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Role of Audit Committee and its Importance

University: Harrods of London

  • Unit No: 15
  • Level: High school
  • Pages: 11 / Words 2664
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 215
Question :

This sample will let you know about the:

  • Describe the role of audit committee.
  • Discuss different data collection methods.
Answer :
Organization Selected : Sainsbury's

Audit is crucial for an organisation as it provide an insight within the culture, procedure, policies and management that support in verifying that each and every practices performed within the organisation are executing in right manner. It support in detecting and preventing fraud, operational efficiency, risk mitigation controls, testing internal control and monitoring policies. This audit support a lot in deter the frauds that are involve in internal practices, under this audit committee is responsible for assessing the overall activities performed within an organisation (Halbouni, Obeid and Garbou, 2016). It is also essential for the committee to determine several type of risks that organisation is currently facing and their likelihood of occurrence.

For conducting the study of importance of audit on big corporate house in detection of fraud, Sainsbury is taken into consideration, which is a UK retailer and offer its services in several different countries. Due to its existence in international market, it become crucial to ensure that all the financial and non-financial activities performing within the organisation are conducting as per ethical and legal principles formulated for the retail market. By performing regular internal audit of its operations it become possible for Sainsbury in maintaining the transparency among its stakeholders in term of business.

Rationale

The main aim of conducting this study is to determine the importance of auditing within an organisation and manner in which it is helpful for businesses in order to create an awarenesses regarding auditing for big corporate houses (Johansson and Carey, 2016). Additionally, it also help in presenting the information regarding the ways to be adopted by an organisation in order to get over a competing position in term of their profitability and turnover by keeping the frauds away from their operations. This will also support in enhancing the understanding of investigator regarding the role that an audit plays within the functioning of an organisation and manner in which it influence over the overall performance of a brand in term of its brand reputation among targeted audience.

Research context

This research is based on importance of audit within an organisation and its role within improving the performance. By performing this assessment an organisation would be able to determine the risks that may affect its performance and on the same page it also help in providing information to top management regarding the fraud that is continuing within an organisation so that corrective actions can be taken in timely manner. 

For this study Sainsbury is taken into consideration as it operates at inte4rnational level and have to perform a range of transaction that make it difficult to regularly have insight over each and every transaction (DeZoort and Harrison, 2018). Therefore the audit committee is crucial as it perform audit annually in order to determine any fraud practices that may be happening in organisation. Therefore, by performing audit it become easier to determine the default that made by company or by some internal practices that may affect its brand image in the marketplace and also the performance as well. Through this corrective actions can be undertaken by top management so that errors can be detect and overcome without having loss. Order assignment help from our experts! 

Research Aim

To understand the importance of audit for big corporate house in detection of fraud” – Case Study on Sainsbury's

Research objective and questions

Research Objective

  • To study the concept  of audit within corporate firms.
  • To identify the factors determining success of Sainsbury's audit committee to enhance  effectiveness of financial statement.   
  • To investigate the challenges of audit which Sainsbury's  face while improving its financial performance. 

Research Question

  • What is the concept  of audit within corporate firms ?
  • What are the factors determining success of Sainsbury's audit committee to enhance  effectiveness of financial statement ?  
  • What are the challenges of audit which Sainsbury's  face while improving its financial performance ?

Literature Review

The Overall Debates that relate to the problem

As per the view point of Rich Gordon, 2019, for an organisation operating at larger scale required to have an audit for their financial transactions made and statements that are created. They require audit committee as it is effective toward anti-fraud mechanism which provide critical defensive tool in war against the frauds. The audit committee members not only just review the financial statement yet they focuses toward adopting some of the proactive approach in order to catch the theft or detecting the misappropriations within an organisation. This is helpful as it provide an insight in financial reporting process, system of internal control, audit process and compliances of laws and regulations.

