Systems Audit and Assurance for Growth

Question: Discuss about the Systems Audit and Assurance for Growth. Answer: Introduction: It is important to maintain our resources so that our future generation can sustain. The bio-based industries form an integral part of European market. Due to the limited stock of natural resources, the entities process these resources in such a way so that they can satisfy the needs of their consumer. These sectors provide many business and job opportunities to the local people, which reside nearby coastal areas of the country. Almost 70% of the earth surface is covered with water. These resources contribute food and energy based products to the world. The objective behind doing this is to manage aquatic resources so that maximum benefit can be obtained from European territories. The school of Agriculture and Food Sciences and the school of Veterinary science together provide the research on the width and mass of the product. In the year 2010, the government of Queensland attracted more than 40 researchers to provide a significant research in fauna and flora industries. This researc h has a direct impact on the Australian market. The marine industries of the country are based on two sources, i.e. land based soya plantation and marine fishmeal. Increased demand for food is the main cause of rise in price for protein sources in the recent years. It is necessary to frame a certification system for the purpose of growth of marine life in the country. This system includes: It is necessary to frame an inventory system. It is important to analyze the structure of the system. It is important to formulate the standards and criteria for the sustainability of biomass trade in the country. It is important to formulate indicators to measure and control the performance of trade. It is important to develop the criteria and indicator for sustainable biomass trade. The company Bio-Sustainable Feeds Ltd. is a listed company in Australia, which is, engage in the research on sustainability of the marine life for more than twenty years. Steps of audit in BSF Ltd.: The government of Australia assured the audit department to provide the necessary data regarding the natural resource management. The main theme of Auditing is the health of an ecosystem. There are six units related to ecosystem. The main purpose of audit is to provide multi attribute assessment frameworks, which can incorporate a range of national resources. The certification bodies have the power to review the standards of ISCC certification system for issuing the certificates. The auditors must comply with the requirements of ISAE 3000 while conducting ISCC audit. The auditors must plan and conduct the audit based on the nature and requirements of ISCC. The validity of the ISCC certificate is for one year. The duty of the certification authorities is to prepare a report after the termination of audit( Havice, Iles,.2015). Assessing and analyzing of risk: the auditors of the company coordinate the risk and plans of the company. To determine the main areas the manager should identify the process of business, which requires auditing. Collection of data and onsite audit: the audit process must take into account all the issues related to legal and environmental. For example, the response of management depends on the speed of the clearance process, whereas, the activity of the monitoring approach depends on the legal actions and requirements of the country. Analyzing the requirement: auditors must consider the natural process of auditing which is based on the availability of time for training the auditors. For example, it is found that the increased testing frequency has many benefits, which might increase the cost of audit. Hence, the cost of auditing for a specified area keeps on increasing. Preparing audit report: the auditors must assure that they comply with the rules and regulations of the act. It is the duty of the auditors to detect the errors of the company so that the management can take required action against the person. Explanation and Discussion on the detection, control and inherent risks of BSF Ltd BSF Ltd has taken a research work which is very complex in nature and thus the inherent risk involved in the audit of the organization are at an extreme level. The field of research for BSF Ltd is highly exposed to elimination because of the insertion of modern technologies and research techniques. Therefore, the development and research activities undertaken by BSF Ltd is inclusive of a high level of inherent risk. The amount of mistakes in the financial and non financial reports due to omission and errors is also a factor for the increasing inherent risks. The knowledge and decisions of the auditor with respect to the authenticity of the auditory evidence depend upon the quality of risks belonging to the misstatement of information in the financial and accounting figures (Kalfagianni, Pattberg, 2013). Inherent risks comprises of the mistakes out of falsification in the different parts of the financial statements before taking into account the level of strength in the internal management control. The auditor is thought to resolve the factors of the inherent risks along with finding out the audit evidences. These services are initially not possible for the auditor during the starting of the audit process as these risks are beyond their control. The strength of these risks changes along with the changing progress of audit work during the proceedings of the service. Control risks involve the risks which takes place due to the drawbacks in the internal control at the accounting books of the client with respect to accounting errors and misrepresentation of the financial reports. The risks pertaining to control are the representation of the non-identification of the material error or omission from the part of the internal control system. The strength of the internal system is imperative towards the prevention of malpractices as it is necessary for finding out the abnormalities in the financial data of materials before their incorporation in the financial reports. The next risk involved in this process are the detection risks. Detection risks