Hi6026 Audit| Independence Of The Assessment Answers

Answer:

Introduction

In today’s scenario, the importance of the auditing or auditor reporting has been increased, forming a base of the success in the corporate world. Users get benefit from the enhanced auditor reporting, which leads to the transparency in their data and management of operations. According to the Australian Audit standards, changes made in the auditor reporting and the requirements related to it. The given report emphasizes on the analysis of the existence of auditor discretion in the firm Apollo Tourism and Leisure Ltd. The report in the later part discusses the audit matter along with the committee of audit and auditor’s opinion has been identified in a manner, which mentions about the performed responsibility of the auditor. An attempt to identify information not provided through the annual report of the company. Thus, the report continues to enlist a number of follow-up questions, which could be asked by the auditor in the company annual general meeting.

Auditor Independence Requirement

The independence with respect to the auditor has been clearly described in the IAFC Code of Ethics. The term independence in context to the code of ethics is defined as the independence, referred to as the free state of mind. It mentions about the state of mind which is not influenced by the forces cooperating with professional judgment, permitting people to act with reliability, exercising independence and judgment as per the standards of  (ASA 200, 2017). Moreover, independence can be defined as the evasion of the facts and conditions, which are important to the third party. It provides all the information pertinent to the third party, through which organization or an associate is reassured about the integrity, objectivity or professional skepticism being cooperated with context to standards (Australian Auditor Independence Requirements, 2017). The definition of the term independence, mentioned above is duly applicable to all the qualified accounting bodies, present in the Australia. It also includes the pertinent jurisdiction which is the member firm of the IAFC (Auditor Independence, 2013).

The auditor has followed the guidelines or standards in compliance with the independence requirements, which can be reviewed by the auditor independence statement of the Apollo Tourism and Leisure Ltd annual reports.

Nature of Non-audit Services

Tepalagul and Lin, (2015) was of the view that it has been analyzed that the non-audit services are generally considered as an engagement, through which an audit firm provides professional services to the client, of the audit. It means client receives the benefit of services other than the pursuant to the inspection to the financial reports. Moreover, the professional code of Ethics for the professional Accountants APES 110 sets the traditional rationale on behalf of the audit client offering auditing services. The traditional rationale is based on the standards of the IAFC code. The non-audit services offered by the auditors of the firm Apollo Tourism and Leisure Ltd include taxation services, due diligence services, and the initial public offering services.

Further, the directors of the firm stated about the provisions of the non-audit services, which are provided by the auditor. It states that auditors comply with the general standards of independence, as obligatory to the Corporation Act 2001. In addition, the directors’ report also stated that non-audit services should not conflict with the reliability and objectivity of the auditors. There should be no services influencing the general principles of auditor independence in APES 110 Code of Ethics for the professional accountants as specified by the Accounting Professional Standards Board. Therefore, in the similar context it assesses or auditing the auditor’s work in the decision making ability who acts as an advocate for an organization, as they share economic risks and incentives mutually.

Figure 1: Statement presenting a description of all services provided by the auditor of Apollo Tourism and Leisure Ltd

(Source:  Apollo Tourism & Leisure Ltd. Annual Report 2017)

Auditor’s Remuneration

From the above table, it can be interpreted that, auditor has received only auditing fees in the year 2016. Apart from this, in the year 2017, author has received addition payment for non-auditing services that includes due diligence, payment related to the services regarding IPO as well as due diligence.

Key auditing matters

Those matters that require the judgment of professions in the significant matters regarding the auditor of the company is said to be key audit matter (Cordos and Fulop, 2015). In addition, Sirois, Bedard and Vera (2018) stated that these matters impact the financial report completely. The annual report of the Apollo Tourism and Leisure ltd stated the following key audit matter:

Attainment of entities into common control- these identified issues has been taken as key audit matter as these are the significant transaction related to the specific period of time because of their amount, efforts and quantum. It is evaluated that the treatment that was adopted by group was stable with the “Australian Accounting Standard.” Besides this, it was also according to the acquisition contract. In this, analytical procedure was applied to analyses the transaction in detail. For analyzing this, financial as well as non-financial data is required.

Accounting for the transaction cost-it is also included as key audit matter. These transactions are essential as well as its judgment is applied in allocating the cost among combined report of the comprehensive income and share capital. It has been evaluated that tax professions is also involved while evaluating the cause of tax and accounting deportment of the operation cost. The fundamental procedure has been applied to measure the transactions cost in responsible and proper manner.

