Discuss about the Audit, Assurance and Compliance for ASX Listed.
ASX has established its Corporate Governance Council in the year 2002 and has been chaired by the Australian Securities Exchange (ASX). The main objective of the corporate governance council is to develop an effective framework based on recommended set of principles and standards for promoting confidence of investors in business operations. As such, the compliance of a selected ASX listed entity, that is, Origin Energy, with the standard corporate governance statement proposed by council is examined as follows:
ASX listed entities as per the corporate governance principle of Council need to define the roles and responsibilities of Board and management. Origin Energy has developed a board Charter for defining the roles and responsibilities of Board that is also provided on the website of the company. The roles and responsibility of the Board includes providing strategic direction to the company that provides a clear established goals and objective for the management people to achieve (Plessis, McConvill and Bagaric, 2005). The key management personnel of the company are directly accountable to the Board and develop strategies for carrying out daily functions and achieving its long-term goals and objectives. Directors and senior executives are provided with letters of appointment at the time of their joining the company that provides them all the details relating to their duties, rights, responsibilities and termination. The performances of all the executive directors of the company are monitored on an annual basis on the basis of some standard measures. These include financial and non-financial goals and adherence to the values and commitments of the company. There is a presence of remuneration and people committee for reviewing the performance of the Chief Executive officer and the business leaders at the time of deciding over the matters related to their incentives as per the performance. The performance of the overall Board is assessed by the Director’s in assistance of the independent external consultant that also reviews the performance of the committees of Board (Corporate Governance Statement, 2017)
Board of Origin Energy has maintained effective composition to ensure that it can effectively carry out its duties and responsibilities. As per ASX principle, the Board has an adequate structure and is comprises mainly of independent directors. The key skills and responsibilities of Board are provided in the corporate governance statement of the company clearly and it can be sated from its review that it possesses diverse range of skills and expertise. Board has maintained its value system that defines the directions and guidance to each individual member for carrying out their roles and responsibilities. Board values include communication styles, interpersonal skills and education, decision-making, background and good working experience in the past. The independence of each director is assessed by the Board on an annual basis and the characteristics of each director member are defined on the basis of ASX principles. This is done to ensure that the roles and responsibilities of the Board members are different form the Chief Executive Officer. The Nomination Committee is developed for providing assistance to the Board by examining the skills and experience of each board member and directors. The committee by establishing the current and future needs of the company also makes criteria for appointment of board members as per the background, experience, professional qualifications and skills required for effectively meeting out its roles and responsibilities in future context (Corporate Governance Statement, 2017).
The company has also developed and implemented high level of ethical standards and principles to be followed by the people of the organization in order to ensure the ethical and responsible way of conducting business as per ASX principle (Nordberg, 2010). The company has established it’s Code of Conduct that defines the policies and regulations to be followed by its shareholders, employees, customers and communities in dealing with the company. The Code of ethics prevents the occurrence of any unethical practices in the company such as bribes, provision of gifts and any other type of corrupt behavior. The company in order to ensure that business activities are carried out in a responsible manner also has developed such policies and programs that encourage individuals to report the instances of inappropriate conduct (Corporate Governance Statement, 2017).
Origin, as per the ASX council principle, has developed a rigorous process for verifying and safeguarding the integrity in corporate reporting. It has established audit committee consisting of independent non-executive directors who are independent and possess financial expertise. The audit committee is responsible for overseeing the structure of the management systems for ensuring the integrity in the corporate reporting. It examines the financial report developed and also provides suggestions to the Board members regarding the measures adopted for promoting reliability and quality of financial information. The committee also reviews the risk management system and implementing an internal control processes for identification and mitigation of the operational risks appropriately. The independence of the external auditor carrying out review of the financial statements is also carried out by committee every six months (Corporate Governance Statement, 2017).
Origin has developed its continuous disclosure policy that in order to ensure that it effectively complies with policies and procedures of ASX to provide timely and balanced disclosure of information to the stakeholders. The policy is developed to provide appropriate disclosure of information to the end-users in a digital format so that it is readily accessible by the stakeholders. The half-year and full-year disclosure of financial information is available on the company website and also all the matters that can impact the securities prices are effective disclosed to the stick exchange on an annual basis. The investor presentations released by the stock exchanges are posted on the website of the company (Corporate Governance Statement, 2017).
The company in order to ensure the protection of the rights of shareholders has developed an effective communication channel to ensure that all relevant information is disclosed to them for facilitating their decision-making process (ASX Corporate Governance Council, 2014). The relevant information is provided to them through annual review, sustainability report, general meeting materials and shareholder review (Corporate Governance Statement, 2017). The sustainability performance of the company is also provided to the shareholders via National Greenhouse Emissions Reporting. The shareholders can also easily access the required information by the use of electronic medium that facilitates their decision-making process (Fleckner and Hopt, 2013).
The company place special emphasis for risk identification and mitigation in advance to ensure its sustainable growth and development. There is presence of a risk committee designed specifically for reviewing and controlling the risk impacting the company. The risk committee holds the responsibility of developing and implementing the internal control systems for risk mitigation. The independent review of the risk management framework is carried out by the board on an annual basis for ensuring that it functions properly and effectively (Corporate Governance Statement, 2017).
