The costs associated with auditing a company’s financial statements in complying with the audit requirements should be sustainable to encourage organizational financial growth. As such, identifying audit alternatives contrary to the proposed high audit fees of $20, 000 in the case of Ambassador Hardware Co. is useful in managing high costs associated with audit practices.
To help the company of Ambassador Hardware reduce the cost of audit fees, the organization's president can discuss with the management on ways of improving its internal financial control systems to attract fewer audit-based tasks in lowering audit fees. For instance, aligning major controls with the probable financial risks may be useful in ensuring that the company is in control of all its financial threats thereby eliminating the need for external financial audits (Donatella et al., 2019). The firm can also adopt reliable accounting software to manage both the external and internal data used to update all the accounting procedures. Such technologies enhance the accuracy and eliminate the workload associated with financial audits relieving the company of the burden of investing much on external audits (Donatella et al., 2019). Finally, the management can train their accountants to conduct financial audits thereby reducing costs associated with relying solely on the services of an external auditor.
Delegate your assignment to our experts and they will do the rest.
When selecting an audit plan proposal, the management of Ambassador Hardware Co. should consider the size of the firm and the nature of its operations in evaluating the required labor involved in verification and approval of accounts. For example, numerous operations will attract tedious work translating into a high cost of audit fees. The company should also consider its state of accounting systems, internal control procedures as well as its adherence to the financial auditing standards to assess the level of workloads that auditors will perform in ascertaining the pay that corresponds with the service provided. To effectively manage high audit fees, Ambassador Hardware Co. needs to utilize the services of an internal auditor and streamline its internal control systems and accounting procedures with its operations in maximizing its control of financial information.
Reference
Donatella, P., Haralson, M., & Tagesson, T. (2019). Do audit firm and audit costs/fees influence earnings management in Swedish municipalities? International Review of Administrative Sciences, 85 (4), 673-691.
