Ha3032 Auditing Answers Assessment Answers

Answer:

Introduction

The team found financial books from the company comparing the statements of available in the company with the information from the commercial bank of Australia. The team ensures that the information found in the company was in the same amount and statements with the books which were released from the national treasury of Australia (Kalinowski 2010 pg 19). The group ensures the company cleared their books at the end of the accounting period providing the information was correct with the form and amount in the company. The areas which had control risks include the company’s management on the purchase and supplies of the raw materials where there was missing information to extend that it the statement is materially affected by the occurrence of the error (Wang 2018 pg 45). The team relied on the computerized system to determine risks which might occur to the financial statements as a result of the various risks in the company. The team collected evidences from the transactions of the period according to the periodic principle of the reporting of financial statements.

Main body

The group was to ensure that the company prepared its financial statements according to the commercial standards, IFRS and all the accounting information followed that generally accepted accounting standards (GAAP)). On the preparation of the audit, the company produced all the financial states, starting from the financial statements, and statement of financial positions, cash flow statement and the statement of changes in owners’ equity (Liu 2018 pg 1). The team analyzed the accounting statement to ensure the degree of error so that to determine the sample in which the auditing was to be done. The team worked in groups to generate different information required for forming an independent judgment which helped in coming up with the opinions of the financial statements of the books of Australasia national bank (Choi et al 2016 pg 5).

The team assessed different financial books in different internal departments with the information from the management of Australia National Bank. In the auditing of the financial statements, the team focused on the specific financial statements which includes; the statement of the financial statements as the 31st September 2017, the comprehensive income statement for the end for the period ending September 2017, cash flow and statement of changes in owners’ equity for the period which ended September 2017 (Drake et al 2017 pg 58).  The team also analyzed the information provided by the financial team of the company which was listed in the notes part of the financial report of the company for to check there is a material statement for the financial statement. The team also focused on the director's information provided by the on the financial reports for the company.

In order to ascertain that the financial statements represented honest information about the entity, the team had to ensure that the financial statements have been presented according to the corporations act of 2001 to ensure that; the company gives a true and fair view report for the accompany for the period in which the report was released and to ensure that the report released by the accompanying was in accordance with the Australian Accounting Standards (Sammut, 2012). In order to ascertain this information was according to the auditors’ interest, the team used substantive measures to ensure that the financial information was correct. They checked the correctness of the figures in the financial statements, the accurateness and the consistency of the values in the financial books with that from the supportive statements like the statements from the creditors of the company (Hope, 2015). 

The basis of the opinion used by the auditing team was according to the Australian Accounting Standards. In team followed the responsibilities of the auditors on the financial statement report. The team ensured that the financial statements of the company had no material misstatements according to the auditor’s judgment. According to the Auditing Standard, the financial statements of an entity should be audited by an independent person who will give an opinion on whether the financial statements were in accordance with the international accounting standards (Feng et al 2013 np). A company should hire an auditing company which does an audit for an entity in which the company pays an examination fees according to the rates of the company. Auditing of financial position is essential since the shareholders of the company will obtain the truthfulness of the financial stamen and would understand how the company uses their financial statements of the company (Bertrand and Coibion 2009 pg 6). 

To maintain independence, the team made their information without the favor of the company. The team ensured that there is no individual with any wrong details on the company. All the opinions given by the team members were supported reasons which helped the company to support the company’s information.  The team relied on the financial information of the company and relationship of the company’s financial presentation about the international requirement of the audit. The team ensures that they provided adequate reasons why they made information pertaining financial statements of the company. The team ensured that they followed the required audit procedures in determining the auditor’s financial report for the company (Seymour and Geldenhuys 2018 np).

The performance of the audit controls by the team ensured that the company had relevant information about the company’s financial statements. The bank was to produce enough information on the operations and financial reports of the company and provide every team member with an opportunity to give audit information about the company’s financial statements and the stories. The company looked for audit information from various departments to ensure that there is enough evidence of determining the truthfulness of the financial statements of the company (Hsu 2018 n p). There was enough reason for the company to generate truthful information because the team bank produced critical financial statements for the company.  The team relied on the evidence from the bank by ensuring that the bank provides the list of deposits, loans and the investments for the company which assured that the team had substantial information about the company’s financial statements. The team also found evidence from other parties such as the treasury to ensure that the company has cleared with the central bank (Hirtle 2014 np).

