Interacting with the key audit matters helps in attaining additional information for the stakeholders of the company. With the communication of such information the user can easily understand diverse information about the activities of the organization. The ASA 701 refers to the responsibility of the auditors to express key audit matters in the auditor’s report. Further, ASA 315 states that identification and assessment of the misstatement of information with considerate of the entity and the environment.
This aspect deals with the accountability of the auditor to analyse the risks related to the information and applying internal controls of the entity. This accounting standard also talks about the identification of the material misstatement by understanding the company and its environment. This deals with the understanding and accountability of the material misstatement (Kulkarni 2017).
Further ASA 570 talks about the going concern concept of the company. It is considered the duty of the auditors to understand various legalities related to the going concern of the company and state its implications on the report of auditors. Lastly, ASA 200 deals with the independence of the auditors to conduct the financial audit without facing any pressure. This standard evaluates the scope, objective and responsibilities of the auditor along with the nature of audit executed by them. Below mentioned report evaluates the financial reports of the company Coca-Cola Amatil(Auditing and Assurance Standards Board 2015). It analyses the various aspects of auditing of the company and recommendations given to them for improving effectiveness. More details about the report are discussed below:
Introduction of Company
Coca-Cola Amatil (CCA) is one of the biggest producers of non-alcoholic drinks present in the Asia Pacific region. The company of five major Coca-Cola bottlers present in some of the biggest nations worldwide like, Samoa, New Zealand, Fiji, Australia, Papua New Guinea and Indonesia. The company Coca-Cola is listed on ASX and its headquartered in New South Wales, Australia. Some of the products served by Coca-Cola Amatil are iced tea, spring water, fruit juices, energy drinks, flavoured milk, coffee etc. The company earned revenue of AS$5.12 billion in the previous year and has more than 15,000 employees in total (Coca-Cola Amatil 2015).
Compliance of Independence Requirements by Auditor
According to the Auditing and Assurance Standards Board (2015) ASA 200 is applied to all the financial reports as per the Corporations Act 2001. This aspect deals with the accountability of the auditor to develop true and fair reports according to the Australia Accounting Standards. Audits help in increasing the confidence of the stakeholders in the financial documents and the activities of the organization. It gives an understanding that according to the opinion of the auditor, the financial reports have been formed using financial reporting frameworks. The auditors of Coca-Cola Amatil (2017) have circulated the information with the directors about the future goals and objectives of the company along with audit procedures, findings evaluating deficiencies present in the internal control system.
The auditors of the company have followed the Divisions 3,4 and 5 of part 2M.4 that talks about the independence of the auditors and Section 307C of the Corporations Act 2001 along with, APES 110 Code of Ethics of Professional Accountants, Auditing Standard ASQC 1 that talks about the quality control of the company that execute the audit and review report and analyse other financial information. The auditors of the company have also followed Standard ASA 220 that talks about the management of quality while conducting an audit of company’s financial reports and evaluation of other historical financial information as well.
It should also be noted that the auditors of the company have also expressed their view on remuneration report created by the directors of the company according to the Section 300A of Corporations Act 2001. The auditor has circulated his opinion in the audit reports of Coca-Cola Amatil. The information that is independent of any personal opinion and is resourceful for the stakeholders of the company (Coca-Cola Amatil 2017).
Nature of non-audit services
Ernst & Young (Australia) takes tax compliance related services for the company Coca-Cola Amatil for which they received $0.045 Million for assurance services or is about to receive $0.587 for tax-related services.