Figure 2: Key Audit Matters of Apollo Tourism & Leisure Ltd

(Source: Apollo Tourism & Leisure Ltd. Annual Report 2017)

Accounting of rearrangement of group is also considered as key audit matter as it is considered as an important transaction.  It assesses the treatment related to capital restructuring of Apollo Tourism and Leisure ltd during the period during that period sop to evaluate that whether it was in accordance with the Australian Accounting Standard or not. The fundamental test has also applied to accomplish the evidences in support of the specification. This test is applied to confirm that no fraud occurs at the assertion level.

Acquisition of business- It has been evaluated that while acquiring the adequate audit evidence, a procurement contract is done to find out the items that might affect the procurement price and re-evaluation of relevant disclosure of the financial statement. Control audit test procedure has also applied to ascertaining the control on the acquired entity.

Figure 3: Key Audit Matters of Apollo Tourism & Leisure Ltd

(Source:  Apollo Tourism & Leisure Ltd. Annual Report 2017)

Audit Committee

Yes, a risk and audit committee exists at the Apollo Tourism and Leisure In the company. The company has two non-executive directors. Stephen Lonie is the frost while another one is Sophie Mitchell. They both has directorship from the last three years. In accordance with the constitution of the organization, board has developed Audit and risk management committee. This committee assists the roles, responsibilities that are designed in Charter (Adelopo, 2016). The main aim of the Charter is to provide framework based on which committee will work to bring focus, independent judgment, and lucidness in the problem.

Structure

Composition and Size- the committee will only comprise of Non-executive executives. It will also cornice the most independent executives that are not less than two members. It will reveal the most important skills are qualification of the committee associates (Audit and risk committee charter. Apollo Tourism & Leisure Ltd, 2017). Membership will be evaluated occasionally; as well as reappointment is not automatic. In addition to this, acknowledgement and knowledge are determined through the board.

Functions

• Also it is the responsibility of the committee for the overall external audits which focuses on considering the suggestions related to board in context to the considering the procedure and also by giving payment to the external auditor.  Also the overall conditions of the engagement of the external auditor are related with the process of inspection.
• Risk management is also considered as the framework that helps in managing the designs and also the overall risk management framework which emphasizes on the considering and securing the risk. It also takes into consideration the issues which are related to the overall schedule (Brasel et al. 2016).

The responsibility of the committee also includes making suggestions for the external audits to the boards such as appointment of the external auditor, suggesting the remuneration of such auditor and choosing procedure for audit. Moreover, before each inspection, the committee should make prior agreement regarding the conditions for the engagement of external auditor.

They are also accountable for the implementation of the appropriate risk management framework which aims at protecting against, recognizing, detecting and responding to risks of all kind. Moreover, they perform the function of reviewing and enhancing the framework.   

Audit Opinion

An unqualified opinion has been provided by the auditor of Apollo Tourism and Leisure Ltd. in its audit report.  Unqualified opinion means that the accurate and fair presentation of the financial reports of the organization without any exemptions. It further provides that the accounting standards have been properly followed by the organization. The independent auditors provided their opinion in the financial report of the company and specified that fair and correct value of the consolidated financial position has been presented. Furthermore, it provided that Corporation Regulations 2001 and Australian Accounting Standards have been strictly followed in the financial report.

Difference between Responsibilities of Directors/ Management and Auditors in the Context of Financial Report

The preparation of the financial report is the responsibility of the directors and the management. They are further responsible for making proper disclosures in the financial report of the company. They are also responsible to ensure that fair and correct data is presented in the financial reports. Their responsibilities also include the implementation of internal sound control and accounting policies for the purpose of minimizing the chances of fraud. The management keeps the assets and liabilities of the organization under its control. In other words, both management and the directors bear the responsibility to present the financial statements in accordance with the generally accepted accounting principles.

On the other hand, the auditor’s prime responsibility is to provide their opinion on the financial statements of an organization. The auditor is required to inspect whether the financial statements present a true and fair view of the organization. The next responsibility of the auditor is to ensure that there are no material misstatements in the financial statement with the help of proper planning. In other words, the auditor only bears the responsibility of expressing the opinion on the financial statements of the company.

Therefore, it can be concluded that the responsibility of directors and managers is associated with the preparation of the financial statements, while auditor’s responsibility is in relation with providing an opinion on the financial statements offered by the management of the organization.

Material subsequent events

The subsequent event is considered as the event which take place after the overall reporting period but it takes place before the issue of the financial statement to the public.  In context to Apollo tourism & Leisure Ltd, organization attained the overall shares which are remaining of the Canadream Company for $ 28,084,000 on 11 July 2017. It has been seen that the company focuses on 20.22% shares of this organization.  Also it has been examined that date of financial report is not practical to offer the overall fair value of the assets and liabilities related with the organization.

