Audit Assurance And Compliance Assessment Answer

Structure of your research report:

1. Focus in each headline the implication of ASX Corporate Governance Principles from your selected company (reference link B). Conceptualize and explain how to 
your selected company implements ASX CGC principles (read carefully from reference link A.3 and A.4 to follow)

2. Risk assessment (When performing an audit, you use risk assessment procedures to assess the risk that material misstatement exists. This step is very important 
because the whole point of a financial statement audit is finding out if the financial statements are materially correct. 

1. Implications of ASX Corporate Governance

• The Board of SEEK Limited (“SEEK” or “the Company”) wants to achieve the Company goals in any way. For this they wants to add value to their employees by guiding them, by assisting them in their work and by supporting the Management to manage the overall business of the Company.For this Management has to create and maintain the Company in such a way that management is capable of generating sustainable growth and profitability for the Company and also for its stakeholders. The Board of Directors of SEEK called SEEK Board (“The Board”) has to follow all the applicable relevant laws and regulations and has to maintain such an environment that employees will feel safe and reward working environment. Company also has its responsibilities against the community and the environment, its external and internalstakeholders. It has to follow and complete all its responsibilities to act as a good corporate citizen.

• The Board has following members:
o non?executive directors, other than the Managing Director and Chief Executive Officer (“CEO”); 
o a majority of independent directors, and 
o a minimum of five members.

• Ethical Performance:

The company always make sure about their ethical performance they keep transparency in the system. Directors are be able to reach the Senior Management of the Company so that they can request important and relevant information in their role as a Non- Executive Director. Directors always provide their expert professional advice how to save Company’s expense or how to increase Company’s revenue acting as Director of the SEEK but they have to take the approval from Chairman for their advice.

Corporate Reporting:

Director and Senior Management of the Company approves the financial statements and other relevant statements like Directors Report or Annual Report that needs to be presented to the all shareholders and other stakeholders of the Company.Company has established certain procedures that helps the management in circulating the financial statements and other reports to the stakeholders of the Company.Timely and balanced disclosure:Company always present its financial statements timely every quarter except for circumstances which are out of control in Company’s hands.

2. Risk Assessment

Risk assessment is the major part of an audit. Auditor has to find out the major parts of the financial statements and find out the areas where there is a threat of risk.

i) Assessment of audit risk

While assessing the audit risk, International Standards of Auditing is applied. ISA 315 is applicable for identifying the risk of material misstatements through understanding of entity and its environment. To identify the risk, auditor should have thorough knowledge of the business. If he has good knowledge of business, he can point out the deviated points in the financial statements. Nowadays, for identifying the risk, internal controls assessment is also made applicable for statutory auditors. Internal controls refers to the controls that are present in an organisation to safeguard the assets of the Company and make employeesnot to do any fraudulent act.

ii) Nature of the Company:

Seek Limited and its subsidiary companies, collectively known as the Seek Group, focusses of providing jobs the unemployed people. They matches the requirement of job seekers with the employment opportunities present in the market. This also helps the Companies to hire the most eligible candidates to their organisation.SEEK Limited is working in the area of recruitment and consultancy. SEEK Limited is the global leader in creation of online employment market. SEEK Limited Company has its business in Australia, New Zealand, China, Brazil, Mexico, Africa and across South East Asia and is available for approx. 4 billion people and relationships with over 800,000 hirers and 180 million candidates. Company’s main purpose to deliver Education. They focus on helping the working adults to achieve career success by eLearning.

iii) Recruitment and Employment Law:

The Australian Law Reform Commission has proposed that the Fair Work Ombudsman (FWO) should conduct a national campaign whose main focus is on the recruitment industry. In that they are reviewing the industry code of conduct so that they cover all the points relating to the client diversity and a law bound arrangement with the job seekers.

iv) Founders of SEEK Limited are brothers Paul and Andrew Bassat and Matthew Rockman. At the initial stage its main agenda is to provide services to the job seekers. The website, www.seek.com.au, was launched in 1998 and SEEK limited listed on the ASX in 2005 with current market price of 18.86 AUD. 

Strategy
•Provide input and get approval from the management so that it can match with the Group Strategic direction.
•Direct, monitor and assess the Group’s performance for the past years against the target and business plans

•Approve and Monitor Capital Management which includes capex, investing in to other companies like merger and acquisitions or divestments

Ratios
Foe evaluating company’s health we need to analysis different ratios to keep on check the liquidity of the company. There are several ratios which can be calculated from Balance sheet items and Income Statement items. Like for evaluation the profitability of the Company Net Profit Ratio and Gross Profit ratio is calculated. For evaluation the earning capacity of the Company different turnover ratios are calculated like Asset Turnover ratio, Debtors Turnover Ratio, Inventory Turnover Ratio. Since this Company belongs to Service Industry, there is no inventory thus Inventory Turnover ratio cannot be calculated. For evaluating the liquidity of the Company Current ratio and Quick Ratio is calculated.

Income Statement and Balance Sheet Ratios
Net Profit Ratio 32%
Gross Profit Ratio 60%
Inventory Turnover Ratio Nil
Asset Turnover Ratio 3.50 
Debtors Turnover Ratio 12.72 
Debt Equity Ratio 1.28 
Current Ratio 1.53 
Quick Ratio 1.53 

Audit Risk in Development of Financial Statements:

While preparing a Balance Sheet, Companies used to window dress their Balance Sheet. For eg: If they want to increase their profits then they generally reverse the provisions made in balance sheet in previous years while if they want to do the reverse i.e. decrease the profits, they create additional provision and accordingly change the Balance sheet as per their convenience. Auditor needs to check all these items very clearly to avoid risk of material misstatements.

References

Nicholson, G. J., & Kiel, G. C. (2007). Can directors impact performance? A case?based test of three theories of corporate governance. Corporate Governance: An International Review, 15(4), 585-608

Quinsey, V. L., Harris, G. T., Rice, M. E., & Cormier, C. A. (1998). Violent offenders: Appraising and managing risk. American Psychological Association.