HI6026 Audit Assignment Sample
Here’s the best sample of HI6026 Audit Assignment, written by the expert.
Executive Summary
The works done by the auditors are included in the audit plan. Through a developed process, it is possible for the auditors to ensure that the right information is included in the evaluation process. The facts are examined, and an authentication report stating the materialistic factors followed or not followed by the bank are included in the evaluation report. The works of auditors are defined under the auditing rule and it is necessary to conduct the tasks in accordance top the stated policies. In banks, the need to include the useful information in the accounting statement is examined. This is done in accordance to the policies that are drafted by the management to include the relevant and accurate information in the books of account. The materialistic factors are also analyzed by the auditors with an intention to certify it’s reliably. An accurate process is followed for the conduct of the works including handling the information is examined by the auditing team to ensure that the relevant and needed information are included in the evaluation process.
Introduction
Company Background
The Commonwealth Bank of Australia was founded in December 1911 as an Australian multinational bank that has businesses in whole New Zealand, Asia, United States, and the United Kingdom. In this way, the main working of the commonwealth bank is to offer a variety of financial services that include retail banking, corporate banking, institutional banking, fund management, superannuation, investment, brokerage, and insurance etc. Their chairman is Catherine Linigstone and the CEO is Matt Comyn (Commonwealth Bank of Australia, 2017). The Commonwealth Bank of Australia is found as the largest Australian company that is listed on the Australian Securities Exchanges in August 2015. It includes some brands such as Bankwest, Colonial First State Investment, Commonwealth Securities, Commonwealth Insurance, ASB Bank. The total revenue of Commonwealth Bank of Australia was A$ 26.005 billion in 2017 whereas its net income was A$ 9.881 billion. In addition, the Commonwealth Bank provides the employment around 51,800 employees as per the provided data in 2017 (Schlagwein et al., 2014).
Main Structure
Has the auditor complied with Independence requirements
During the analyzing the financial report of 2017 of Commonwealth Bank of Australia, it is determined that the Commonwealth Bank of Australia fulfill all the requirements of the independence with effective manner while maintaining the financial statements in the financial year (Godwin and Schmulow, 2015). In addition, it is also determined by the annual report of the Commonwealth Bank of Australia that the audit procedure is maintained by the Catherine Livingstone, Launa Inman and Shirish Apte etc. These are the person of the audit committee in the Commonwealth Bank of Australia. In this way, the audit committee of Commonwealth Bank of Australia has adopted the provisions, in whole the year of non-audit services done by PwC and it has also concluded that the auditor independence requirements of Corporation Act 2001, was not compromised by the provision of those services (Cummings and Durrani, 2016). In this way, it is also identified that the board was advised by the audit committee that the provision of the non-audit services by PwC PwC in the whole year was well-matched with the general standards of independence that are imposed by the Corporation Act 2001.
If there were non-audit services provided, what was the nature of such services?
During the analyzing the financial statements of the Commonwealth Bank of Australia, the bank takes the non-audit services from the PricewaterhouseCoopers (PwC) in whole the financial year. For taking these services, Commonwealth paid around $ 7,099,000 to PwC. Apart from this, an additional amount of $ 2,327,788 million was also paid to PwC in order to non-audit services that were provided to entities and not consolidated into the financial statements (Commonwealth Bank of Australia, 2017). In its non-audit services, some activities such as accounting, system integration, tax planning as well as preparation and consultancy related to business development. In the concern of non-audit services, it is identified that these kinds of services include the services that are provided by the auditor but the concept of these services are separate from the auditing (Carey, 2015).
Furthermore, it is examined that the preparation of financial statements is not come under the audit process for the company. At the same time, if the auditor helps the management to prepare the financial statement, then it is mentioned as the non-audit services. The non-audit service provider in the Commonwealth Bank of Australia is PricewaterhouseCoopers (PwC). It provides the services such as assurance and evidence reviews of the Group’s foreign disclosures in order to overseas investors, services in concern to regulatory requirements, acquisition accounting advice as well as an assessment of internal control systems and financial or regulatory information (Carnegie and O’Connell, 2014). In addition, after analyzing the financial report of the Commonwealth Bank of Australia, the bank has paid A$ 28,556 million for its audit as well as related services in 2017.