Also the next subsequent material event is that organization focused on entering into the agreement which is binding at the time of attaining the assets of the George day Caravans business for $ 9,100,000 dated 23 August 2017.

Also there are events that are elaborated which have given impact on the overall activities of the entity. The disclosure related with the events is elaborated in a proper manner and also in the director reports of the organization, which is also the sub part of the overall financial report.

Material information

Material information is considered as the data which can be affected by the overall decision of the customers if they are given information. By focusing on the overall financial report of the Apollo tourism and leisure ltd it has been analysed that the overall data is concerned with the users of the company and also it is disclosed to the manager of the organization. Disclosures are important for the customers are elaborated and also disclosed in a proper manner.  There is no such data which could be not here or is not elaborated by the managers of the company.

Conclusion

Auditor report is also considered as the essential part at the time of focusing on the financial statement as there are various external customers who focuses on considering the certification offered by the auditors on the basis of the financial statement and also on the basis of the overall process of decision making. Also in the audit report it has been seen that there is disclosure in context to the duty of the management and also it is the duty of the auditor to consider the views on the financial statement.  So, the information is given to the third party with the help of the auditor report and also the policies related to accounting are considered according to the principles and internal control system of the overall entity.

Follow up question

At the time of annual general meeting it has been seen that there are various shareholders who have the opportunity to consider the question form the auditors of the organization.  There are various questions that are stated below:

• The problem concerned with the internal analysis of the organization is also offered to the mangers and the auditors and then the overall result is considered.
• To control the activities of the company the auditor is also considered and also the weakness is taken into consideration. Also it has been seen that elaborated information is given in context to the deficiency.
• Also the accounting treatment which is taken into consideration is right or wrong. But the auditor stated that it was not right and also the overall information is needs in the accounting treatment.
• Also if any investigation takes place in context to accounting fraud has been considered by the auditors. Also the same question can be asked form the shareholders at the time of conducting the annual general meeting of the organisation.

References

Apollo Tourism & Leisure Ltd. Annual Report 2017. 2017. [PDF]. Available through <https://wcsecure.weblink.com.au/pdf/ATL/01898718.pdf>. [Accessed on 9^th September 2018].

Audit and risk committee charter. Apollo Tourism & Leisure Ltd 2017. [PDF]. Available through < https://apollotourism.com/wp-content/uploads/AUI_930168970_1_Audit-Risk-Committee-Charter_SJ.pdf >.[Accessed on 9^th September 2018].

Auditing Standard ASA 200 .2017. [PDF]. Available through < https://www.auasb.gov.au/admin/file/content102/c3/ASA_200_Compiled_2015.pdf > [Accessed on 9^th September 2018].

AUDITOR INDEPENDENCE. 2013. [PDF]. Available through < https://www.cpaaustralia.com.au/professional-resources/audit-and-assurance/auditor-independence > [Accessed on 9^th September 2018].

Australian Auditor Independence Requirements .2017. [PDF]. Available through< https://archive.treasury.gov.au/documents/1184/PDF/Australian_Auditor_Independence_Requirements.pdf  >. [Accessed on 9^th September 2018].

Brasel, K., Doxey, M.M., Grenier, J.H. and Reffett, A., 2016. Risk disclosure preceding negative outcomes: The effects of reporting critical audit matters on judgments of auditor liability. The Accounting Review, 91(5), pp.1345-1362.

Cordo?, G.S. and Fülöp, M.T., 2015. Understanding audit reporting changes: the introduction of Key Audit Matters. Accounting & Management Information Systems/Contabilitate si Informatica de Gestiune, 14(1).

DeZoort, F.T. and Harrison, P.D., 2018. Understanding auditors’ sense of responsibility for detecting fraud within organizations. Journal of Business Ethics, 149(4), pp.857-874.

Griffin, J.B., 2014. The effects of uncertainty and disclosure on auditors' fair value materiality decisions. Journal of Accounting Research, 52(5), pp.1165-1193.

Lakis, V. and Masiulevi?ius, A., 2017. ACCEPTABLE AUDIT MATERIALITY FOR USERS OF FINANCIAL STATEMENTS. Journal of Management, 2(31).

Sirois, L.P., Bédard, J. and Bera, P., 2018. The informational value of key audit matters in the auditor's report: evidence from an Eye-tracking study. Accounting Horizons.

Tepalagul, N. and Lin, L., 2015. Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1), pp.101-121.