compositions and foreign competition. Ford is an automobile company in United States of America that have been affected positively and negatively by external factors. This paper discusses external audit for strategic management of Ford Company in the United States of America.

The process of organizing an external audit

To gather as much information as possible, the management should undertake the process with as many competent employees as possible. It should also analyze both published and unpublished data which will assist it in appreciating the need the prevailing conditions. The following process is followed;

• Gathering of information.
• Testing data validity.
• Interpolating and analyzing information gotten.
• Making strategic decision based on the information gotten.

The nature of external audit

An external audit addresses five area, they are;

• Economic factors.
• Social and cultural factors.
• Political/governmental structures.
• Technology and innovations and
• Competitive forces.

The factors may affects a business either negatively to positively, to illustrate how this is attained this paper will analyze threats and opportunities of external forces to Ford company;

Ford Company

Ford motor company was established in June 16, 1903, by twelve business associates with Henry Ford as the most influential. It is an automobile company with head quarters in Dearborn, Michigan (US) (Hoovers, Inc, 2010).

Through the years of operation, there are different external factors that have affected the company and its processes. These factors have changed the way the company conducts its processes (Ford Company Limited official website, 2010). These factors are in the larger united State of America and the world in general. They include;

Opportunities offered by External forces

There are different opportunities that external environment have offered to Ford Company and the company has taken the advantage;

Technological change

The world is experiencing a rapid technological change; this is brought about by the use of computers in different sectors of a business (E*TRADE Financial Corporation official website, 2010). Ford Company has been forced by the prevailing conditions to adopt the changes; for example the company has a website where a customer can log in and communicate directly to the company.

These services are available for 24 hours in seven days. In line with the same, the company has embraced computerized marketing and advertisement where it sells its products all over the world through the internet (Fred, 2008).

Population increase

United States has had an increased population, with the greatest number being youth. As a result the company has been faced with a changing demand of its products. This has lead to development of various models. Models are sometimes rebranded while others are just improved to meet the needs of changing customer trends; currently the company has the following brands; Aston Martin, Lincoln, Mazda, Mercury and Volvo, Ford and Jaguar (Ford Company Limited official website, 2010).

Managerial processes developments

The model of management has changed with increased enlightened people; customers are continuously demanding for better treatments form companies in the way they are served and the production processes involved. Currently social corporate responsibility management, ethical business products and customer care services have taken center stage.

The company has embarked on corporate social responsibilities, it practices in environmental management exercises like tree planting, engage in clean technology among others. This is in the efforts to meet track with changing need/demand from customers (Haberbeg & Rieple, 2001)

International and national legislations/regulations

The government of united states is increasingly adopting laws and regulation aimed at ensuring that business are conducted effectively, standards have been reviewed and compliance with the treads is important. An Article by Bell, 2010 in Money central says that there is a change in taxation policies in United States and businesses and individuals are left with no option other than comply with the set laws.

On the international, United States has been a signatory of various international treaties. An example of such treaty is Kyoto protocol which requires companies to minimize the amount of green house gases produced from their processes. In this response Ford Company has automated its processes and developed new disposal measures. It has also increased fuel efficiency of its products (Donaldson, 1995).

Social status/ living conditions

United States living conditions are on the rise; this has lead to an increased demand to the companys products. As more people are getting stable jobs, the need for a motor vehicle is increased. Well structured financial institutions have also assisted people to purchase motor vehicles through loan facilities. This has worked to the benefit of the company.

Threats offered by External Forces

The company has suffered a number of threats from the outside world; this is in the following areas;

Foreign competition

Foreign competition is competition from companies situated in other countries than in United States. The motor industry is targeting international markets with their custom made products aimed at reaching more customers. Internationally Toyota Company in Japan is the largest motor industry followed by General motors; they have entered United States market offering stiff competition to Ford Company.

In the efforts to remain competitive, the company has embarked on making products that give more satisfaction than its competitors however in some countries, it has not been able to compete effectively; it has been withdrawn from the markets in such areas. An example is in 2008, when the company was forced to sell its United Kingdom branch to Tata limited of India; the sold branch was concentrating on making of Jaguar and Land Rover (Ford Company Limited official website, 2010).

Global financial crisis

The world is experiencing global financial crisis which started in 2007, the crisis has affected businesses negatively. Drawbaugh, 2010, in his article in Reuters is of the opinion that the economy is not fully recovered. Ford Company is not left either; the companys sales have reduced with time (Ford Company Limited official website 2010).

This is despite various improvement processes undertaken in the companys products. The company has no control of global crisis and thus it is left with no option other than suffer hard economic times. Associated Press, 2010, is of the opinion that the situation is changing.

