Comparison of IT Governance and Control

Question: Discuss about the Comparison of IT Governance and Control. Answer: Introduction: According to Generally Accepted Accounting Principles (GAAP), auditors are liable to evaluate the overall data of the company and detect any kind of misstatement or manipulation, which might hinder its financial condition. As auditors are liable for stating qualified or unqualified as per the rules laid down by GAAP, King Queen has mainly depicted that the financials of Impulse Pty ltd are unqualified. The unqualified report of the auditor mainly states the Impulse Pyt Ltd has accordingly depicted the overall financial position of the company. In this context, Becker and Bailey (2014) mentioned that qualified and unqualified variation mainly states that the company has correctly presented the value in their financial report, which is according to the GAAP rules. Nevertheless, Chambers and Odar (2015) argued that some auditors to increase their financial gain use unethical methods and provide companies with unqualified quotations, whose financial report is not presented according to the GAAP rules. Furthermore, the case study also depicts that the auditors have provided Impulse Pyt Ltd with unqualified audio report. This depiction mainly states that the company has prepared their financial report according to GAAP rules, where the liquidation problem is also identified in the financial report. The intense liquidation problems, which is identified in the financial report was not actually analysed by EFL before involving in the investment scope. Furthermore, the company has not been using effective asset valuation, which needed an audit report for analysing financial report. Christensen, Glover and Wood (2012) stated that auditors are mainly responsible for any kind of valuation, which is needed for detecting the financial condition of the company. On the other hand, Cohen and Simnett (2014) argued that some auditors use qualified denotation for companies, who does not present adequate financial data in their report. Moreover, the liquidation problems of the Impulse Pty Ltd mainly states that the company has fallen short in supporting their short-term obligations as debtors and inventory turner declined over the period. This reduction in cash flow mainly reduced the companys ability to support its payments, which led to sever liquidation problems. Decaux and Sarens (2015) mentioned that companies with the help of auditors are able to mask their liquidation problems and project financially healthy condition. However, the relevant rules and cases could be identified, which might help in understanding the actual liability of King Queen auditing firm. In this context, Duncan and Whittington (2014) cited that liability limitation agreements (LLAs) presented in 2008 mainly helps the auditors to reduce any kind of litigations, which might be presented companies having loss due to its audit report. The overall unqualified report presented by King Queen has for the financial year 2012, does not reflect any kind of liquidation problems, which is been faced by the company. However, the major issues of the liquidation mainly resulted in loss, which was acquired by EFL. Specific case like Dick Smith and Lehman Brothers scandal mainly resulted in overall loss, which was incurred by many investors. In addition, the directors and CEOs were prosecuted in the court, while the auditors were mere fined a small amount. The overall decision taken by the regulatory mainly states that auditors were not liable for paying any kind of loss, which is been acquired by investors. Moreover, the financial condition is mainly reflected in their financial report, which was utilised by the EFL in conducting their investments. This wrong depiction in their financial report mainly states the negligence in of auditors responsibility, which was conducted by King Queen auditing firm. Erickson, Goldman and Stekelberg (2015) argued that auditing firm mainly represents authenticity in the financial report, which could be manipulated for nay monetary gain. Specific cases like Hedley Byrne and Co Ltd v Heller and Partners (1964) AC 465 and Law Society vs. KPMG Peat Marwick and Ot hers; CHD 3 NOV, 1999 mainly represents influence that was flamed by auditors in making adequate investment decisions. These case also represents the negligence of the auditors responsibility, which resulted in scandals and losses incurred by auditors. Thus, after the analysis of the two cases and the liability limitation agreements (LLAs) it could be stated that auditors are partially liable for the misstatements conducted by company. However, after the augmentation of liability limitation agreements (LLAs) in 2008 the auditors are mainly exempted in Australia regarding any kind of misjudgement or negligence found in the financial audit. Graham (2015) mentioned that after the augmentation of LLAs the investors mainly uses auditors report as reference to complete the financial evaluation before conducting any type of investment. Depicting a different scenario where EFL contacted King Queen before making their investment decision: The change in the overall scenario mainly reflects upon the confidentially regulations stated by GAAP in their rulebook. King Queen is liable to keep the financial reports of Impulse Pyt ltd confidential from EFL as they are third party investors. In addition, the approach of EFL mainly states that the auditing company is liable to analyse the financial condition of Impulse and present viability of its financial position. Homb et al. (2014) cited that investors mainly chooses the services of auditors to analyse the actual financial condition of the company and present the future scope and return, which could be provide by the investment. Moreover, as EFl has approach King Queen auditing firm for analysing the financial condition of the Impulse Pyt Ltd and after that if the loss happens then the auditing firm is liable to EFl. The request for gathering information and presenting the financials report as per GAAP rule is adequate and by doing so King Queen is not violating the confidentially law as its only presenting and highlighting what is actually present in the financial report and no internal data is been leaked. In this scenario, King Queen auditing firm will be liable