Auditing and assurance service in Australia - Myassignmenthelp.Com

Question: Discuss about the Auditing and assurance service in Australia. Answer: Introduction The study helps in illustrating about ASA 701 auditing directive, which suggests about the advices regarding communication of key audit matters predominantly in the independent report of the auditors. The auditing standard ASA701 Communicating Key Audit Matters in the Independent Auditors Report is developed at the backdrop of the international fiscal crisis (Vallabhaneni 2013). The current segment evaluates the monetary crisis, where all the relevant problems faced by the organisation during the period is evaluated. The times of diverse monetary unsteadiness can essentially help in comprehension of different concepts of crisis. There is manifestation of diverse challenges particularly from the economic, political plus social environment. As rightly indicated by the worldwide financial crisis, relevant tensions during the period, disorder along with critical examination has manifested in the financial sector of the world. Thus, economic crisis can be regarded as a distrust in the fin ancial structure, a substantial decrease in transactions of stock exchange and a disorder of market transactions. This mainly occur due to the negative impact of financial sector on performance of the company in generating higher rate of return. The government and international institutions such as Woolworths Limited can attempt to rise above the adverse impacts of the financial crisis by directing the method of worldwide financial reform (William Jr et al. 2016). ASA 701 auditing measure institutes diverse necessities and carries along with explanatory materials about communication of Key Matters of Audit (KAM) in essentially the independent report of the auditors. This standard can be applied to the process of audit of financial declaration of Woolworths Limited for a specific financial year or else assessment of financial report for half year as per Corporations Act of the year 2001. Audit of financial assertion of Woolworths Limited otherwise a complete set of financial declarations for other reasons can use ASA 701 for pecuniary reporting of business entity on and after December 15, 2016 (Arenset al, 2012). This directive can hereby help in dealing with accountabilities of the auditors of the corporation Woolworths Limited to correspond properly key audit matters. However, in carrying out the process, the assessor has the need to take into consideration diverse areas of high examined risk of mainly material misstatement else wise other considerable risks detected in financial statements of Woolworths Limited as per ASA 315 (as mentioned in paragraph A 19 to A 22). This process of determination also includes considerable auditor judgements associated to areas in the financial assertions that include important management judgement, counting diverse estimates of accounting detected as high estimation uncertainty. The impact of audit of significance incidents or else transactions happened during specific time. Essentially, the evaluator also has the need to ascertain matters that were mentioned according to paragraph 9.In addition, the auditing standard depicts the financial declaration of current period and thus can be identified as the key audit matters (as mentioned in the paragraph: A 9 to A 11 and A 27 to A 30). The financial assertions of the firm Woolworths Limited states that both the consolidated as well as individual annual financial assertions have been presented as per the International Financial Reporting Standards- IFRS by the International Accounting Standards Board also simply referred to as (IASB), pecuniary declarations as mentioned by particularly Financial Reporting Standards Council, varied requirements stipulated under Companies Act of particularly South Africa, South African Institute of Chartered Accountants abbreviated as SAICA, necessities of the Companies Act stipulated under South Africa together with the JSE Limited Listing Requirements. In addition to this, the group also combines different subsidiaries. These matters can help investors in observing maintenance of adherence to regulations regarding financial presentation, auditing, and assurance. Accounting policies: The annual report of the corporation Woolworths Limited presents the accounting policies that can subsequently be used by investors for comprehending the pecuniary condition of the corporation. The basis of preparation used for preparation of consolidated along with the separate annual financial assertions of the firm Woolworths Limited are necessarily presented utilizing both the historical cost as well as bases of going concern. Thus, this can help in understanding diverse modified opinion as per regulations of ASA 570 or else material uncertainty related to diverse incidents otherwise state of affairs that might perhaps shed uncertainty on ability of business entity to carry on as a going concern as per regulations specified as per ASA 570. Therefore, the key audit matters mainly need to provide all the relevant information, where auditors can report relevant information to help them understand capability of the firm to continue its operations. Analysing annual report of Woolworths Limited The auditors report in the financial statement mainly reflect