Analysis of the Auditor’s remuneration as compared to the previous year
|
Particulars |
2017(in $ Million) |
2016(in $ Million) |
Proportionate Change |
|
The amount received by Ernst and Young (Australia) and its members for reviewing financial reports and auditing on half yearly basis |
3.47 |
2.63 |
31.93% |
|
Others |
0.63 |
0.34 |
85.29% |
From the above-mentioned analysis, it can be clearly seen that the remuneration paid to the auditors for their services has been increased from last year by 31.93%. Also, the non-audit services have also increased by 85.29% in the current year. The directors of the company Coca-Cola are satisfied with the working of the auditors and the way they complied with the provisions of the independence standards of auditors and non-audit services as well. The company understands that the independence of the auditors is not an aspect that can be compromised (Karaibrahimoglu, and Cangarli 2016).
Audit Procedures for Key Audit Matters
Key audit matters are developed by the Auditing and Assurance Standards Board that is the most significant part of the audit and is professional judgement of the auditors as well. ASA 701 determines that it is important for the auditor to include the key audit matter in the report of the company so as to enhance the transparency in the company and the effectiveness of the audit as well. The Key Audit Matters of the company Coca-Cola Amatil in the year 2017 was the unlimited life of the intangible assets that was comprised with the investment agreement with the bottlers amounting $929.3 million and goodwill to $147.5 million (Coca-Cola Amatil 2018).
Other assets of the company for that matter amounted $1093.1 Million, this amount also denoted 18% of the total resources of the group. According to the note 9 of financial statements, the assessment of deficiency of the intangible assets and revenue generating units include the estimation and supposition of future prospects along with cash flow of the company.
The audit procedures of the company include test of controls that relates to the execution of the procedures and these procedures are directed towards evaluating the efficiency of design and implementing internal controls as well. The auditors also determined the cash generating units that were used in the impairment model. The auditors of the company also looked at the appropriateness of assets and liabilities that were also involved in carrying value of CGU. They also tested the accuracy of cash flow model (Stikeleather 2016).
The second key audit matter involves the accounting for the rebate and promotional expenses. In such instances, the revenue for the sales is analysed with the rewards and risks of the ownership that is being passed on to the consumers and the cash is measured. The understanding and acceptance of the rebate and allowances include accrual at the end of the year that involves prudent judgement and estimations as well. The applied audit procedures include the comparison of data from different sources so as to determine the correctness of the information that is reported. For the purpose of applying the analytical procedures, the auditors have selected a performance of rebate and promotional allowances that includes the level of expected claims by evaluating the past records, trends of claims and evaluating the adequateness of accruals (Deloitte 2017).
Structure, Responsibilities and Functions of Audit Committee
According to the Coca-Cola Amatil (2015), the company has an audit and risk committee that supervises the risk management and internal control with thoroughly overseeing the financial risks. It is important for the financial reporting to maintain balance, transparency along with integrity with the organization and its policies. The financial reporting includes two aspects that are the internal and external audit. The role of internal audit is to evaluate the efficiency of the internal control and risk assessment process. Further external audit aims to make sure that the process of the independent audit is followed along with recommendations to perform independent audit. The function of the audit is to supervise the compliance of laws, policies and procedures of the company(Auditing and Assurance Standards Board 2013).
It is considered as the responsibility of the auditor to exercise proper diligence in evaluating and analysing the financial statements of Coca-Cola Amatil and to provide recommendations for the favourableness of the accounting policies and adequately maintaining procedures as well. It is the duty of the auditor to look after the risk management internal control system of the company.
The auditor of company oversee the risk management with internal control system of the company and oversee various laws, standards and policies of the company. The association of the ARC consists of three Non-executive Directors, who are independent directors. These include independent Chairman that is not chairman of the Board and the Chairman of the Sustainability Committee as well. The Board appoints all the members including the Chairman (Auditing and Assurance Standards Board 2015).
