The choice of topic “The risk-based audit approach in France” comes from several concerns that arose during the studies of my Master degree. First of all, I majored in finance since my Bachelor’s degree and was able to perform a successful internship for the cabinet Deloitte during my Master degree. This experience not only enabled me to catch a first glimpse at the financial statements of different companies from various sectors, but it also stressed out the necessity to deliver reliable financial information while following strict regulation, both local and international. Secondly, the financial crisis that arose in 2007 has had tremendous impacts on numerous companies worldwide. This economic context led to more risks in the reliability of the companies’ financial statements and emphasized the crucial role the statutory auditor must adopt. Moreover, the high-tech sector representing a fast changing environment, more risks can be attributed to the companies running their business in this segment. While highlighting all these facts, this paper also attempts to solve auditing risks and issues that could arise in a high tech company, by picking a real case.
Table of Contents
1. Introduction
1.1 Background
1.2 Purpose of research
1.3 Research main points and methods
1.4 Contents and structure
2. Relative theories and literature review
2.1 Relative theories of auditing
2.1.1 Relative theories for the demand and supply of audit services
2.1.2 Agency theory
2.1.3 The role of audit
2.2 Audit environment
2.2.1 The organization of the statutory audit profession in France
2.2.2 French legal aspects and obligations
2.2.3 Global legislation & guidelines for the Professional Accountant
2.2.4 The financial auditing market: the Big Four & their operations
2.3 Auditing purpose and principles defining the audit approach
2.3.1 Purpose
2.3.2 Principles
2.3.3 Overview of the auditing method & process
3. Company’s industry and economic context – Focus on the inventories’ account
3.1 Financial impact of the crisis on the global economy and on auditing
3.1.1 Financial Impact of the Financial Crisis
3.1.2 The role of the audit subjected to progress
3.1.3 The impact of the crisis on the auditing approach
3.2 Auditing in the high-tech sector
3.2.1 Overview of the industry
3.2.2 Risks associated with the industry
3.3 High risk account balance: the case of the inventories
3.3.1 Inventories – Presentation & Specificities
3.3.2 Risks associated with inventories
4. Risk-based auditing system design and practice
4.1 Risk-based auditing system design
4.1.1 Acquisition of company knowledge and internal control systems
4.1.2 Materiality’s settings and audit risk assessment
4.1.3 The audit memorandum and the audit program
4.2 Risk-Based auditing system practice
4.2.1 Statutory audit work
4.2.2 Complementary analysis
5. Conclusion
Objectives & Topics
The primary objective of this research is to provide a comprehensive understanding of the risk-based audit approach, with a specific focus on the French regulatory framework, the high-technology sector, and the complexities surrounding inventory account balances in the aftermath of the global financial crisis.
- The theoretical underpinnings and economic theories of the audit profession.
- The regulatory and legal environment governing statutory audits in France.
- The impact of global economic crises on audit procedures and the high-tech industry.
- Methodologies for designing and executing risk-based audit programs for inventory accounts.
- Practical application of audit strategies within a multinational corporate context.
Auszug aus dem Buch
The policeman theory
The policeman theory argues that the auditor is accountable for searching, disclosing and preventing fraud. In this sense, the auditor must act as a policeman and focus mainly on arithmetical accuracy, with the aim of detecting fraud. Nonetheless, while this theory was the most widely held until the 1940s (Hayes et al., 1999), the focus of auditors has shifted since then to provide a reasonable assurance, a verification of truth as well as a righteousness of the financial statements. The detection of fraud still mobilizes concerns about the auditor’s responsibilities but does not embody the major purpose. Hence, the policeman theory seems to have lost much of its explicative power as auditing has more functions nowadays, such as procuring an overall more consistent credibility to the financial statements.
Summary of Chapters
1. Introduction: Presents the background of the study, the research purpose, and the methodologies used to analyze the risk-based audit approach.
2. Relative theories and literature review: Examines foundational auditing theories and the legislative environment, focusing on the French profession and global standards.
3. Company’s industry and economic context – Focus on the inventories’ account: Analyzes the impact of the financial crisis on industries and specific high-risk accounting areas like inventories.
4. Risk-based auditing system design and practice: Details the practical application of risk-based audit design, including internal control review and the execution of audit programs for a specific case study.
5. Conclusion: Summarizes the study's findings regarding the evolving role of the auditor as a vital and valued link in the modern financial reporting chain.
Keywords
Risk-based audit, Statutory auditor, France, Financial crisis, Agency theory, High-tech sector, Inventory management, Internal control, Materiality, Audit risk, Compliance, IFRS, Audit evidence, Financial reporting, Audit independence
Frequently Asked Questions
What is the core focus of this publication?
This work examines the risk-based audit approach within the French business and legal environment, specifically highlighting how such audits are conducted for multinational companies in the high-technology sector.
What are the central themes discussed in the paper?
Key themes include the economic theories justifying the demand for audits, the organizational structure of French statutory auditors, the impact of the 2008 financial crisis on industry risk, and technical methodologies for auditing high-risk accounts like inventories.
What is the primary research goal?
The goal is to provide a detailed understanding of how auditors adapt their methodologies—particularly using a risk-based framework—to address complex economic conditions and maintain the reliability of financial statements.
Which scientific methods are employed?
The paper utilizes a combination of theoretical extraction from academic literature and practical insights derived from the author's internship experience at a major auditing firm (Deloitte), analyzed through a case study approach.
What does the main body of the work cover?
The main body covers the regulatory framework in France, the specific auditing challenges posed by the high-tech industry's rapid innovation cycles, and a step-by-step documentation of the risk-based audit process applied to a specific company, "Dupont".
Which keywords characterize this paper?
The paper is characterized by terms such as risk-based audit, statutory auditor, high-tech sector, inventory management, internal control, financial crisis, and IFRS compliance.
How does the transition to SAP software impact the audit process described?
The migration to SAP is highlighted as a significant risk factor, increasing the probability of misstatements due to the accounting department's lack of familiarity with the new system, which necessitated targeted training and adjustments in the audit program.
Why are inventory accounts considered high risk in the high-tech sector?
Inventories in this sector are high-risk due to rapid product obsolescence, complex global supply chains, and the significant impact that inventory valuation errors have on both the balance sheet and profit margins.
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- Mathilde Chaumont (Autor:in), 2013, The risk-based audit approach, München, GRIN Verlag, https://www.grin.com/document/263384