Specific Debate relating to topic in Literature

As per the view point of Comer, 2017, auditors act as a watchdog for financial practices performed by an organisation as they focuses toward examining the financial documents and review the operating procedures to determine if their any error and fraud present. It is important for big corporate houses like Sainsbury as it help in maintaining the operational efficiency, safeguarding the asset and maintaining the financial reliability. As it provide Sainsbury an assurance that organisation's risk management, internal control processes and governance are operating effectively.

According to the view point of Rengganis and et. al., 2019, Auditors are responsible for determining the  discrepancies among the operational processes and  those processes that are designed to do so. When such discrepancies found within the organisation then they provide advise to its senior management regarding the process or action they can adopt to improve it. Hence, it can be said that by regularly implementing this Sainsbury would be able to get several benefits such as collecting information in order to determine the risk of material that get misstatement because of fraud, identifying the risk after taking in account regarding the evaluation of entity program and its control etc.

Thematic Literature Review relating to Specific Debate

Concept  of audit within corporate firms

According to the Brazel, 2018 audit is the inspection or examination of different books of accounts by an auditor. It can be completed internally by workers or heads of a specific department and externally by an external organisation or an independent auditor. In context of corporate firms, audit means to inspecting something thoroughly. It is an independent examination of the financial data of any enterprise; where non-profit oriented or profit oriented, regardless of its status, legal form or size when such inspection is conducted with an opinion to express  a view thereof. In simple word, an audit is an independent and systematic examination of documents, vouchers, statutory records, accounts and books of a corporate firm to find out how far the financial statements and non-financial disclosure that present a fair and true view of the concern.

On the other hand, auditing is a systematic process used by auditor for examine the financial statement and information of the organisation. In this process, auditor examine or analyse that is the organisation making profit or not. Along with this, it is an useful process in which auditor examine the economic actions and conditions. Audit is completed to find out the accuracy of financial information or statements provided by corporate firm. Need Assignment Examples?Talk to our Experts!

Factors determining success of Sainsbury's audit committee to enhance effectiveness of financial statement

As per the view presented by Tugman and Leka (2019), there are number of factors or ways that helps Sainsbury's in enhancement of its financial statement in effective manner. These are audit committee transparency, effective communication, committee composition i.e. appropriate skills, expertise and competencies, how it gets its work done, strength of the finance functions etc. These are consider more effective ways that would be help an organisation in improvement of its financial statement. For example: flow of effective communication is important for an organisation to communicate each information about their financial statement or information to the employees. As it will support company to improve effectiveness of their financial statement and gain better outcomes.

The challenges of audit which Sainsbury's  face while improving its financial performance

As per the information presented by Brazel, 2018, Audit committee plays a significant role within an organisation by detecting the errors or misappropriate involve within the financial practices of business. But while performing this there are number of issues that Sainsbury may face which includes, revenue recognition as it one of the most complicated area of audit as it involve an analytical procedure that support in generating the sufficient evidence to prove about the profit and its source. Another challenge is to detect fraud as management held responsible if the blatant fraud is ignored as it mainly rise due to weak internal control so they try to keep it secret.

Research Methodology

Research methodology refers to the specific techniques or procedures that is used by researcher for identifying, selecting, processing and analysing data about a topic. In addition, it is an useful process of data collection that will be essential for investigator in gathering of reliable and valid information (Flick, 2015). In this section, number of techniques will be included which are publication research, surveys, interview and other methods. Main purpose of research methodology is to assist the investigator in collection of qualitative or quantitative information.     

Research Philosophy

There are mainly two types of philosophy: positivism and interpretivisim. Within a study, positivism philosophy is more suitable that will be going to applied by investigator. Main reason for using positivism philosophy as it support investigator to gather quantitative information regarding the significance of audit for large corporate house in detection of fraud. Interpretative another form of philosophy that will be not useful according to the current investigation because it require maximum sources and time. Therefore as comparison to interpretivisim philosophy, positivism type is more useful and applicable for this report  (Gioia, Corley and Hamilton, 2013). 

