Assess the Industry and the Auditing Process
Overview of the Industry
Electronic Industry
Electronic industry deals with the production of electronic equipment such as mobile devices, televisions, and circuit boards. There are many companies that operate in the electronic industry. Key among these companies industry Apple, Samsung, Huawei, and Sony, among other small and upcoming companies. The electronic industry is one of the most competitive industries, and the only way to survive in this industry is through creativity and innovation (Jung, & Chung, 2016). Each company that operates in this industry is dominant in a particular region, with Apple dominating the US markets and Samsung dominating a section of the Asian and African markets. However, Huawei dominates the Chinese market and African markets due to the ability of the company to produce low-end products that are relatively cheaper to target most consumers in the developing economies of Africa.
The Company
Samsung is a Korean based company known in the world due to the kind of products that the company produces and sells in the world. Samsung is considered the largest producer of electronic devices with the success of the firm originating from a wide variety of appliances, televisions, and mobile phones (Jung, & Chung, 2016). Samsung has a recognizable name and a leading exporter from South Korea, with almost a fifth of Samsung exports, making it a leading exporter of the country. Samsung is the second-largest electronic company in terms of sales after Apple. However, across different regions, Samsung performs better than Apple, whose sales return come majorly from American markets.
Primary Competitors
In developing economies such as American markets and European markets, Apple remains Samsung’s main competitor, while in developing economies of Asia and Africa, Huawei and other upcoming Chinese companies remain the main competitors of Samsung. Other companies that offer competition to Samsung include Sony, Oppo, and Motorola, among other companies. However, Oppo, Motorola, and other Chinese companies have a strong presence in China and do not control a sizeable size in other regions such as Samsung and Apple.
Current State of the industry to identify key concerns that I would have if my company was to enter into an engagement with Samsung
Before anything takes place, audit engagement must be agreed and signed by both parties to the contract. The engagement letter is sent before commencing the audit, and the main purpose of doing so is to discourage misunderstanding with respect to the agreement signed. The engagement letter is expected to confirm acceptance of the appointment, the scope and objective of the audit, and, finally, the extent of responsibilities of the auditor. In the audit as a whole, the process of engagement includes several distinct steps that include planning, testing of controls, conducting fieldwork (substantiation), and exit strategies (finalization of the report).
Once the firm has made a decision to go ahead with audit engagement, I will ensure the firm (Samsung) complies with the requirement of ISA 210, which generally discusses Agreeing on the Terms of Audit Engagement. After a discussion of the terms of the agreement, I will concentrate on the audit planning process that includes establishing strategies for the engagement and how an appropriate audit plan would be developed and used (Chopra & Chaudhary, 2020). Planning is a continuous process and would require the assistance of the firms’ employers during the process. However, they caution that I will raise at the time is the assurance from the company that there will be no interference of my work and financial records would be recorded as they appeared in the books of accounts and not how the company ought to have them appear. Through the discussion of terms of the agreement, I will raise the following issues and will require Samsung to respond accordingly.
First, as the auditing firm, we must discuss and determine the acceptability of the financial reporting framework to be used in the preparation of financial statements of the company to be audited (Samsung). This will include evaluating whether the financial framework to be used falls within the recommended financial reporting framework (Jakovác, Domokos, & Németh, 2016). I will also ensure there is a proper understanding of the purpose of the financial statement and the nature of reporting that the entity has been using so as to ensure there is no contradiction in the financial reporting statements of the firm. In simple terms, the pre-agreement will be about confirming whether all the financial statements to be made about the company are to be prepared under the IFRS (International Reporting Financial Standards) (Răvaş, 2018). After agreeing on the type of reporting standards to be utilized, the next concern would be to obtain an agreement of management that acknowledges the management of the firm understands its role and will not interfere with my work as an auditor.
Planning Activities
At the beginning of the audit, I will perform the following activities: One will be to perform procedures that regard to a continuance of relationship and determine the specific type of audit engagement (Jakovác, Domokos, & Németh, 2016). Second, I will agree on compliance and independence because the whole process depends on the integrity and transparency of the process.
During the planning process, I will evaluate whether the following activities are important for the auditor’s procedure. I will demand to know matters that affect the industry that the firm operates, such as the financial reporting framework that is commonly used, the economic conditions, technological changes, and laws and regulations because all these factors influence the financial statement of the organization (Răvaş, 2018). Others would be knowledgeable about the risks associated with the firm and what the owners believe should be considered in the auditor’s client’s acceptance and retention lists.
Some of the factors to consider in risk assessment include the nature and the kind of assets that need to consider during the audit report, the specific risk associated with a material misstatement of the firm. Others include consolidated financial statements, the degree of centralization (how the information are processed in the firm, frequency, the timing, and scope of the firm and independence of all the departments of the firm because their assistance would be highly recommended to achieve the firms organization goals (Jakovác, Domokos, & Németh, 2016).
Audit Strategy
Before commencing to do conduct the actual audit, I will establish the overall audit strategy and set the scope, estimate the time to be taken, and direction and guide that I will use to develop an audit plan. It will set the reporting objectives of engagements and communication nature that is expected to take place in the organization. I will also allocate the time to discuss preliminary engagement activities and evaluate important matters that must be considered in the report.
Audit Plan
My audit will consist of the following: the planned nature, timing and risk assessment extents and procedures, the test of controls and substantive procedures to be used and finally planned audit procedures that I will ensure compliance with PCAOB standards (Vašiček, & Roje, 2019).
References
Chopra, A., & Chaudhary, M. (2020). External Audit. In Implementing an Information Security Management System (pp. 247-258). Apress, Berkeley, CA.
Jakovác, K., Domokos, L., & Németh, E. (2016). Supporting Good Governance in Audit Planning.
Răvaş, B. (2018). A STUDY CASE ON PLANNING ACTIVITIES DURING THE AUDIT ENGAGEMENT. Annals of the University of Petroşani. Economics, 18, 137-144.
Vašiček, V., & Roje, G. (Eds.). (2019). Public Sector Accounting, Auditing, and Control in South-Eastern Europe. Springer International Publishing.
Jung, U., & Chung, B. D. (2016). Lessons from the history of Samsung’s SCM innovations: focus on the TQM perspective. Total Quality Management & Business Excellence, 27(7-8), 751-760.