Auditing Services Business Risk Evaluation

Question: Describe about the Auditing Services for Business Risk Evaluation. Answer: 1 (a) Evaluation of business risk associated with HIH made it clear that all the business risks remains associated with international, environmental, as well as domestic aspects (Margret and Hoque 2016). These risks are considered to remain associated with the recognition of Australian insurance industry and the manner in which HIH remains efficient to amend itself with the risk analysis parameters. Determining Insolvency Risk- Ample strategies can be employed for recognizing insolvency risks within which the function of risk analysis are associated with the auditing risk analysis (Abdullah et al. 2016). There exists ample wide-ranging agreement, which is vital to encompass the expertise to deal with the debts of the organization. Having the support of risks linked with insolvency along with structure of profitability there exist a need to focus hugely on business which will encompass less number of consumers to commence the sector (Lessambo 2016). Such framework is in consideration of the organizations expertise to decrease its remaining debt. This is because, it is necessary that an organizations solvency is determined which then evaluates non-financial in addition to financial factors. Analysis on Profitability and Structure Associated with it- Though there are several applicable approaches that can analyze business risks associated with HIHs, it is deemed to consider to explore the competitive environment of the sector regarding the boost in competition and increase in range of prices (Caplan and Dutta 2016). In order to explore associated risks, handling the insurance in accordance to the Australian industry happen to be considerably easier than those are new within to the industrial regulations. 1 (b) An ample risk that HIH insurance company is able to eliminate contains risk factors related to auditing. For this reason, the company needs to issue an unqualified audit based on certain financial statements. Such aspects were intended to handle planning and procedure associated with several risks associated with business that should be detected and controlled accordingly (Emmerig and Legg 2016). Control risks have several material inaccuracies that HIH Insurance was not capable to detect within its internal control systems. Results were gathered from the case of HIH indicates the accuracy and comprehensiveness of the general ledger in order to facilitate ledger recognition as well as the bank account, that HIH Insurance still did not concern to consider (Pearson 2016). Company performance is deemed to be focused on the method of substantive differential, which presents excess dependence on the external documentation method (Sirtes et al. 2016). Ledger accounts enclosure along with different bank accounts supports valuation of tangible assets within organization. Risk can be evaluated through applying several techniques based on auditing and organizational performance. Risk also includes not being aware of the inaccuracies or any material assertions (Adams 2016). It has been recognized that it is extremely vital for HIH that will ensure timely planning and eliminate the situations whereas material misstatement remains undetected quite effectively. HIH Insurance Company had certain internal documents based on which the company could not conduct applicable processes intended to address problems associated with organizational performance of company (Betta 2016). Risks within business are the uncertainties related to financial report of HIH Insurance Company in which the firm declared to maintain its solvency, asked for premiums for the liquidity factors of the organization. This encompass number of distinct policies that considers presenting the record of marine insurance conducts that largely relates to insurance professions. 2 (a) Legal liability based problem is related with unqualified audit procedure which encompass audit risk which is improperly managed by HIH Insurance. Auditors of the company are observed to have inadequate awareness on inherent risk. This is considered as unrecognized modifications facilitated by HIH Insurance in the past years (Bobtcheff et al. 2016). Auditing report was analyzed effectively which explains the auditing practices brought into practice by HIH. The auditor was inefficient in exploring the auditing conducts of HIH insurance which it can incorporate within it other practices. These problems are deemed to be linked with insufficient auditors independence that is associated with the non-auditing task performance and observing the business conduct of HIH for additional business risk (James 2016). These conducts of the company are associated with several auditing techniques with anticipated auditing risk. The reports stays associated with the determination of management to address the existing legal concern. It is considered vital to indicate that HIH Insurance needs increasing attention on the liquidity position of the insurance company within which the liquidity position remains concerned with financial and operational activities of HIH Insurance (Margret and Hoque 2016). Such risks are found to be associated to pricing capability and outstanding claims of organizations. This is in accordance with the reservation practices in order to deal and work on decisions related with investments (Chen et al. 2016). As far as the clients are concerned, the focus is hugely on the performance of HIH Insurance Company that signifies inefficient planning of goodwill, postponed acquisition expenses and enhanced tax benefits. Based on the situation it can be said that if the consumers appoint former auditors, it could have an ill impact on the independence of peripheral auditing. It is clarified that such auditors continues to maintain superior partnership with the auditing members (May 2016). Conversely, it is evident that that there is a good association among former and the present auditors for they remain proficient to recognize and address the issues associated to parties that they have and have an influence on. 2 (b) Some of the conditions that have revealed the practice of negligence conduct of HIH insurance are found to be linked with