Conclusion and recommendation

Businesses do not operate in a vacuum but in environments, these environments have factors that affect a business. These are external factors which must be considered in strategic management. Recognizing the effect that external environment has on a business assists management to remain competitive and devise measures aimed at mitigating any potential loss.

Some of external factors include; Social status/ living conditions, International/national legislations/regulations, Managerial processes developments Global financial crisis, foreign competition, Population increase, and technological change. Ford Company has been in operation since 1903 and has faced changed external environments.

References

Associated Press. (2010). Euro steady at $1.3642 after better US data. Web.

Bell, K. (2010). If you moved after filing your 2008 return and never gave the IRS your new address, some of the $123.5 million in unclaimed tax refunds might be yours. Web.

Donaldson, G. (1995). A New Tool for Boards: The Strategic Audit, Harvard Business Review, July-August, pp. 99-107.

Drawbaugh, G. (2010). Economy still needs reinforcement: Geithner. Reuters. Web.

E*TRADE Financial Corporation official website. (2010). Web.

Ford Company Limited official website. (2010). Ford . Web.

Fred, D. (2008). Strategic Management: Concepts and Cases. New Jersey: Pearson Education.

Haberbeg, A. and Rieple, A. (2001). The Strategic Management of Organisations. Prentice Hall, London.

Hoovers, Inc. (2010). Ford Motor Company. Web.

External factors affecting Ford Company

The ethical standards of auditing are the independence, competence, conscientiousness, and objectivity of the auditor. In carrying out their professional duties, the auditor should be guided by the standards established by professional audit associations. It is also necessary to observe the following ethical principles: independence, honesty, objectivity, professional competence and integrity, confidentiality, and professional skepticism (Duska, et al., 2018). At the same time, the independence of the auditor implies the freedom of the auditor from influence, pressure, control, both from the audited entity and from any third parties. This independence means the absence of any financial or property interest of the auditor in the audited firm.

Thus, in the case under consideration, Thorne should not accept the proposed audit fee arrangement, otherwise, it will be a manifestation of special interest. The auditor should plan and perform the audit with a degree of professional skepticism, being aware that circumstances that give rise to a sound distortion of the financial statements may exist. Exhibiting professional skepticism means that the auditor critically evaluates the weight of the audit evidence obtained and carefully examines any of it. The evidence may include those materials that contradict any documents or statements of management or casts doubt on the reliability of such documents or statements. For example, if the auditor determines that management is under pressure to meet certain profit expectations, there is risk management will overstate sales by inappropriately recognizing revenue from sales on terms that effectively exclude revenue recognition.

In performing inquiries and other audit procedures, the auditor should not assume that management is dishonest, but, at the same time, should not assume that management and those charged with governance are unquestionably honest. Thus, managements statements do not replace the need to obtain sufficient appropriate audit evidence to draw reasonable conclusions on which to base the auditors opinion. The auditors duty should not be limited only to meeting the interests of clients ordering and paying for their services. An independent audit contributes to the organization of normal relationships between economic entities, maintains the reliability of financial information, and raises the level of trust between market entities, thereby contributing to the formation of civilized relations.

References

Duska, R. F., Duska, B. S., & Kury, R. (2018). Accounting ethics (3^rd ed.). John Wiley & Sons.

Introduction

For automated cleaning, thermal or chemical disinfection, and drying of reusable general surgical instruments prior to sterilization in outpatient/same-day surgery departments, surgical centers, and ambulatory care centers, a variety of Washer-Disinfectors (WS) are in use. This audit report reviews a Yearly Validation And Re- Performance Qualification Tests on a Getinge Decomat 8666 Washer-Disinfector (WD), Serial No. 80338, Unit Number 3, for Sterile Services Department of Holby City Hospital. The reviewed test program was required by senior management to demonstrate compliance with published HTM 2030, BS EN ISO 15883, BS EN ISO 13485 and ISO TR 14969:2005 standards and other relevant standards or guidance documents. The review includes reporting perceived deficiencies of the tests, recommendation of necessary additional investigation or testing, and consideration of whether the data reported would justify the use of the WD for processing the instruments for laparoscopic cholecystectomy.