generally take place when the audit proof is insufficient for detecting any physical omission and misrepresentation. Audit Risk = Inherent risk*Control Risk * Detection Risk Or, Audit Risk = (0.9*0.05*0.80)*100 = 0.036*100 = 3.6% In the present scenario of BSF Ltd, a decreased amount of control risks represents that the internal system of the organization is healthy enough to restrict any misrepresentation of materials rising due to any internal system issues. The inherent risks are high for BSF Ltd but it can be eliminated once the auditing functions are started (Hotel, Spa, 2016). The existence of an increased amount of detection risks can be tranquilized through comprehensive lower levels of control risks that creates a positive effect towards the reduction of the risks involved in audit. The audit firm needs to accept the audit assignment at a level of 3.6% audit risk. Inclusion in audit program: In todays generation, the suppliers must assure the consumers about the quality of the product, so that they can sustain at the end. The auditors supply the report about the services and sales of the company. The report must provide the commitment of the company regarding the health and safety of the products so that they can promote much about the marine products without damaging the environment. The top-level managers must ensure about the quality of the products (ISO 9001:2008 5.3) so that they can review the suitability of the products by including the requirements to improve the management system. Its management shall monitor the aim of the company, so that the audit process can be implemented efficiently. The company must establish a documented process to analyze the applicable rules and regulations of marine business. Furthermore, the company must recommend the rules of IMO and marine industries. For this, the company needs to evaluate its data once in the period of twelve months. The company must keep all the necessary records of auditing. The company should determine some rules and regulations related to its services, which includes the service related to delivery of products. The company must resolve all the earlier requirements before making any new venture so that the company can meet the new demand more easily. The company must analyze the fluctuating demands of the customer for its sustainability. For this, it is advisable for the company to maintain effective management for communication with its customer. The company needs to provide the relevant information related to product and its service. The company must keep the records of its customer grievances and complaints for fu ture references so that they can improve their service according to the requirements of the customer. Furthermore, the company must focus on the design and operating activities of the product. The company must describe about the health and safety of the product by describing the core elements of the management structure. The company must govern the complexity of the work of the personnel of the management system. It describes the interaction between the process of the management system, by including the records to demonstrate the requirements of effective planning and control. The top-level management of the company must provide all the necessary resources related to human resources, technology, and so on. The management should demonstrate their responsibilities and roles by implementing the effective system of OHS performance. They should provide the resource to enhance the customer satisfaction and requirements. The company must handle the working environment, which is essential t o meet the product requirements(Lee, Phelps, 2014).. They should verify that the personnel who are performing those activities have the ability to meet the operations related to prevention of pollution, OHS risks. The company has provided proper training and education to the personnel for handling this activity. The company must store the service related to delivery in order to maintain its requirement. For this, they must include the process of packaging and storing. The company must identify all the technical system that they are not performing any activity, which is hazardous in nature. The main idea behind this is to promote the reliability of the equipments, which the company uses for processing process. The authorities of control of monitoring and measuring equipments (MME) control all the equipments of the company. RD transaction concerns According to the AASB 1011, a vast list of activities related to development and research are available, which allows a proper allocation of activities in the research and development, which depend upon a number of factors. The initial form of allocation with respect to RD activities is in relation to inclusion of research with respect to both natural and social sciences. Furthermore, the degree also recapitulates the fact that the sequential outcome from the research and development process has a great anticipation of generating and creating production and preproduction process. The research undertaken by BSF Ltd relates to the innovation of advanced process to upgrade the manufacturing of fishes, and thus developing a new prototype of knowledge through research findings. AASB 1011 explains the expenditure that are partitioned to research and development processes which characters the nature used in research and development activities. The RD allowance received from the government is conditional to tax offset of 40% according to the new budget of 2014-15. The tax rate of 40% is applicable for the fact that the profit revenue for BSF Ltd is over $20 million per annum. The allowance of $500 million from the government is subject to a condition that the organization needs to have an expense of minimum $100 million AUD per year or above. Therefore, the incentive given by the government to BSF Ltd is a conditional grant. The payment of money by the government has been paid in advance and thus the transaction is treated as an advance payment until the conditions are fulfilled over which the grant of allowance was approved. The firm records the transaction of the grants from the government for the next five