Research approach & Strategy

Research approach is based on data collection and data analysis. For collecting data, qualitative and quantitative are consider two approaches, while for analysing information inductive and deductive are two main approaches. Within a research quantitative and deductive approach of research will be applied. As these approaches support investigation in collecting and analysing of numerical data regarding the importance of audit for large organisation in detection of fraud (Green, Camilli and Elmore, 2012). Qualitative and inductive approach will be not useful according to the current investigation because these approaches require maximum time as well as cost.

There are number of research strategies which are interview, case study, survey, observation etc. These are main strategies but according to the current study survey will be going to applied. In this method, questionnaire is used because it support investigator in gathering of quantitative and valid information about a topic. 

Research Design

Entire activity of study is depend on the research design. Main purpose of research design as it support researcher in identification of impact. There are three sort of research design i.e. experimental, exploratory and descriptive. These are consider main types of research design that would be beneficial in determination of research impact. Within a research, descriptive design will be applied because it helps researcher in driving of valid and effective conclusion (Kumar, 2019). 

Sampling & Participation

Sampling introduces as a process of selecting a sample size from larger population. There are two techniques of sampling which are probabilistic and non-probabilistic. For selecting sample size for current study, probabilistic type of sampling is more appropriate. As it support an investigator in selection of large sample size. 50 employees of  Sainsbury's will be recruited or selected on random basis by using probabilistic sampling. Main reason for using this type of sampling as it save time and cost of the researcher. Employees are main participants of this study. Main purpose for selecting employees as a participant is they have accurate knowledge about the business and its operations  (Mackenzie and et. al., 2012).

Data collection methods

There are two specific methods of data collection which are primary and secondary. In order to accumulate primary information about the importance of audit for big corporate house in detection of fraud, questionnaire will be applied. Main purpose for using this instrument as it support investigator in gathering of accurate data from the employees of Sainsbury's. This method not require more time and resources of researcher and also provide valid outputs.

On the other hand, for gathering secondary data about a topic, there is need of some sources i.e. magazines, books, articles, journals, companies financial report etc. These are consider main sources that will support researcher to collect secondary data about a current study. Within a study, both primary and secondary sources of data collection will be used for gathering detailed and reliable information  (Mackey and Gass, 2015).       

Data analysis methods

Data analysis has two methods such as quantitative research and qualitative research. Each method has their own tools and techniques. Observations and interviews are consider types of qualitative study, while survey and experiments are quantitative research. Current report is based on quantitative research and for analysing quantitative data, content analysis will be going to applied by the investigator.

Under this method of data analysis, number of themes will be made with purpose to completing each activities of research in systematic manner. Along with this, for analysing quantitative data, there is requirement of some steps i.e. making a frequency table, making a pie chart and than writing an interpretation. These steps support researcher in analysation of quantitative information easily (McCusker and Gunaydin, 2015).

Ethics and limitations

Ethics within an investigation plays an important role by completing each activities of study in ethical manner. There are some principles of research ethics that should be follow by researcher such as minimising the risk of harm, obtaining informed consent, avoiding deceptive practices, giving the right to withdraw, protecting confidentiality and anonymity etc. These are main principles that must be follow by investigator for doing this investigation in systematic and ethical manner.

There are several limitations that will be faced by researcher such as lack of time, insufficient time period, lack of resources, etc. These are consider major limitations that have direct impact on researcher while performing this investigation. In order to overcome these limitations, researcher should use Gantt chart, follow ethical considerations etc. AS these will be helpful for investigator in completion of report effectively. Get Finance Dissertation Topics from our experts!

Conclusion

From the above mentioned information it can be summarised that audit committee plays a significant role within improving the financial performance of an organisation. This is so because it provide an insight within the operations or actions that are performed by an organisation along with their financial transactions. It further support in getting an idea regarding the area of business where an error exists or the consequences it have over the performance of organisation and also providing direction to improve those errors for reducing the possibility of occurring error or fraud within the organisation functional unit.  Brazel, J.F., 2018

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