According to the auditing standards, there are material misstatements of financial statements if three things occur; when the team realizes that an error is made while coming up with the financial statements, the team was tasked with identifying the inherent risk pertaining the team. Second are when the internal control of the company fails to manage errors which arise from the company and when; the team will be tasked with identifying the inherent risk and finally when the auditing team responsible with auditing the books of the company reasonably to detect a material error which occurs in the financial statements. This risk is referred to a detection risk. The team is tasked to identify these risks and ensured that they include while identifying the material misstatements of the financial statements (Ruhnke and Schmidt 2014 pg 258).

After identifying the errors which may have occurred in the financial statements the team determined that the bank had good internal control systems. According to the auditing standards, when the internal controls system is good, the team will make an unqualified opinion about the company relying on the available evidence for the company (Khlif and Samaha 2013 pg 145). However, if the internal control of the company is weak, the auditing team will perform a series of activities; ensure that the internal control systems of the company are good by revising the earlier work of the group or they start looking for audit evidence. To obtain the additional evidence about the internal control systems, the team does the control test for the company (Singh et al. 2013 pp 238).

On making our report on the financial statements of Australia Bank Limited, we ensured that the responsibilities of the employees which were presented in the financial report were correct according to the internal control information provided by the organization. We ensured that the team provided enough information about the company’s management system.  The team secured that the management responsibility of ensuring that the financial reporting responsibility was according to the financial reporting standards (Ryan 2015 np). The group included the information about the control test of the company and provided that the internal control system was excellent. To do these, the team ensured that they obtained reference numbers from customers of the organization, establish the company’s credit limit, and ensure that the bank comes up with aged receivables and to ensure that the amounts which are not paid are paid immediately if the team is to make an unqualified opinion about the financial statements of the organization (Rumniak 2015 pp 338).

The material balances and assertions are shown in the table below;

Table 1. Material account balances and assertions

(Annual Financial Report 2017, 2017)

The auditing team described the assertions obtained in the table below;

Table 2.  Description of the assertions

(Annual Financial Report 2017, 2017)

The audit team came up with the following results as from the audit procedures of the Australian Bank Limited; this ensured that the team found enough reasons for the audit opinion about the financial report of the Bank. The team conducted risks and provisions of the liabilities and the contingent risk of the company. The team focused on certain matters of the company; legal cases of the company and other investigations about the company. The team ensured that they obtained all the evidence of the company before they made a decision about the company (Stevens 2014 pp 3). The team identified the key credit and the liabilities of the bank as the key audit matter of the company and ensured that they made an opinion of the company’s financial statements. The key matters which were identified by the company parts from the credit and liabilities of the bank included;

•    The identifications of the new systems in the bank on the responsibilities of the various departments were a source of inherent risk. The team so this indication of an inherent risk which will affect the company’s financial statements (Stevens, 2014 pp 4).
•    The management decisions when the decisions about costs incurred on the change in the systems were made.
•    Additional information made by the management of the company which would affect the financial reporting of the company.

To respond to the management question about the auditing procedures of the company, the team addressed the following matters about the company:

•    The team sort understanding about the group’s new internal system and determining whether the system is positive on the company’s financial statements on the management
•    Assessing the various models in the organization and ensure that the company the company works according to the bank requirement of the Australian banks
•    The team ensured that the company worked according the international standards.

The decisions of the audit team relied on the critical analysis of the company’s strategic goals and objectives with the current business and corporate performance of the company. The team analyzed, financial statements, management reports and strategic plans for the company to make an opinion of the company. The always determined the company’s commented on the company’s net worth basing on the existing assets of the company by looking at the company’ financial statements in the head office and the subsidiaries. Therefore, the decisions depended majorly on the analysis of the existing sources of information about the company (Chiappetta 2012 pp 9).

The auditing team was independent and honest whey they made opinions about the operations of the company. According to the auditing standards, an auditor must remain independent while conducting audit practice and ensure that they provide a reliable, relevant, honest and independent audit opinion about the company. For instance, the recommended the team new management to continue with the implementation of the strategic plan of the company as stated by the transferred management. Also, the auditor’s report on relied exclusively on the analysis of the company’s financial statement and comparison with other existing sources. Also, the group did not obtain any biased information from either of the stakeholders. Therefore, their team played its role in an honest and fair way to provide a reliable and fair view of the company’s information which determines their high ethical standards (MohammadRezaei et al 2015 pp 95). 