that according to viewpoints of the auditors, consolidated as well as individual financial statement essentially presents fair view. Importance of assessing the risk of audit The reasons for issuance of the auditing standard ASA 315by the Auditing and Assurance Standards Board (AUASB) helps in recognizing and analysing the material misstatement risk by comprehending specific entity and organisational environment. According to the regulation ASA 315, Woolworths Limiteds auditors have the need to understand the business risk that essentially indicates towards the risk resulting from important conditions, incidents, state of affairs else wise inactions that cam adversely affect potential of an entity to attain its objectives and implement its stratagems (Messier et al.2014). It is important to assess the risk of audit processes for obtaining clear understanding of the business entity along with the environment, counting the internal control of the entity to recognize as well as evaluate the risks of particularly material misstatement, whether owing to fraud or else error (intentional or unintentional) in the annual report together with levels of assertion. The methods that can be associated with the accounting statement pronouncements of Woolworths Limited The regulatory procedures that ASA 315 (Reference: Paragraph A 105 A108) includes, gives an overview into the identification and assessment of the risks associated with materiality that have been included in the different segments of the annual report. The risks associated with the material misstatement at the particular level of assertion for diverse classes of transaction, balances of account as well as disclosures of the corporation to deliver a foundation for chiefly designing and performing processes related to audit can be linked with it (Messier et al. 2014). The auditor will be able analyse the risks that have been detected, and analyse whether they associate more to financial report. From the overall evaluation of annual report relevant material misstatement of the organisation could be identified. The auditors report has mainly depicted the financial statement, where material misstatement of the company could be identified. In addition, both auditors and directors report mainly states that no material misstatement is currently present within the organisation. The auditors mainly state that no material misstatement in currently present within the operations of the organisation. The company has mainly generated from the Accounting Standard AASB 101, which is used in preparing the financial statement. The companys financial report is mainly free from any kind of material misstatement, which is depicted in the annual report. In addition, the financial report prepared by the company is ethically viable, as it helps in depicting financial performance of the company. The annual report is mainly designed for depicting performance of the company. The auditors report has mainly complied with Australian Auditing Standards, while evaluating the financial annual report of Woolworths. The viable method of preparing the financial report could eventually allow the company to depict its financial performance to its stakeholders. Therefore, the preparation of the annual report is relatively considered a positive attribute of the company, where no material misstatements are present. Significant business risks that are common to the planning process of audit In view of high profile scandals of accounting in current times, the role as well as accountabilities of assessors can be questioned. The auditors of the corporation Woolworths need to have understanding regarding the corporation; risks together with the areas where the corporation is exposed, causing them to reduce the impacts of extreme practices related to accounting (Messier et al. 2014). It is for these kinds of accounting scandals that the top down approach has been accepted and is even stressed which involves the auditor advances to gain an explanation of the corporate entity, business surroundings in regards to the operations of the business firm, important business risks and the conversion of these risks into audit risks. Procedures that can be performed by an evaluator to analyse the risk The procedures that can be followed by an evaluator to analyse the risk include the following: Identification of risks of business pertinent to objectives of financial reporting of the firm (Kend 2015) Approximating the importance of risks Evaluating the overall likelihood of the occurrence Deciding regarding activities to address the identified risks As per AUS A24.1 of ASA 315, ownership as well as governance arrangement also need to be there. The directors of the organization and the executives delegated with the responsibility of corporate governance can determine policies for the determination of the levels of risk (Kend 2015). The senior management can design, implement and monitor effectual risk management systems to execute policies that have been advised by the directors of the organization. Again, the non-executive directors present on the higher-level management as well as independent compensation commission will be able to review diverse plans, counting commissions, bonuses that are discretionary in nature, service contracts of executives and sharing of profits. The strength of specifically