NAII’s risk assessment for planning an audit process

NAII’s risk assessment for planning an audit process

            The process of inspecting the official financial accounts of an organization is very crucial. It makes an organization to be trusted by the shareholders as well as the government as it reveals the correct financial position and the general transactions within. However, during this process, there are risks which are due to the company being audited as well as the office of the auditor, all of which must be established to ensure that before the auditor takes the job, some risk has been analyzed and a proper decision made on whether it would be worthwhile to carry on with the work as the auditor in charge. This is the reason that before taking the task of auditing NAII, proper risk assessment, planning, is done for appropriate and financially favorable decision be made by the office of the auditor.

Enterprise Risk

One of the enterprise risk that affects most companies, and in this case, NAII, is regulatory compliance (AICPA., 2018). Being a company that works on nutritional complements, right from formulation to the manufacturing and distribution to marketers in different parts, the many compliances by the regulator in the industry must be adhered to. If these regulations are not adhered to by NAII, then it would be tricky auditing a company, which in the first place, is not allowed to operate within the market. At the same time, accounting standards and reporting must be complied with by NAII to ensure that the auditing process is easy and smooth, revealing the accurate information of the company. Such rules require the release of the complete information needed by the auditor during the auditing process to be availed. All these must be complied with for the process to be smooth and reveal the accurate picture of the firm. 

Global financial shocks is another enterprise risk that the auditor must not fail to evaluate NAII (AICPA., 2018). The possibility of the company being affected by the global financial challenges soon would mean a lot to the auditor as they proceed to execute their auditing duty. Most companies, sometimes are influenced by economic shocks to the extent that they are not able to meet their financial obligations. If this happens, especially before the auditor can be paid, then it would take a very long time for payment to be made thus affecting the auditor’s operations or holding of the report to the users until payments are made. If this holding happens, then the users of such auditing information, like decision-makers, would be delayed.

Strategic transition is yet another risk that must be looked into by the auditor about the company and its leadership as it determines the going concern of the NAII (AICPA, 2018). If stable and competent leadership is in place, then the company is likely to operate for years. This has implications for the auditor and stakeholders of the organization. To the auditor, continuous operation for long into the future would mean the auditor is likely to be engaged for long, or be employed again in the process of service, especially if proper and acceptable work would be done this first time. Such histories of good and ethically fit audit work, very confidential, will impact the office of the auditor through more referrals. If after realizing that the company would be there for long, the reporting by the auditor will be thorough, one that does not leave any chance and this would make it possible for more future work by the company.

Information Risks

These are risks associated with the release of misstated accounting information to the users, probably stakeholders of NAII. It is possible that if crucial data is lost by either fire to machines and server, computer and gadget damages, the right and correct information about the financial statements would not be released by the auditor and hence misinformation about how NAII is doing financially to the shareholders (AICPA, 2018). Such risks are possible, and this would call for backup of almost all the information at the server and the systemic information in general.

Another risk related to information is the threats of electronics. This could include hackers accessing the data of NAII from the website, virus to the electronics being used, to mention a few (AICPA, 2018). When such issues are experienced by the company, it will affect the quality of information available for auditing and hence the final report from the auditor. It would thus be a risk issue to the outcome of the last audit by the auditor, and before acceptance to continue working with the work, it would be clear such risks have been assessed, and proper mitigations are taken in place. For a business operating in a developed world like NAII, such reductions to prevent cybercrime must be in place for the accuracy of the audit to be taken.

Engagements risks

Engagement risks need to be assessed before, during and after the audit process. The first risk that we at Haskell & White should consider is the clients’ mix at the present moment. If there is a client that we currently have and is strictly competing NAII, whose deal is better than that being offered to our company than that of NAII, we shall have to review the decision since it would be two way: either take to provide NAII with our services and lose them or lose NAII and retain the competing company (Pickett, 2006).

Again, both enterprise and informational risks are very critical, and if such is likely to occur to NAII, it would not be possible to accept the offer to retain the company as it is obvious it will make losses in the event of such potential risks (Pickett, 2006). It is thus precise and proper that before engagement, the auditor has to look at the possible future and past of the organization. Further, the auditor will have to evaluate the control within and outside the NAII Company. Is the company like to hand over all the required documents for the audit process to go on, or are they likely to deny some access? Are some of the risks associated with the NAII likely to be under the control of the auditor or are they all out of control of the auditor? These are some of the questions that the auditor should ask and answer as per the whole assessment before accepting or denying the audit job with NAII.

Materiality

Looking at the previous report by the former auditor that was present at the office, I noted that some of the financial records were not available to the auditor during the 2019 audit. This, according to the auditor, reduced the accuracy of the statement that was released and if continues will still have adverse effects on the company as the true reflection of the financials of the company would not be realized (NAII, 2020).