Auditor’s remuneration
| Particular | Bank | % Change | |
| 2017 ($’000) | 2016 ($’000) | ||
| a) Audit and audit related services Audit services | |||
| Audit Services | 11,463 | 11,974 | -4% |
| Audit Related Services | 5,130 | 2,938 | 75% |
| Total Audit and audit-related services Audit services | 16,593 | 14,912 | 11% |
| b) Non-audit services | |||
| Taxation Services | 1,031 | 1,759 | -41% |
| Other Services | 4,300 | 4,394 | -2% |
| Total remuneration for non-audit services | 5,331 | 6,153 | -13% |
| Total remuneration for audit and non-audit services | 21,924 | 21,065 | 4% |
After analyzing the above table, it is identified that the remuneration of the auditors in the Commonwealth Bank of Australia has increased in 2017. In this way, it can be identified that bank paid $ 21,065 million in 2016 whereas it paid $ 21,924 in 2017 that was increased according to financial statements of the bank (Commonwealth Bank of Australia, 2017).
Key audit Matter
The concept of key audit Matters indicates that the professional judgment that proves to be useful in regards to successfully implement the audit process. However, this supports the professional judgment as it allows the auditor to perform the audit at a right time and proper manner (Christensen et al., 2014). The commonwealth bank of Australia presents various areas in the KAM such as provision for impairment of lending assets. In regards to address the key audit matter, the firm identifies the following areas:-
- Identification of impaired loans
- Monitor the reliability and integrity of credit information
- Transfer of information from the underlying sources system to the impairment provisioning models
Therefore, this practice helps the commonwealth bank of Australia in the form of maintaining the accurate auditing report which contributes towards taking the right decision. This way commonwealth bank of Australia performs its key matter audit.
Directors’ and Management’s responsibilities and Auditor’s responsibilities
The responsibility of directors and management are different from the auditor’s responsibility in the area of accounting and financial statement. In regards to Director & management, it is found that they are held responsibly related to make collection and integration of all financial statement (Keddie, 2013). On the other hand, the auditor is responsible for monitoring the financial statement in order to find the reliability of the financial statement.
However, the management and director also have a responsibility to prepare the financial reports with fairness while auditor has a responsibility to check the fairness of accounts so that they can take a further decision based on that. Moreover, the auditor also helped the top management to prepare the financial reports and their responsibility does not limit till the preparation but it also goes to the investigation of accounts reliability (Bear et al., 2010). Thus, both the parties are useless without each other as proper financial reports require the management as well as an auditor.
audit committee and non-executive directors on the audit committee?
There are various members are involved in the 2017 auditing committee of Commonwealth Bank of Australia. It includes the Catherine Livingstone AO as an auditor and Shirish Apte as Non-executive Director (Carcello et al., 2011). The audit committee is held responsible for the audit, risk management, and compliance. Furthermore, the audit committee shows that the ethical framework in the action as it follows rules and regulations. The audit committee also helps in managing the risk. However, internal control is implemented by the audit committee of the organization.
Audit Opinion was expressed
The audit option is considered as an auditor certification that accomplishes the financial statements which are based on an audit of an accountant opinion (Kraft, 2014). In regards to commonwealth bank of Australia, it is identified that business financial statement is right and it includes the ethical action in each audit process. This is because no audit option is presented for commonwealth bank for making further audit (Chen et al., 2013). The previous auditing process is quite relevant and effective as it is based on the ethics within which auditor accurately analyze the report without performing any unethical act. It results in taking a proper decision which considers principles and rules & regulation.
Material subsequent events in the annual report of the company
The review of the annual report of Commonwealth bank of Australia depicted that there are no matters subsequent event occurs and recorded in the financial report (Van Auken and Carraher, 2013). This statement shows that the preparation of financial statement does not found the subsequent event. This helps to not make any effect on the financial statement of the company.
The effectiveness of the material information reported by the Auditor
The auditors were opposed to check the authenticity of the books of accounts for the bank. Selection was done by the stakeholders and the external investor. The work of the auditor was to report in the reliability of the books of account, and the information provided by the company. A proper reporting process was followed to include the material information into reporting process. The material planning was done in accordance to the audit planning and the details included in the auditing process. AS 2101 was implemented so that accurate and relevant information were included in the material information sharing (Carcello et al., 2011).
In banks, the management has to strictly follow the compliance issues and ensure to include the useful business related information. This was planned in accordance to the material information auditing process where the useful details were included in the auditing process. The compliance requirements were analyzed for its reliability by the external auditor of the company. Ethical requirements like the disclosure of the information, facts and figures about the business management, and others were properly included in the auditing report for the material information. The engagement of the primary partners in the decision-making process including evaluating the facts that were included in the analysis was conducted. This was done in accordance to the auditing rules and policies that were created by the management.
Missing, under-reported and/or not fully Material information
The work of the auditors was not to provide an opinion about the facts and other information included in the books of account. Auditors were responsible to state the information about the materialistic facts that were supposed to be included in the books facing by the banks. In accordance with the “Commonwealth Bank of Australia” the information to be included in the books of accounts were associated with the material purchases, decisions made to invest on new products, and dividends paid. Particle information would occur when the company doesn’t make or provide the whole information in accordance to the stated policy. This affects the quality of the informant that is supposed to be provided to the investors and the clients (Carey, 2015).
