Educational Management Administration and Leadership

Question: Discuss about the Educational Management Administration and Leadership. Answer: Introduction: The auditors often deliver services to their clients out of the auditing scope, which are considered as non-audit services. Such services might be in the form of tax-related service, management service and client business promotion (Arnold et al. 2016). However, providing non-audit services might lead to loss of auditor independence, which is a serious concern. In the provided case, the advocacy threat could be adjudged as the major threat to the independence of the auditor. This happens at the time the auditor is involved in promoting the business of the client or the opinion at a point, in which the individuals might perceive that there is compromise in objectivity. Hence, if the auditor offers advocacy services, it breaches the code of ethics, which would influence the independence of the auditor. The auditors independence could be in threat, in case; the person obtains monetary or non-monetary benefits other than the prescribed fees for audit services. In the provided case, the members of the audit firm have been offered with a holiday package. If the offer is accepted, it would raise the question regarding the independency of the audit firm. In addition, the independency threat rises with the increase in benefits (Christopher 2015). The spouse, parent, siblings, dependent and non-dependent child of an auditor are taken into account as close members of the family. The financial interest constitutes of debt ownership guarantee and securities of the person in relation to other person or intermediary, in case, the person involves in investment decision or controlling intermediary. The financial controller is the business of the client is the father of the proposed accountant. Thus, if the offer is accepted, it would result in loss of independence for the auditor (Fu, Carson and Simnett 2015). In relation to develop close relationship with the client, officers, staffs and directors, influential risk is inherent in the clients business environment. In this scenario, the auditor might feel sympathetic and the person could be associated with the client. This might influence the representation of the auditor, since the person has useful information of the client due to association in a past assignment with LTH a month ago. The auditor has provided services to the client by computing tax and passing accounting entries. Therefore, the auditor could not conduct evaluation of self-audit services. The following measures could be implemented for strengthening the independence of the auditor and they are classified as follows: The rotational system related to major partners minimises the threat of over-familiarity and self-interest and hence, this would promote the aspect of objectivity without adequate cost. Moreover, the historical and institutional knowledge of the firm would be available to each staff for assisting in maintaining high audit quality (Hay, Stewart and Botica Redmayne 2016). The auditor needs to be well-resourced and it is needed for the organisation to appoint qualified and independent audit members. Thus, it is necessary for the audit team to evaluate the objectivity and independence, while making the results available for the stakeholders. The main characteristics of effective auditor oversight involve independence from the audit profession and political interference. Thus, they are required to provide transparency, fair and true representation along with sharing and cooperating private data with another with utmost care. The auditor independence could be strengthened by using robust and effective standards of ethics. Thus, a global set of high quality independence and standards of ethics would minimise the difficulties associated with the procedures of auditing (Knechel and Salterio 2016). Two business risks to MSL in relation to equipment and spare parts purchase: The two business risks involved with the purchase of spare parts and equipments are briefly described as follows: This risk is not associated with the business approaches and the selection of the organisation for accurate products and market. The strategic risk engaged with managing inventory is related to the management of spare parts. At one level, the organisation might choose ad-hoc, which denotes spending items on purchase, using formal policies and involving the experienced managers for providing judgement on procedural issues. On the other level, the organisation might choose to standardise the management aspects for spare parts in the same way like the standardisation of financial management (Nicoll 2016). The pertinent approach for the organisation is reliant on the financial investment in inventory and risk involved with the possible loss. This type of risk is associated with the execution of the selected approach. The organisation might initiate a policy related to stocking for undertaking decisions associated with standardisation. However, it has been observed that this policy is not sufficient or the management approach is not in line with the initiated policy. Thus, in relation to spare parts inventory management, risk management denotes identifying the feasible things and conducting them accurately. Audit risk for each identified business risk and impact on account balances: The risk involved in the strategic risk could be considered as inherent risk. This risk takes place because of error in the financial statements or omission, instead of the contributory factor of control failure. In addition, the complex nature of the transaction or the circumstances needing greater judgement level for the financial estimations is also responsible for this inherent risk. This risk has an influence on the amount of account receivables and inventory balance. Certain transactions and accounts are related to inherent risk, which has severe influence on the accounting balances based on transaction losses (Shah and Jarzabkowski 2013). The risks that are associated with operations are identified as detection risk. This risk occurs when the auditor is unable to detection the material misstatement involved with the financial statement of the organisation through procedures of substantive tests and evaluation. The detection risks are highly expected at the time the auditor fails to implement the relevant processes (Van Akkeren and Tarr 2014). This has severe impact on the accounting balance, as it is above the accountant evaluation. The accounts that are highly prone to this risk include sales account, inventory account, revenue account and purchase account. References: Arnold, B., Bateman, H., Ferguson, A. and Raftery, A.M., 2016. Partner-scale economies, service bundling and auditor independence in the Australian self-managed superannuation (pension) fund industry.Auditing: A Journal of Practice and Theory. Christopher, J., 2015. Internal audit: Does it enhance governance in the Australian public university sector?.Educational Management Administration Leadership,43(6), pp.954-971. Fu, Y., Carson, E. and Simnett, R., 2015. Transparency report disclosure by Australian audit firms and opportunities for research.Managerial Auditing Journal,30(8/9), pp.870-910. Hay, D., Stewart, J. and Botica Redmayne, N., 2016. The Role of Auditing in Corporate Governance in Australia and New Zealand: A Research Synthesis. Knechel, W.R. and Salterio, S.E., 2016.Auditing: assurance and risk. Routledge. Nicoll, P., 2016.Audit in a democracy: the Australian model of public sector audit and its application to emerging markets. Routledge. Shah, M. and Jarzabkowski, L., 2013. The Australian higher education quality assurance framework: From improvement-led to compliance-driven.Perspectives: Policy and Practice in Higher Education,17(3), pp.96-106. Van Akkeren, J. and Tarr, J.A., 2014. Regulation, compliance and the Australian forensic accounting profession.Journal of Forensic and Investigative Accounting,6(3), pp.1-26.