to pay the losses incurred by EFL from the investment conducted from their data base. Knechel (2016) mentioned that Goldman Sachs were liable to pay heft among of money to its investors as wring financial report and analysis was conducted, which resulted in heavy losses. Thus it could be evaluated that King Queen are liable to EFL if their were contacted before investment was conducted. Evaluating perceived and actual interdependence and explaining its significance: Internal and external auditors are mainly provided with perceived and actual auditing independence, which mainly depicts the financial interest of the business. Independence of auditors mainly states that no external influence is been forced on to the auditors, during the process of conducting the financial report. Lad and Dahl (2014) mentioned that non-influenced auditors mainly present the actual financial condition of the company in the auditors report, which could be used by investors in making adequate financial decisions. The following are the viable independence, which is been provided to the auditors during the audit process. This type of independence is mainly provided to auditors for perceiving any kind of judgment, which might be taken during the auditing report. In addition, the perceived independence is mainly used in valuing the asset of the company or any other judgement, which requires perception. However, increased dependence in perception calculation might increase the chance of misstatement analysed by the auditors, which in turn might hamper the financial report. Melidis et al. (2014) mentioned that companies sometimes allow perception method to inflate their assets valuation and increase the overall financial condition. However, Sandberg et al. (2016) argued that inflated values in financial report mainly instigate insolvency conditions of the company, which might hamper both auditors and companies reputation among investors. The independence, which does not restrict the auditors in making their full valuation and depicting the adequate financial condition, is known as actual independence. This type of independence is mainly required for each auditor, which mainly help the investors make adequate financial decision by evaluating the overall risk to their investment. Shah and Jarzabkowski (2013) argued that due to lucrative offers auditors does not conduct the auditing process in actual independence, as the company in form or other influences them. Moreover, the actual independence of the auditors mainly relies on the attitude towards the overall situation and the willingness to present authentic and viable report to relevant users. In this context, Shah and Nair (2013) mentioned that due to strict laws and regulations auditors are mainly relying on actual independence during their auditing process or else it will attract punishment, which might negatively reflect on the career. Providing professional standards and regulatory requirements for independent situations depicted in the scenario: The first scenario mainly states that Bob needs to conduct the assignment provided by its university, which needs an in-depth analysis of the financial position of Club Casino. However, during the analyses of the financial information Bob mainly used the companys internal information in its report, which was needed as per the assignment brief. The use of internal data is mainly an auditing breach, which is been conducted Bob and is punishable by law. As per the law, publishing the auditing report without prior notice to the company might attract litigation, which might hamper reputation and tarnish viability of the persons audit report. Becker and Bailey (2014) mentioned that strict auditing rules are mainly enforced to prohibit competitors from taking advantage of companies secrets and hamper their overall market position. The second situation mainly states that Wendy is been acting as the company secretary in absence of an appointed secretary, as asked by Ace limited. Wendy has been acting as the company secretary for past six months only, which clearly violates the rules laid down by GAAP. AS per the guidelines, the company are liable to follow the rules and regulation laid by GAAP, which mainly states that a company must have a proper secretary in hand, who will be handing the internal matter of the company. However, after the violation of the rules Wendy must be asked to leave the post immediately and the secretarial position must be filled with some qualified. Chambers and Odar (2015) stated that GAAP rules and regulations are mainly there for preventing any mishap, which might hamper overall performance of the company. The third scenario mainly states that Leo has been appointed during the vacation as a temporary auditor for Precision Machinery limited. The appointment is mainly conducted as he Leo is the eldest son of the foreman and has been involved in the internal audit system. In addition, this type of decision, which is been conducted mainly violates the regulations that might be depicted by GAAP. The overall rules of the auditor members mainly states that any family members, staff, or acquaintance could not be appointed in the internal audit report. The appointment of Leo in the internal auditor procedure mainly violates the rules laid down by GAAP. Christensen, Glover and Wood (2012) stated that investors mainly evaluate the persons, which are involved in the audit procedure for detecting the viability of the financial report. Either father or Leo could resign from their position for compensating the violation, which is been conducted by the company in their internal audit procedure. The fourth scenario mainly states that Classic Reproduction Pty Limited is not able to pay the full audit dues to the Chan Associates, which is been compensated by provided furniture worth 50% and 25% stake in its shares. This type of arrangement mainly violates the auditing principle of not taking any kind of bribe from the client. In addition, the overall acceptance of change could also be not conducted, as the company is still not incorporated (Cohen and Simnett 2014). Thus, the auditing firm mainly needs to return the overall furniture and shares, which is been provided by Classic Reproduction Pty Limited in exchange for their services. 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