Auditing Essay Example | Topics and Well Written Essays - 750 words - 6

Auditing - Essay Example It has been noticed that frauds related to theft of inventory have a direct impact on the income statement of the company. Loss due to theft is directly proportion to decrease in profit (Week, 4 2012). There are following ways Mr. Franklin can reduce the probability of risk through theft. Access Control is like security measures these measures are taken so we can prohibit any kind of unauthorized entry in some restricted area (Audit Risk Assessment, Page 31), by this risk of theft of any asset can be reduced to a minimal level if the access is restricted to a minimal level then there is less probability of any kind of fraud or misrepresentation e.g. If there is only one person who is managing all cash related affairs and he is the only authorized person who have access to cash so, in such a scenario, the probability of theft will be low. It is necessary to count the assets periodically and then compare it with our records (Audit Risk Assessment, Page 381). It is quite essential to safeguard our assets from theft. It can provide you detail if there is some sort of difference between counted assets and recorded assets then we need an explanation. For that reason, first of all we need to understand the concept of materiality and we have to understand which category of goods is valuable to us (Week, 5 2012). It is a concept in which we use more than one person to complete a task; it means that we have to include different personal to execute a single transaction (Audit Risk Assessment, Page 380) so work of one individual is being cross checked by another individual. In such setup, there is a possibility that the risk of theft will reduce. But we have to make sure that no one is performing any duty which is mismatched. It is quite a good way for an internal control. The other risk the hospitality industry was exposed to a risk of fiddles or