internal audit operation and audit committee and their role can help in independent appraisal function. Appreciation of significance of internal control to a specific entity and to the independent auditors As per (Ref: paragraph A 36 to A41) the auditor can acquire an understanding regarding pertinent industry divisions, regulatory as well as other external facets along with the applicable framework financial reporting. The auditor can also acquire a comprehensive understanding as regards the internal control pertinent to the work of audit. Even though, majority of the controls applicable to the process of audit can probably be related to the process of financial reporting (Vera-Muoz et al. 2014). However, not all kinds of controls that relate to financial reporting are applicable to audit. Essentially, according to regulation stipulated under (ASA 315, ref paragraph, A42 to A65), this pertains to professional judgement of the assessor whether a specific control, singly or in combination with different others is pertinent to the process of audit. Essentially, the assessor can think about comprehending the control environment by acquiring clear understanding by evaluating whether admini stration with the oversight of the ones charged with governance has generated and maintained culture of honesty as well as ethical behaviour (Arenset al. 2012). Risk of material misstatement: Risk of material misstatement can be regarded as risk that the financial assertions of a corporation have been improperly stated to a certain degree of materiality. However, the risk might be evaluated by the assessors at two different levels, including inherent risk as well as control risk at the level of assertion. As rightly indicated by Knechel and Salterio (2016), inherent risk refers to a susceptibility of the management of the organizations financial assertion in regards to misstatement that pertains to error or else fraud that should be considered in regards to diversified controls. On the other hand, control risk related to the material risk mandatorily has to be considered or else recognized by auditing controls implemented within an organization. Auditing standard have the need to comply with the International Standard on Auditing Standard ISA 260 that refers to the need for communicating the ones associated with governance practices issued by particularly International Auditing as well as Assurance Standards Board. As rightly indicated by Gay and Simnett (2014), the entire board is responsible for the system/process of internal control for the entire group. It is important to declare the result of the risk management practices, alongside actions of autonomous assurance provider. This helps in controlling, counting financial controlling and can be considered to be important audit matters (Louwerset al. 2015). Woolworths Limiteds financial report reveals the fact that the directors have evaluated the Groups annual budget along with the financial forecast in regards to the inflow of cash during the financial year of 2017 and overview into the insurance arrangements of the entire group. However, based on the review as well as on the basis of the settings of the present financial condition and present debt facilities, the board of directors of the organization are content that the specific group is an appropriate going concern and have sustained to presuppose going concern based in the course of preparing and presenting Annual Financial Statements. This process of communicating key audit matters thus helps management to arrive at appropriate judgements and preparation as well as presentation of the financial statements (Cohen and Simnett 2014). Going concern considerations As per Auditing Standard ASA 570 (indicating towards going concern), there is requirement for mentioning risk related assessment procedure as well related activities, evaluation of administrations assessment, phase beyond assessment of the supplementary inspection procedures and management when events or else conditions have been detected (Junior et al. 2014). The requirement of the standard ASA 570 also includes communication with entities charged with governance accountability (Hayes et al. 2014). However, analysis of financial assertion of the firm Woolworths Limited reveals the fact that group treasury committee was instituted in the firm that necessarily can oversee specific actions in regards to the treasury of the entire group. This group was responsible to make it certain that there is appropriate regulation of diverse crucial function/operation (Kendet al. 2014). The audit committee delivers diverse duties that have been oversighted from the viewpoint of the entire management and from the perspective of mainly Companies Act of particularly South Africa. This mainly can be associated to auditors, specific governance controls as well as pecuniary assertions of the corporation and the extent to which it complies with the pertinent legislation, directives as well as governance exercises. The committee properly regulated all these affairs as established in terms of reference that are assessed as well as approved by the board on a yearly basis, aligned to the regulatory neces sities of the committee. This helps users of accounting statements to understand whether the company is fulfilling the requirements to become a going concern (Vanstraelen