Details and Analysis of the Yearly Validation and Re-Performance Quantification Tests on the Getinge Decomat 8666 Washer-Disinfector (WD)

In Declarations, it is stated that the Washer-Disinfector (WD) met the requirements of HTM 2030 Validation and Verification except for any limitations detailed. However, limitations should not be acceptable in reports dealing with medical devices (see and ISO TR 14969:2005). The declaration statements it has been tested in accordance with the HTM 2030 and did/did not perform satisfactorily automatic test cycles giving accurate/inaccurate temperature recordings. It meets/fails to meet the test requirements of HTM and can/cannot be returned to service are vague and meaningless since the words did not, inaccurate, fails, cannot were not crossed out or deleted from the report to indicate that the Washer-Disinfector (WD) actually passed (or did not pass  whichever is the case) the Yearly Validation and Re-Performance Qualification Tests. Furthermore, no Limitations/Remarks, etc, are given in the report (the space is left blank) though the Washer-Disnfector (WD) test person signed the declaration form.

In the Test Report Sheet dated 28th February 2002, it is reported that the results of the test confirmed that all the requirements of HTM 2030 were met and the Washer-Disinfector (WD) was fit for use on Surgical Instruments program, The requirements of HTM 2030 carried out, i.e., yearly safety checks, automatic control tests, verification of calibration of WD instrument, water system, drainage, doors and door interlocks, water vapor discharge tests, aerosol discharge tests, chemical additive dosing tests, load carriers, tests for air quality, cleaning efficacy tests, over-temperature cut-out tests, thermometric tests for thermal disinfection, load dryness tests, and process residues are simply listed under observations without stating that the detailed test results are given in another specified section of the report.

For the water systems, it is stated that a third party carried out the tests without giving appropriate details of the third party. Though it is stated that the test report showing results are included in Plant History Record File, the details or location of the file is not mentioned in the report for easy cross-reference.

In the Conclusions section of the Test Report Sheet, it is stated that the Water System results indicated that the RO water system was not operating correctly  further investigations were required and yet the details of the required further investioations is not given and when they were to be done not stated.

The givenTest Report Sheets for Anaesthetic Accessories and Surgical Instruments, respectively, are more or less similar. The only differences are that for Anaesthetic Accessories, Performance Quantification Tests are reported to have been carried out by the user, and also as expected there were differences in Automaic Control Tests and Thermostatic Tests.

In the Test Sequence Sheets for Anaesthetic Accessories and Surgical Instruments, respectively, it is clear that the tests were done and the WD equipment passed the yearly safety checks, automatic control tests (wash time 1m 06s, wash temp 60^oC, disinfect time 3m 2s and disinfect temp 75^oC for Anaesthetic Accessories; and wash time 1m 04s, wash temp 60^oC, disinfect time 1m 02s and disinfect temp 93^oC for Surgical Instuments), cleaning efficiency tests (photos were attached to show actual cleaning efficiency of the Surgical Instruments, Anaesthetic Accessories and the WD cabinets), thermostatic tests (measured temp 75.2^oC, indicated temp 74.0^oC, recorded temp 74.0^oC, carrier temp [U] 75.4^oC, carrier temp [M] 75.2^oC, and carrier temp [L] 75.4^oC for Anaesthetic Accessories; and measured temp 94.9^oC, indicated temp 93.0^oC, recorded temp 93.8^oC, carrier temp [U] 94.7^oC, carrier temp [M] 94.5^oC, and carrier temp [L] 94.7^oC for for Surgical Instruments), load dryness tests, and process residues and performance qualification tests (stated for the Anaesthetic Accesories to have been carried out by the user). For aerosol discharge and over-temp cut out tests, it is indicated that they were Not Applicable (N/A) though reasons should have been given in the report.

In page 1 of the Yearly Records Sheets for week 48, it is shown that the following tests were carried out: maintenance, weekly safety checks (7.8 to 7.9  the meaning of these figures are not explained in the report), and weekly record cheeks.

Water quality tests showed that water harness (soft water) was 4mg/l (max limit 210mg/l), water hardness (RO water) was 0mg/l (max limit 210mg/l), water conductivity (soft water) was 764uscm-1 (max limit 300uscm-1) meaning that the tested water conductivity value was higher than the max limit  yet no explanation is given for this in the report, water conductivity (RO water) was 7.7uscm-1 (max limit 10uscm-1), and that the system analysis failed, and also that water system results indicated that the RO water system was not working correctly and further investigation was required. It would have been better to give details of these required further investigations.

On pages 2 to 4 in the Yearly Records Sheet, detailed results of the tests are also given and sentinel logger charts are provided for temperatures and pump pressure validation test records. Certificates of Calibration for high-temperature loggers are also given and showed that they were in good working condition.