years in its accounting books, which are as follows: Date Particulars Amount (Dr) Amount (Cr) 2013 Cash A/C.Dr 500,000,000 To CSIRO A/C 500,000,000 (Being grant on scientific research received from CSIRO) 2014 Research and Development A/CDr 360,000,000 To Cash A/C 360,000,000 (Being expenses incurred for research activities) 2014 Plant Feed A/C.Dr 360,000,000 To Research and Development A/C 360,000,000 (Being cash payment made towards Plant based feed) 2015 Research and Development A/C...Dr 160,000,000 To Cash A/C 160,000,000 (Being cash payment made towards research activities) 2015 Development Cost A/C.Dr 160,000,000 To Research and Development A/C 160,000,000 (Being cash payments made as research and development expenses) As the government has determined conditions for offering grants to the organization, the numbers relating to expenditure and needs to be distributed to capital expenditure and research expenditure on the patents separately. A sum total of $100 million every year has to be assigned towards the scientific expenditure while the amount over and above $100 million needs to be treated as capital expenditure related to the patents. Arguments to signing of triple- bottom line addendum BSF Ltd has shown an overwhelming progress over the past decades with the development of fish and animal feedstock. The aquaculture feedstock contains amino acids which is helpful for providing nutrition to the various species of fish and thus providing high growth potential. Moreover, Havice, Iles, (2015). comments that aquaculture species primarily shrimp, trout, salmon etc has an increased average growth rate due to the evolution of high protein feeds along with an increase in omega 3 intakes. The introduction of lipid rich pellets in the diet of the fishes, which are nurtured for the human consumption, exhibits a comprehensive development of the bone density and the outer flesh of the fishes. Therefore, these fishes become less exposed to the damage from refrigeration. The transition of role of the reduction fisheries has developed the general fish and marine manufacture. In the past, during the 80s and 90s, reduction fisheries proposed to gratify the wants of the fishes, which are not eaten by the humans but were given as food to the higher value fishes. It was stated that with the introduction of other types of aquaculture diets into the fisheries like for example the inclusion of soya beans, wheat gluttons and canola with protein led to a drastic improvement in the production function of the organization. These new food elements are processed from nature especially from plants and thus decrease the total cost of feedstock and also provides a increased amount of nutrition into the fishes. Evaluation on prospectus Bio-sustainable Feeds Ltd has not implemented the bacteria based technique for the manufacture of aqua feeds and is still enduring the research and development activities according to the information provided in the study. Moreover, the case study also identifies the fact that the organization has not made much success relating to the bacteria based bio-sustainable feeds. It should not be assumed that the company holds exclusive power in the bacteria related bio feeds unless the organization gains full authority of gaining the patent rights in this form of feedstock. So being an auditor, it cannot assert the fact that the firm is in possession of the patents and is the ultimate authority of manufacturing bacteria based feeds technology. A further improvement in the paradigm of sprouts indicates a fall of 10% in the growth attributing to the unavailability of fish feeds in the diet. Therefore, it is understood that removal of fish feeds from the meals of the fish stocks are not benefi cial regardless of the introduction of various substitutions of edible nutrients. Conclusion The above study exhibits an analysis of the government grant provided to BSF Ltd. The study also evaluates with respect to interpretation of the scientific expenditures and reveals that the research and development activities borne by the organization come under the recognition of the research and development expenditure. The judgment making of the firm in accordance with the consent of the audit engagements are analyzed with accordance with the present frameworks and proper practices. The decisions relating to the thorough check of the previous records, turnover ratios with respect to the directors and senior managements, the past administrative actions taken against the organization, the repetition of involvement in litigation by the firm along with the history check of the directors, which are important towards audit engagement acceptance. The rules related to the RD activities have been considered to compute the activities of BSF Ltd. The rate of exemption to the organization wit h respect to the government incentive has been considered and it was found that the organization stands to get an exemption of 45% of the $500 million government reward. This results to the accomplishment of the conditions that requires the organization to incur an expense of $100 million or more on research and development of aqua feed, nutrition based on plant feeds along with bacteria based feeds. The study with respect to the accounting treatments of research and development expenditures into capitalization pertaining to the patents are made duly. It was found out that the firm makes a profit of $700 million depending on the speed of sustainable development of aqua feeds. Reference List CBC. 2016. Shift to plant-based fish feed could hurt health, environment, CBCNews Technology Science, (23 Mar/16), Retrieved on 11 Jul/16 from: https://www.cbc.ca/news/technology/aquaculture-feed-1.3262922 Hatanaka, M. (2015). Organic Certification and the Rationalization of Alternative Food and Agriculture: Sustainable Shrimp Farming in Indonesia. InRe-Thinking Organic Food and Farming in a Changing World(pp. 45-60). Springer Netherlands. Havice, E., Iles, A. (2015). Shaping the aquaculture sustainability assemblage: Revealing the rule-making behind the rules.Geoforum,58, 27-37. Hotel, S. N. T., Spa, V. N. (2016). 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