the accelerations variations made within legislations (Chen et al. 2016). HIH Insurance Company makes it clear that it deals with high risk of related with pricing, unsuitable investments and inefficient policies that depleted the financial resources of the company. Corporate Governance- HIH Insurance Company faced the risk of bankruptcy, issues of agency cost from agency conflict arising from debtors and managers of insurance firm. The case study makes it clear that the aspects those lead to a companys bankruptcy encompass few agency cost problems generated from agency conflict taking place among proprietors, debtors and companys managers (Bobtcheff et al. 2016). A large part of the problems is dependent on the changes those are practiced with the direct liability framework of the improper risk governance had resulted in improper management. The legislative alterations implementations are linked with public liabilities and have a significant role for unproductive management (Bobtcheff et al. 2016). Information collected from the case study signifies that there is faulty risk management. This is due to the reason of failure in implementing effective management practices as well as regulations. The companys management avoided carrying out strateg y evaluation to make investment by accepting risk having several information sources. Non-availability of Information Source- HIH Insurance Company presented a situation where accounting systems has vital roles that intends to ensure improved use of commercial systems. For an insurance company, it does not seem to be suitable for the non-executive directors to gather vital data that will fulfill responsibilities of their director and for this reason, responsibilities non-executive directors of an organization needs being compromised. This is because there remain no alternatives other than depending on the generated and directed accounting systems regulated by the management (Emmerig and Legg 2016). Non-executive Directors Shortfall- The case study made it clear that non-executive directors must be asked certain questions related to risks those are justified. The company has to pay an amount of dollar 1.7 million to the auditing services of Anderson and dollar 1.631 million to the secretarial company of the individual (Emmerig and Legg 2016). Auditing facilities results out from external auditors and companys directors. Whether indirectly or straightforwardly corporate governance conducts of HIH Insurance Company are found being responsible for such negligence deeds. This also effectively signifies that certain guiding regulations or action takes place due to lack in independent management analysis. 3 (a) The construction of strong relationship with services provided by non-accounting entities led to refusal concerning increase of paid auditing facilities (Abdullah et al. 2016). HIH Company decided to employ internal auditors other than appointing external auditors for these reasons: Auditors observed to be familiar to the organization Auditors are supposed to have good experience in the areas of monetary and fiscal aspects. The management focuses on conducting audit work for in order to maintain a good relationship with its external auditors (Chen et al. 2016). Auditors of the organization should maintain the professional skepticism that facilitates implementation of an organizations managerial activities. This is because the auditors and management have incapability to manage their financial statement (Abdullah et al. 2016). 3 (b) Non-auditing facilities must be offered by the organizations those regularly conduct auditing works. Such specialized non-auditing supports encompass tax advantage advices and operational consultancy. Through such facilities, the company can ensure offering both auditing and non-auditing consumer services (Sirtes et al. 2016). The company intends to rely on handling consumer responses that is the major income source. Financial reports are maintained by the auditors, which will consider the financial situation analysis. This will focus on increasing profit objective of organizations. Such advantageous facilities support the alteration in some of the false statements (Sirtes et al. 2016). The reports should consider recognizing errors of a company for the reason it supports the auditors and consultant to sustain efficient consumer information management. Such facilities allow in addressing faults and offer the management report compilation. The measures on regulatory perspective happen s to be the efficient solution in order to ensure accuracy of the financial reports in which providing such services remains of great benefit for several accounting firms (Margret and Hoque 2016). 3 (c) Case study on HIH Insurance Company signifies that the members of that organization did not complete their duties with honesty, for the reason that they offered misleading or false data on a constant basis (Margret and Hoque 2016). A large proportion of staff of the company remained involved in unethical conducts where they were not able to accomplish their organizational duties in an efficient manner. With the failure of Enron, the circumstances further worsened and situations rose where fair dealing of work paper deductions was not observed in the company and several organizational staff was held guilty (Pearson 2016). Staff of organizations requires needs to involve themselves in complying with ethical duties of the company other than managing their clients. This ethical statement ensures to maintain regulations with codes and business standards those are applicable. Information disclosure applicable to the accounting standards will be encompasses in the statement (Pearson 2016). 3 (d) HIH Insurance Company considered governance and financial compliance practices under the amendment of CLERP 9: Engagement partner needs certain regulations in order to appraise staff including the senior management employees rotation on yearly basis (James 2016). The audit partners must be involved with the board of directors of the company that might take a long time to accept the auditing activities. Such recommendations have an objective to identify and address the issues related with business groups. 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