The International Auditing and Assurance Standards Board has implemented a host of reforms that have been intended to improve the utility and transparency of auditor report. These variations have been in effect since 15th December, 2015.Through the existence of the auditor’s report, the standard report enclosed a host of recommendations on how to better manage the exposure of auditors to litigation(Morley 2016.). However as a result of the financial crisis that engulfed the globe, investors had to take a step back. They felt that they should have been warned of corporate failures prior to the crisis. The investors now demand more stringent examinations of financial statements by auditors. Under this new enhanced reporting, the auditors will need to deliver more evocative discernments into the audit (Kachelmeier,Schmidt and Valentine 2017). This can be done through customised disclosures. Diclosures of this nature will facilitate an open communication between auditors and investors. The auditor’s opinion will be presented first. This will be followed by the section contining the basis for opinion of the auditors report . There will be a new section, that will be made mandatory for listed entities (Newton et al.2015). This new section will summarise key audit matters . it is also compulsory for auditors to include a separate section This section is called the material Uncertainty section about the going concern risk of the company. In this section there is an uncertainty regarding the ability of the entity to continue its current form . This requires the management to make adequate disclosures in respect of this matter.Auditors are also required to include an independence statement. This will declare the fact that the auditors have satisfied all their ehical responsibilities (Yu et al.2018). The report analyses the effectiveness of the extended audit reporting procedures of the company Commonwealth Bank.
The commonwealth bank is one of the largest banks in Australia.it provides a host of financial services and communities all over Australia. It is presently one of the most reputable financial institutions. It provides institutional banking and wealth management services to multiple countries all over the world.
According to the external auditor of Commonwealth Bank, PWC , the lead auditor had made an independent declaration . The declaration suggested that the audit contained no discrepancies regarding the independence requirements of the auditor of the Corporaton Act, 2001 . There was also no discrepancies regarding any breach of professional conduct rules in respect of the audit(Tepalagul and Lin 2015).
The auditor’s report , after auditing all the relevant financial statements of a company came to an unqualified opinion. The opinion stated was that all the financial stattements of the company is in fact done as per the Corporations Act 2001 . The auditor was also of the opinion that a true and fair view of the company was provided. The audit also revealed that the financial positions of the Group was provided.. The financial report also complies with the Australian Accounting standards and the Corporations Regulations 2001.( Griffiths, Mendoza and Arthur 2015)so
In addition to the audit related services provided by he auditors at pwc, there were some non audit services that were payable to the auditor that includes:
A further independent declaration by the auditor in terms of providing non audit services to clients has been discussed. This states that the non audit services provided by PWC had no bearing to the requirements of the auditor independence of the Corporations Act 2001.According to the audit committee, the non audit services was provided in conformance to the generals standard of independence as levied by the Corporations Act 2001(Commbank.com.au 2018).
The remuneration that is payable to an auditor is comprised of both audit and non audit services that is provided to the bank. The audit services include providing statutory auditing to the company and forming an independent opinon on the financial statements of a company. The non audit services on the other hand include, as mentioned above providing project assurance services, taxation services and risk management services (Chang and Lim 2016). The fees of non audit services has been found to be compatible with the level of maintaining auditor’s independence. The audit related services mainly includes the reviews of assurance and attestation of the foreign disclosures of the Group.Other audit services include internal control review systems and providing financial or supervisory data(Chang and Lim 2016). The taxation services also included training and assistance facilities . (Commbank.com.au 2018).
The percentage changes of the auditors remuneration with prior year has been given below:
An independent audit committee is very vital constituent in reflecting a good corporate governance of the company. The audit committee is normally set up by the board of directors as a subcommittee . The powers of this committee are set up by the Board itself. The audit committee helps in supporting the board to fulfil its oversight responsibilities. These responsibilies relate to areas that include an entity’s financial reporting and systems of internal control . The committee also helps in risk management services and the external and internal audit functions(Badolato, Donelson and Ege 2014). In case of commonwealth bank , the audit committee provides functions like facilitating maintenance of the. independence of auditor, providing internal control system and making sure that the applicable laws, regulations and standards have been best complied with. The audit committee of the Commonwealth Bank has a very important role to play in maintaining that all the relevant audit and non audit services that have been provided by the auditor have been duly complied with according to the auditing standards and requirements.
The audit committee should be structured in such a way that it contains at least three members. All of these members should be non executive directors(Samaha, Khlif and Hussainey 2015) . Also the majority of them should also be independent directors. This committee should also be chaired by an independent director . That director however cannot be the chairman of the board. The members also need to possess a mix of accounting and financial expertise, coupled with industry knowledge and skills in order to enable them to perform their duties in this regard. The audit committee of Commonwealth Bank includes:
The auditor charter, as set out by the Commonwealth bank sets out the authority of the audit committee to help in carrying out the responsibilities of the members of the audit committee. This charter empowers the audit committee members to have unrestricted access to information and any management personnel. It gives them the degree of freedom that is necessary for the audit committee to keep a strict check on overseeing all audit and non audit function . These services are however performed by the external auditor . The charter also pre approves all auditing and non audit services performed by external auditors. Further it also resolves any disagreement between the management and the auditor(Böhm, Bollen and Hassink 2016).