Audit Opinion expressed
The evaluators communicated their view as an unqualified opinion. It is an expression as communicated by the auditor reviewers with respect to the reasonableness and fitting portrayal of budgetary proclamations. They have likewise expressed that the organization has agreed to the accounting standards. They have evaluated the budgetary reports of the organization and its backups including its consolidated balance sheet as at 31st December 2017 alongside an announcement of changes in value and money streams for the year finishing. In this way, as they would like to think,
the organization has arranged its money related proclamations as per the Companies Act 2001 (Eccles, and Serafeim 2015). The books of records uncover a genuine and reasonable viewpoint of the fiscal position and effective activities of the organization as of 31st December 2017. It has additionally confirmed to the Australian Accounting Standards and Corporate Regulations 2001. Adequate review confirms has been gotten which has given a premise to the conclusion (Antao, et. al., 2016).
The difference in Director’s and Management’s responsibilities with Auditor’s responsibilities
According to APES 110 Code of Ethics for Proficient Professional Accountants, it has been expressed that the inspectors ought to embrace the rule of honesty that forces the commitment, to be completely forthright, and clear in all the expert connections. It additionally suggests that they ought to be reasonable and honest alongside embracing objectivity in the entirety of their dealings. They likewise have the duty to embrace the standards of the expert witness and due care, secrecy and expert conduct while managing the expert commitments (Albu, Albu, and Alexander 2014).
The obligations of directors and administrators relate to responsibility and announcing. The administration has the duty to stick to the Corporate Administration Standards and Proposals of ASX. Its fundamental reason for existing is to speak to and serve the premiums of speculators by guaranteeing that suitable human and monetary assets are set to help the organization in achieving its goals (Florou, Kosi, and Pope 2017).
Treatment of Material Subsequent Events
According to ASA 570, the inspectors are responsible for expressing the different parts of a going concern and ought to uncover its suggestions in the evaluator’s report. ASA 315 states that the evaluators ought to recognize and survey the danger of material misquotes by fathoming the earth of an element (Backof, Bamber, and Carpenter 2013).
The financial risk management of the organization is executed by the treasury arrangement which is endorsed by the board. The organization is stood up to by different kinds of risks like commodity prices, foreign currency and interest rate. The other money-related dangers identified with remote cash exchange, credit and liquidity (Libby 2017).
Foreign currency risks relate to the changes in the money streams because of advances in the rates of remote currency. The risk management strategy enables the organization to support the exchanges identified with the gauge cost of merchandise sold later on the capital consumptions are supported upon the acknowledgement of the company’s responsibility. The interest rate risks related to presenting the organization to loan fee chance related with enthusiasm bearing monetary resources, for example, money, credits, term stores and bank overdrafts (Sharma, and Iselin 2012).
The strategy received for its alleviation is reasonable administration of these exposures. The normal development of the supporting portfolio is somewhere in the range of one and five years. It goes into financing cost swap and choice and cross-money swap assertions for dealing with these dangers. Product costs risks are the risk that emerges from instability in the costs of items identifying with crude materials used in the business. The organization has gone into choices, swaps and prospects contracts keeping in mind the end goal to fence the commodity price risk at acquiring lower costs and greater solidness in the results of commodity costs (Louwers, et. al., 2015).
With a specific end goal to relieve the liquidity chance, the organization has embraced the liquidity arrangement which goes for the base level of offices in connection to net obligation. To deal with the translation risks it relates to changing over the financial statements of the foreign exchanges of the organization. The instability in the foreign trade rates can affect the net resources, benefit and salary of the gathering. The organization does not fence the interpretation hazard and when considered vital, it is supported intermittently. The credit risks of the organization are relieved through receiving an arrangement for building up credit limits for the substances it is managing and may require insurance securities for the same (Schmidt 2012).
Presence of Other Material information
The organization can’t uncover the material data in regards to its intent to merge one of its units or get some other organization. In the event that it does as such, it would result in spillage of the price-sensitive data and insider trading. Moreover, it doesn’t uncover the purpose of giving a specific sum as compensation to the key administrative faculty. It likewise does not uncover the inalienable hazard gone up against by the organization.
It is the hazard presented by a blunder or exclusion in the money related proclamations as a result of the components other than the disappointments to control them. It speaks to the situation of the most pessimistic scenario as every one of the controls has been flopped in such manner (Goh, Krishnan, and Li 2013).