In case of the missing or part or nit fully material information the auditor will provide a detailed report about the same. It would be commucnaited with the members and the investors, so that the right decisions could be made on the same. The auditors will not instruct the bank to include or discard the material information, as it is not their part of the work. Instead the details would be included in the auditor’s report. This will be done in accordance to the auditing policies and standards implemented in the auditing strategies.
Questions can be by Auditor at the company’s Annual General Meeting
Auditors are allowed to pose certain questions about the credibility of the bank. However, there is a proper procedure and format to do so. As per the auditing rule, the auditor could post there; event accruing and auditing information in the annual general meeting. It is relevant for the bank and the auditor to follow the stead policies and methods that is necessary to record the information in the right manner.
The questions could be posted for the performances, accounting information recording process, ad about other factors in the general meeting. This is done in accordance to the stated policies and methods included in the fact presentation in an organized manner. However, the auditor is not allowed to ask questions about the decisions made by the bank in the previous financial year. This would be against the value analysis and the work procedure that is defined for the auditor. With a standardized process and method, the members of the audit team could collect and analyses different factual information. As per the auditing rule, it is mandatory for the audit team to intimate the executive panel or the directors about the possibilities to ask the question in the annual general meeting. It is important to ask questions pertinent to the development of Theban and the strategies followed for the execution of the works (Carnegie and O’Connell, 2014).
Conclusion
The auditing works are conducted to certify the reliability of the information presented by the bank. Auditor’s role is to certify the information presented fee the bank in the previous financial year. While conducting the audit it is relevant for the managers to consider the materialistic factors to be included in the auditing process. It assists in including the relevant and useful information in the books of accounts, and to certify its reliability. The certified copy is being shared with the external stakeholders and the investors. It is relevant for the auditor to include the useful and proficient informal in the auditing statement. This is also done in accordance to the standards and procedure mentioned in the books of accounts.
The materialistic information could have a direct impact on the decisions made by the investors. It is this relevant to share the useful and effective information with the members. At no point, the members or the executive of the companies could avoid or miss out any information. It is the responsibility of the auditor to verify and certify the reliability of the information. For this, the auditors ensure that the company has followed the accounting standards and policies relevant for the execution of the works.
Reference
Bear, S., Rahman, N. and Post, C., 2010. The impact of board diversity and gender composition on corporate social responsibility and firm reputation. Journal of Business Ethics, 97(2), pp.207-221.
Carcello, J.V., Neal, T.L., Palmrose, Z.V. and Scholz, S., 2011. CEO involvement in selecting board members, audit committee effectiveness, and restatements. Contemporary Accounting Research, 28(2), pp.396-430.
Carey, P.J., 2015. External accountants’ business advice and SME performance. Pacific Accounting Review, 27(2), pp.166-188.
Carnegie, G.D. and O’Connell, B.T., 2014. A longitudinal study of the interplay of corporate collapse, accounting failure and governance change in Australia: Early 1890s to early 2000s. Critical Perspectives on Accounting, 25(6), pp.446-468.
Chen, J., Cumming, D., Hou, W. and Lee, E., 2013. Executive integrity, audit opinion, and fraud in Chinese listed firms. Emerging Markets Review, 15, pp.72-91.
Christensen, B.E., Glover, S.M. and Wolfe, C.J., 2014. Do critical audit matter paragraphs in the audit report change nonprofessional investors’ decision to invest?. Auditing: A Journal of Practice & Theory, 33(4), pp.71-93.
Commonwealth Bank of Australia, 2017. Annual Report 2017. [Online] Available at: https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-reports/annual_report_2017_14_aug_2017.pdf. (Assesses: 22 September, 2018)
Cummings, J.R. and Durrani, K.J., 2016. Effect of the Basel Accord capital requirements on the loan-loss provisioning practices of Australian banks. Journal of Banking & Finance, 67, pp.23-36.
Godwin, A.J. and Schmulow, A.D., 2015. Financial Sector Regulation Bill in South Africa, Second Draft: Lessons from Australia. S. African LJ, 132, p.756.
Keddie, A., 2013. Thriving amid the performative demands of the contemporary audit culture: a matter of school context. Journal of Education Policy, 28(6), pp.750-766.
Kraft, P., 2014. Rating agency adjustments to GAAP financial statements and their effect on ratings and credit spreads. The Accounting Review, 90(2), pp.641-674.
Schlagwein, D., Thorogood, A. and Willcocks, L.P., 2014. How Commonwealth Bank of Australia Gained Benefits Using a Standards-Based, Multi-Provider Cloud Model. MIS Quarterly Executive, 13(4).
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