The opinion of the auditor, after reviewing the financial statemets suggested that the company has presented a true and fair view of the financial statements . It has also followed the relevant proviosions of the Australian accounting standards. The financial reports comprises of
The company also asserted that they obtained enough audit evidence so as to form a basis for an audit opinion . They also asserted that they have conducted their audit according to the Australian Accounting Standards. The auditor has expressed an unqualified opinion on the financial statements . He has come to this opinion after being presented with all relevant financial statements(Chan and Vasarhelyi 2018).
As per the audit report, the auditor asserts that the audit has been accomplished in a manner that is independent.. The auditor had followed the requirements of the Corporations Act as per the auditor independence requirements. In addition the auditor also successfully met the ethical requirements of the APES 110 Code of ethics for Professional Accountants. This code of ethics is pertinent to the financial audit in Australia. The auditor has also satisfied all the ethical responsibilities . These responsibilies were put in place with the code of ethics ( Páez and Liu 2017.).
The auditor asserts that the scope of the audit is to make sure that the audit has been done in a way so as to ensure that the auditor can formulate an audit opinion on the financial reports. He can best undertake the scope of his audit if he takes into account the geographical and management structure of the company. A further understanding of the accounting process and controls will help him in formulating a better and more thorough review of his opinion. (Sirois, Bédard and Bera 2018). They have also taken steps that the audit team has the necessary skills and expertise to undertake an audit of such a complex banking company.
According to the professional opinion of the auditors , key audit matters represent those matters that are most significant in the auditing function of a company. The key audit matters included are:
The audit procedures performed in this case are:
The audit procedures undertaken in this issue include are :
The material subsequent events that are included are:
AUSTRAC civil proceedings- on 3rd August, AUSTRAC started civil penalty proceedings against the bank. The bank , after taking these allegations seriously has filed a defence in relation to the matter. The actual outcome will be determined by an Australian court of law in relation to the legal principles that have been established(Commbank.com.au 2018).
Aussie Home Loan Acquisition- A shareholder named John Symond exercised his put option.This exercise of put option willl require the comapny to acquire a 20 per cent interest in AHL. The bought price for the leftover 20 per cent interest will be assessed. It will be computed in accordance with the conditions that were previosly agreed in 2012.
The material information that is reported by the auditor contain a true and fair view of the financial statement . The information provided by the auditor was material .The audit was clearly performed in accordance with the audit procedures involved. The material information is effective in presenting an accurate version of financial statements(Stewart 2015). This information will help the users of financial statements to make informed decisions.
A couple of material informant that is missing from the auditors report include:
Conclusion
After a thorough analysis of the auditors report , it is evident that the company Commonwealth Bank has applied all the relevant audit procedures and inspected the financial statements in a fair and responsible way. The resulting opinion has also been illustrated. The auditors and non auditors services provided by the auditor has been evidently discussed in the report , including a detailed remuneration chart showing the percentage changes in the remuneration chart between the year 2016 and 2017. The company has many new key audit matters , including impairment of lending assets, determination of fair value for financial matters. The report shows how these matters have been dealt with by the company. It has made an assessment as to how the auditor has complied with independence requirements and what audit procedures were implemented on the review of these key audit matters. It also evaluates the performance of the audit committee and their roles and their performances, including the charter which states what their responsibility will be. Based on a final analysis of the audit report, it is evident that the financial statements continue to have a true and fair view and the audit has been conducted on accordance with the relevant audit standards. The audit procedures that were followed were appropriate for the preparation of the financial statements. The audit opinion expressed was an unqualified one, which suggested that the auditor had verified that all the financial statements and that they reflected a true and fair view.
References
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Bell, T.B., Causholli, M. and Knechel, W.R., 2015. Audit firm tenure, non-audit services, and internal assessments of audit quality. Journal of Accounting Research, 53(3), pp.461-509.
Böhm, F., Bollen, L.H. and Hassink, H.F., 2016. Audit committee charter scope: Determinants and effects on audit committee effort. International Journal of Auditing, 20(2), pp.119-132.
Chan, D.Y. and Vasarhelyi, M.A., 2018. Innovation and practice of continuous auditing. In Continuous Auditing: Theory and Application (pp. 271-283). Emerald Publishing Limited.
Chan, D.Y. and Vasarhelyi, M.A., 2018. Innovation and practice of continuous auditing. In Continuous Auditing: Theory and Application (pp. 271-283). Emerald Publishing Limited.
Chang, M. and Lim, Y., 2016. Late disclosure of insider trades: Who does it and why?. Journal of business ethics, 133(3), pp.519-531.
Commbank.com.au 2018 [online] Commbank.com.au. Available at: https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-reports/annual_report_2017_14_aug_2017.pdf [Accessed 9 Sep. 2018].
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.
Griffiths, K.M., Mendoza, J. and Carron-Arthur, B., 2015. Whereto mental health reform in Australia: is anyone listening to our independent auditors. Med J Aust, 202(4), pp.172-174.
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He, L., Páez, A. and Liu, D., 2017. Built environment and violent crime: An environmental audit approach using Google Street View. Computers, Environment and Urban Systems, 66, pp.83-95.
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