Follow-ups taken from Auditor
The subsequent inquiries to be asked by the inspectors at the Annual General Meeting of the organization would be what is the premise behind shaping an opinion in regards to the genuine and reasonable perspective of the records of the organization? Another inquiry can be what level of attestations they have expected while looking at the books of records of the organization?
For this, the inspectors ought to get the Management Representative letter which is to be marked by the senior administration and signifies the precision of the monetary proclamations which the organization has submitted to the evaluators for breaking down.
Conclusion
Thus, in the limelight of above mentioned events, the fact should be noted that with an aim to find out the adequacy of material data by the auditors, the stakeholders ought to look after the effectiveness of ASA 101 Presentation of Financial Statements of the organization. The money related reports ought to give the data about the benefits, risk, value, salary and costs, changes in value and money streams of the organization. The examiners should survey the money related proclamations of the organization and its consistency with the Inspecting and Bookkeeping Models and Partnerships Act 2001.
References
Albu, C.N., Albu, N. and Alexander, D., 2014. When global accounting standards meet the local context—Insights from an emerging economy. Critical Perspectives on Accounting, 25(6), pp.489-510.
Antao, L., Insolia, G.E. and Kolls, H.B., Coca-Cola Co, 2016. Systems and methods for providing electronic transaction auditing and accountability. U.S. Patent 9,460,440.
Auditing and Assurance Standards Board (2015) Auditing Standard ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standard.
Auditing and Assurance Standards Board (2015) Auditing Standard ASA 701 Communicating Key Audit Matters in the Independent Auditor’s Report.
Auditing and Assurance Standards Board (2013) Auditing Standard ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment
Backof, A.G., Bamber, E.M. and Carpenter, T.D., 2013. More precise versus less precise accounting standards: The effect of auditor judgment frameworks in constraining aggressive reporting. University of Georgia.
Coca Cola Amatil (2015) Audit and Risk Committee Charter
Coca Cola Amatil (2017) Annual Report 2017
Coca Cola Amatil (n.d.) Our Company
Deloitte (2017) Australian financial reporting guide Financial reporting periods ending on or after 31 December 2016 . Deloitte Touche Tohmatsu.
Eccles, R.G. and Serafeim, G., 2015. Corporate and integrated reporting. Corporate Stewardship: Achieving Sustainable Effectiveness, p.156.
Florou, A., Kosi, U. and Pope, P.F., 2017. Are international accounting standards more credit relevant than domestic standards?. Accounting and Business Research, 47(1), pp.1-29.
Goh, B.W., Krishnan, J. and Li, D.(2013) Auditor reporting under Section 404: The association between the internal control and going concern audit opinions. Contemporary Accounting Research, 30(3), pp.970-995.
Karaibrahimoglu, Y.Z. and Cangarli, B.G., 2016. Do auditing and reporting standards affect firms’ ethical behaviours? The moderating role of national culture. Journal of Business Ethics, 139(1), pp.55-75.
Kulkarni, A.D., 2017. Emphasizing Sustainable and Balanced Growth through Integrated Reporting. IBMRD’s Journal of Management & Research, 6(2), pp.1-7.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). UK: Routledge.
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015. Auditing & assurance services. McGraw-Hill Education.
Schmidt, J.J.(2012) Perceived auditor independence and audit litigation: The role of nonaudit services fees. The Accounting Review, 87(3), pp.1033-1065.
Sharma, V.D. and Iselin, E.R.(2012) The association between audit committee multiple-directorships, tenure, and financial misstatements. Auditing: A Journal of Practice & Theory, 31(3), pp.149-175.
Stikeleather, B.R., 2016. When do employers benefit from offering workers a financial reward for reporting internal misconduct?. Accounting, Organizations and Society, 52, pp.1-14.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download