The Remuneration and people Committee developed by the company ensures that all the board members and key management personnel are provided fair and responsible remuneration (Corporate Governance Statement, 2017). The remuneration structure of executive and non-executive directors is maintained separately by the company and the relevant information about the same is provided in the remuneration report (Bazley, Hancock and Robinson, 2014).
The auditors need to review the risk and the control procedures implemented by a company for ensuring that materialistic information presented its accurate for review process. Auditing Standard has established the analytic procedures used by the auditor for reviewing the audit risk as per the ASA 50 standard (Auditing and Assurance Standards Board, 2009). The risk assessment procedures for identification and mitigation of the audit risk can be discussed as follows:
Origin Energy is involved in providing energy product and services across Australia. The company is managed by a competent and skilled team of leaders. It is a public listed company and is involved in providing electricity to about 4.3 million Australians. The financial transactions are carried out by the company as per AASB standards and Corporations Act 2001. It has also provided information about related parties in its annual review as per AASB standard. Some directors of the company are also directors at supply origin energy limited and such transactions are approved from management and these directors do not participated in the decisions to enter such transactions (O’Donnell and Perkins, 2011).
The company provides its products and services across Australia and operates in a highly competitive energy market of the country. The company major competitor is AGL Energy Limited and also it has to meet the strict rules and regulation operating for energy sector of Australia.
The company strategic aim is to drive its continued performance by developing and providing the best energy products across Australia. The company is involved in energy retailing and aim to act in accordance with the highest standards of safety and integrity in meeting its goals and objectives (Origin Energy: Annual Report, 2017).
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Financial Data on Woolworth Group |
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Particulars |
2016 |
2017 |
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|
Net profit |
-$615.00 |
-$2,223.00 |
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Gross Profit |
$2,959.00 |
$2,547.00 |
||
|
Revenue |
$11,923.00 |
$13,646.00 |
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|
Total Assets |
$28,898.00 |
$25,199.00 |
||
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Long term Debts |
$9,498.00 |
$8,375.00 |
||
|
Shareholder’s Equity |
$14,509.00 |
$11,396.00 |
||
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Current Assets |
$3,571.00 |
$5,011.00 |
||
|
Current Liabilities |
$2,889.00 |
$3,854.00 |
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|
Income Statement Ratios |
Formula |
Interpretation |
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|
Net Profit Ratio |
Net Profit/Revenue |
-5.16% |
-16.29% |
It can be analyzed from the profitability ratio that the company at present is having negative growth and is not able to realize profits from sale of its products and services |
|
Gross Profit Ratio |
Gross Profit/ Revenue |
24.82% |
18.66% |
The gross profits have also been declined which is not a good indicator of the future growth of the company |
|
Return on Assets |
Net Profit/Assets |
-2.13% |
-8.82% |
Its return on investment in assets is also not good and has lower efficiency in generating assets to realize sales |
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Balance Sheet Ratios |
||||
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Debt Equity Ratio |
Debt/Equity |
0.65 |
0.73 |
It assess the financial risk of liquidity and it can be said that the company has high proportion of debt in comparison to equity |
|
Fixed Assets Turnover |
Revenue/Total Assets |
0.41 |
0.54 |
The company efficiency of realizing revenue from the use of fixed assets however has improved to some extent |
|
Current Ratio |
Current Assets/Current Liabilities |
1.24 |
1.30 |
It assesses the solvency condition by measuring the current assets possessed by the company in relation to the current liabilities. The solvency risk is less in the company as indicated from its current ratio (Origin Energy: Annual Report, 2017). |
The significant risk identified from the annual report of the company that can have a material impact on the financial information is discussed as follows (Putra, 2010):
References
ASX Corporate Governance Council. 2014. [Online]. Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf [Accessed on: 29 April, 2018].
Auditing and Assurance Standards Board. 2009. Auditing Standard ASA 520 Analytical Procedures. [Online]. Available at: https://www.auasb.gov.au/admin/file/content102/c3/ASA_520_27-10-09.pdf [Accessed on: 29 April, 2018].
Bazley, M., Hancock, P. and Robinson, P. 2014. Contemporary Accounting PDF. Cengage Learning Australia.
Corporate Governance Statement. 2017. Origin Energy Limited. [Online]. Available at: https://www.originenergy.com.au/content/dam/origin/about/investors-media/170816%20Corporate%20Governance%20Statement%204G.pdf [Accessed on: 29 April 2018].
Fleckner, A. and Hopt, K. 2013. Comparative Corporate Governance: A Functional and International Analysis. Cambridge University Press.
Nordberg, D. 2010. Corporate Governance: Principles and Issues. SAGE.
O’Donnell, Ed and Perkins, D. 2011. Assessing Risk with Analytical Procedures: Do Systems-Thinking Tools Help Auditors Focus on Diagnostic Patterns? Auditing; Sarasota 30 (4), pp. 273-283.
Origin Energy. 2017 Annual Report. 2017. [Online]. Available at: https://member.afraccess.com/media?id=CMN://2A1036116&filename=20170914/ORG_01895939.pdf [Accessed on: 29 April 2018].
Plessis, J., McConvill, J. and Bagaric, M. 2005. Principles of Contemporary Corporate Governance. Cambridge University Press.
Putra, L. 2010. The Use Of Analytical Procedures In Auditing. [Online]. Available at: https://accounting-financial-tax.com/2010/04/the-use-of-analytical-procedures-in-auditing/ [Accessed on: 29 April, 2018].
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