Compliance with Published HTM 2030 and BS EN ISO 15883 Standards

In HTM 2030 requirements for validation and verification of washer-disinfectors, there are statutory and personnel requirements (e.g. safety, training and competency aspects) (EN 554:1994) which seemingly were not addressed in the report indicating noncomplete compliance. As per BS EN ISO 15883-1: 2009, part 1, which covers general requirements, terms and definitions and tests (ISO 15883-1: 2006), certificate of validation and requalification for the WD was authorized and done appropriately and signed by relevant staff which is commendable. However, in annexes C and D of BS EN ISO 15883-1: 2009, part 1, which covers general requirements, terms and definitions and tests (ISO 15883-1: 2006), there are tests for the detection and assessment of residual proteinaceous contamination and also assessment of microbial contamination of WD (ISO 11737-2: ISO 11737-1) which should have been carried out.

As per BS EN ISO 15883-3: 2009 which cover requirements and tests for WDs employing thermal disinfection for human waste containers (ISO 15883-3: 2006) in annex A, drain seal integrity, flushing of non-absorbent materials, flushing of absorbent materials, and safety of loading and emptying of containers tests were either not done or if they were done then the report has not adequately explained them.

Consideration of Whether the Data Reported Would Justify the Use of the WD for Processing Instruments for Laparoscopic Cholecystectomy

The surgery to remove the gallbladder is called a cholecystectomy. An incision of about 5 to 8 inches long or an abdominal cut is used to remove the gall bladder. Open cholecystectomy involves making a cut on the right side just below the ribs which extends to the area just below the waist (Kapoor, 2001). However, laparoscopic cholecystectomy which is performed through many small incisions as opposed to one large incision uses a laparoscope which is able to show the inside of the body and presents a less invasive way of removing the gall bladder. (Kapoor, 2007). The data reported for the WD may not justify its use for some of the instruments for laparoscopic cholecystectomy such as veress needle, suction-irrigation devices and the thin tubular laparoscope which may contain thermo-labile components and may need chemical disinfection unless the tested WD has specific software or program for chemical disinfection as well  details which are unfortunately not given in the report (see BS EN ISO 15883-4:2009, part 4: requirements and tests for WDs employing chemical disinfection for thermolabile endoscopes [ISO 15883-4:2008]; PINEAU et al., 1997). Chemical disinfection also requires additional microbiological tests for efficacy of chemical disinfection of the load and microbiological evaluation of disinfection of liquid transport systems (see BS ISO 15883-4: 2009  ISO 15883-4: 2008).

Compliance with Published BS EN ISO 13485 and ISO TR 14969:2005 Standards, and Conclusions

In BS EN ISO 13485 (CEN ISO/TR 14969): medical devices  quality management systems  a requirement for regulatory purposes, the WD equipment can be categorized as a medical device since it is used for disinfection of medical devices or equipment. In that case, its cabinet and the instruments that have been disinfected should meet the requirements for sterility. In that case, also, microbiological contamination and the presence of proteinaceous materials tests should have been done. Also, the presence and poof of use of relevant manuals and documents, and records of use, for the WD operation should have been determined as part of the validation and verification tests and evaluation. The report should have also contained information on infrastructure and wok environment pertaining to the location and use of the WD. There should also have been mention of quality management systems in place for operation and use of the WD.

References

BS EN ISO 15883-1: 2009, part 1, which covers general requirements, terms and definitions and tests (ISO 15883-1: 2006)

BS EN ISO 15883-3: 2009 which cover requirements and tests for WDs employing thermal disinfection for human waste containers (ISO 15883-3: 2006)

BS EN ISO 15883-4: 2009 (ISO 15883-4: 2008). Part 4: Requirements and tests for washer-disinfectors employing chemical disinfection for a thermolabile endoscope.

EN 554:1994, Sterilization of medical devices  Validation and routine control of sterilization by moist heat.

Health Technical Memorandum 2030, Washer-disinfectors  Validation and verification  The Stationery Office, London. 1997 ISBN 0-11-322071-5

ISO 11737-1, Sterilization of medical devices  Microbiological methods  Part 1: Determination of a population of microorganisms on products.

ISO 11737-2, Sterilization of medical devices  Microbiological methods  Part 2: Tests of sterility performed in the validation of a sterilization process.

ISO 13485:2003 (BS EN ISO 13485; CEN ISO/TR 14969), Medical devices  Quality management systems  Requirements for regulatory purposes

KAPOOR VK. Bile duct injury repair  When? What? Who? Journal of HBP Surgery 2007; 14: 476-9.

KAPOOR VK. Incidental gall bladder cancer. American Journal of Gastroenterology 2001; 96: 627-629.

PINEAU, L., ROQUES, C., LUE, J., MICHEL, G. Automatic WD for flexible endoscopes  A new valuation process endoscopy. 1997; 29, pp. 372-377