Since the information based on the independent judgment of every member of the team, at some point, the members of the group came to conflicting situations when they made contradicting judgments’. The members who made conflicting opinions to explain their judgments’ based on the commonly available source.  After they have both made their explanations, the team leader would make a good clarification basing on the opinions of both parties. The team would, therefore, agree on one point which was important for presentations to the team. The team relied majorly on international auditing standards, and they ensured that they ensured that the company used international reporting standards on making their reports when they compare with what they existed in the company’s original statements (Ruh et al., 2009 pp 198).

The group followed step by step auditing procedures and practices while they conducted an audit. All the members in the group played a role in coming up to making a judgment about the company’s management and operation which ensured that the company was working towards achieving a true and fair view of the company’s information. However, because the group did not have enough in the auditing profession, there are some steps which the sipped while preparing and conducting the audit activity. Given another chance to conduct a research, the group would ensure that they followed step by step procedure of auditing to ensure that they produce reliable audit information (Graham et al 2018 np) 

In the Australia bank limited, managers need to be in a good position. Making decisions requires that a manager uses available information to make informed decisions. Auditing helps the management makes informed decisions a situation where the management needs audit information to generate the performance of the company. An audit manager needs to explore all the available information to make an informed decision about an organization. , and a well-informed decision should conclude. For example, a group manager needs to rely on the information from other group members to determine whether an opinion to management is good or bad (Mahmud, 2010 pg 3). 

Table 3. Table on Financial Ratios

(Annual Financial Report 2017, 2017)

Various matters which were considered as the key significance matters according to the team include;  

• The creditors of the company were a key matter. The team looked for evidence to ensure that the information provided by the financial institution was according to the company’s ability to make pay with time. According to the current ratio of the company, the company is able to meet its financial obligations as they fall due. Team relied on the information provided in the balance sheet to calculate the current ratio of the company.
• The team also determined the reasonableness of the institution’s deposits from the customers. The team compared the number of depositors of the company with the amount of the cash resources available in the organization. The team relied on the information provided on the balance sheet of the financial statement with the cash flows statement for the financial period under audit.
• The amount of long term liability for the company was also a material factor considered by the team. The team relied on the amount of the loan recorded on the balance sheet and made comparison with the activities which has already been done to the purpose of the loan. The team relied on the debt to asset and debt to equity ratios which shows how the company has used its loan to increase the assets of the organization and the shareholders equity. These ratios showed positive impact on the financial statements according to the credit of financial institution. This was in hand with the amount of assets owned by the company as ascertained by the audit team.
• The number of accounts opened by the financial institution in the current period was also a key matter in the auditing of the company’s financial books. Increase in the number of accounts meant that the financial institutions expanded and therefore the shareholders would expect an increase in return. The team would therefore conduct an evaluation of how the increase in the accounts would affect the financial position of the organization which would enable the management to make informed decisions about the organizations. The team also relied majorly on the availability of the financial institution’s information at the national treasury (Yousef 2015).

The different materials which were of material significance to the auditing group included;

• Cash and liquid assets. The team ensured that the cash balances recorded in the statement of financial position reflected a true and fair view of the financial statements. The team focused on the accuracy and timeliness of generating the balance in the financial information.
• The revenue reported in the income statement of the company was of material significance to the group. The group performed control test and accuracy of the information provided by the team.
• The trading securities of the company were also important to the team. The team performed test control on the accuracy and cut off of the company financial information.
• The team focused on the control on the treasury derivation like the SWAPs, futures and forwards. The control tests was done to determine whether the information was the accuracy and cut offs on the underlying information.
• The team also focused on the payables and current tax liability of the company. This information was necessary to ensure that the company in paying off its debts. The assertions included; occurrence, completeness and cut offs.
• The team did more assertions on; loans and advances, receivables, disbursements, bonds, notes and subordinated debts. The team tested control on occurrence, classifications and cut off due ensure that information helped them to make an informed decision.

Conclusion

In conclusion, the team exercised its audit responsibility on financial reporting of making independent judgment on the financial report. On the opinion of the team, the financial report of the financial institution is in accordance to the Australian Accounting standards (2010). The reported an unqualified opinion on the audit. The decision to recognize conduct costs within the internal control department. The team identified the relevant costs including interests, discounts and transaction costs has being of significant impact on the financial report of the financial institution.

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