and Schelleman 2017). The working group analysed the appraisal of entire going concern position in regards to the whole group and recommended to the management that the total group will be able to convert into a going concern for the approximated future. This report suggests that it is solvent and can give out projected dividend (Earley 2015). This disclosure by the management of the company can also be considered to be an important audit matter that essentially has the need for communication of the comprehensive financial condition of Woolworths Limited. Comprehending business entities and business environment The assessors also have the requirement to have appropriate comprehension of the business concern and the business atmosphere in which the business functions. In addition to this, the auditors also feel the necessity to focus on particular areas of accounting statements for recognition of firms material misstatements (Soh et al. 2015). The assessor also has the requirement for special considerations for diverse areas of financial reporting that comprises of adjustments in accounting, impairments of diverse registered value of asset, alterations in share capital along with debt preparations among loads of others (Carson et al. 2016). Recommendations and conclusions In the end, it can be concluded that the assessors need to outline stratagems and subsequently gather substantiation to support different kinds of management. The numerous financial declarations are accurate within the restrictions of materiality. As a result, for expressing this kind of viewpoints, the assessor needs to assess all the existing evidences to wrap up the financial assertions would be maintained. Essentially, professional scepticism in the accounting statements of Woolworths Limited can constrain the judgement of the assessors regarding the substantiation that are necessary to achieve the state. Again, principles in regards to accounting have been fundamentally prescriptive in addition to perfunctory in nature as well as characteristics. Conversely, the auditing regulations should mandatorily have the features as the examinations and methods are descriptive and rely exclusively on the judgements of the assessors. The assessors are expected to be autonomous and regulate different clients. Therefore, it is highly recommended that the auditors should maintain an objective overview and should mandatorily look out for audit substantiation. References Arens, A.A., Best, P., Shailer, G., Fiedler, B., Elder, R.J. and Beasley, M., 2012.Auditing and assurance services in Australia: an integrated approach. Pearson Education Australia. Arens, A.A., Elder, R.J. and Mark, B., 2012.Auditing and assurance services: an integrated approach. Boston: Prentice Hall. Carson, E., Fargher, N. and Zhang, Y., 2016. Trends in auditor reporting in Australia: A synthesis and opportunities for research.Australian Accounting Review,26(3), pp.226-242. Cohen, J.R. and Simnett, R., 2014. CSR and assurance services: A research agenda.Auditing: A Journal of Practice Theory,34(1), pp.59-74. Contessotto, C. and Moroney, R., 2014. The association between audit committee effectiveness and audit risk.Accounting Finance,54(2), pp.393-418. Earley, C.E., 2015. Data analytics in auditing: Opportunities and challenges.Business Horizons,58(5), pp.493-500. Gay, G.E. and Simnett, R., 2014.Auditing and assurance services in Australia. McGraw-Hill Book Company. Hayes, R., Wallage, P. and Gortemaker, H., 2014.Principles of auditing: an introduction to international standards on auditing. Pearson Higher Ed. Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: A historical analysis on a world-wide phenomenon.Journal of Business Ethics,120(1), pp.1-11. Kend, M., 2015. Governance, firm-level characteristics and their impact on the clients voluntary sustainability disclosures and assurance decisions.Sustainability Accounting, Management and Policy Journal,6(1), pp.54-78. Kend, M., Houghton, K.A. and Jubb, C., 2014. Competition issues in the market for audit and assurance services: are the concerns justified?.Australian Accounting Review,24(4), pp.313-320. Knechel, W.R. and Salterio, S.E., 2016.Auditing: Assurance and risk. Taylor Francis. Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015.Auditing assurance services. McGraw-Hill Education. Messier, W.F., Glover, S.M. and Prawitt, D.F., 2014. Auditing and Assurance Services: A Systematic Approach; Diterjemaholeh Denies Priantinah, Linda KusumaningWedari, 2014.SalembaEmpat. Jakarta. Soh, D.S., Leung, P. and Leong, S., 2015. The development of integrated reporting and the role of the accounting and auditing profession. InSocial Audit Regulation(pp. 33-57). Springer International Publishing. Vallabhaneni, S., 2013.Internal audit practice. Somerset, N.J.: Wiley. Vanstraelen, A. and Schelleman, C., 2017. Auditing private companies: what do we know?.Accounting and Business Research,47(5), pp.565-584. Vera-Muoz, S., Gaynor, L., McDaniel, L. and KINNEY JR, W.R., 2014.Do Procedures Matter when Communicating Assurance? An Experiment Applying New IAASB Standards. Working paper, University of Notre Dame, University of South Florida, University of Kentucky, and University of Texas at Austin. William Jr, M., Glover, S. and Prawitt, D., 2016.Auditing and assurance services: A systematic approach. McGraw-Hill Education.