Discuss About The Accounting Auditing Accountability Journal?
The Auditing and Assurance Board (AUASB) is an independent, statutory agency of the Australian Government, that monitors develops, issues and maintains auditing and assurance standards. AUASB standards are enforced by the law for audit or reviews from financial reports required under the corporations’ act 2001.AUASB has a plan that adopts a number changes to the Australian Auditing Standards resulting from the ISAAB project. Of these ISAAB projects, changes to the way auditor’s report are the most significant, mostly with the introduction of a new standard ASA701 (Christopher, Sarens, and Leung, 2009).
The auditing standards makes use of the an auditor’s responsibility to communicate Key Audit Matters (KAMs) as reported in the auditor’s report and also involves an address of the auditor’s decision as to what to communicate in the auditors’ report and the composition of such communications.
The main aim of auditors is to investigate the KAMs and having drawn a professional judgment on financial statements reported. This is communicated through describing what in the auditor’s report (Cosserat, and Rodda, 2009). New auditing standards ISA701 regulates auditor’s ability to determine and speak out the KAMs in the auditor’s report and applies to audits of full sets of general purpose of financial statement (Ifac.org, 2017). It also applies when it is a requirement by the law that the Auditor must communicate the KAMs for other organizations or communicates on personal will. The reason to communicate KAMs is to encourage the value of communication of the auditors’ report that helps to provide greater accountability of the audit that was done.
Communication of KAMs also provides more information to stakeholders of financial report to help them understand the matters that were most significance in the auditor’s decision.
Communicating KAMs also helps the appropriate users to understand the most of the significance issues area of judgment in the results of the financial report audit.
Communicating KAMs in the auditor’s report also assists the stakeholders to further engage with the advisory committee.
When determining KAMs the significant judgments relating to the areas in the financial report that involved important management decision.
KAMs are not supposed to be described where the law or regulation includes public disclosure about the issue or in rare circumstances, the auditor determines that the issue should not be communicated in the auditor’s report because there are adverse effects of doing so which would outweigh the public interests benefits.
The ASA701 applies to audits of general purpose reports of the listed entities when the auditor decides to communicate key audit matters in the auditor’s report.
KAMs refer to issues that are most significance to an auditor’s professional decision when auditing an entity financial statement. KAM is selected with those issues that are charged with governance.
KAMs are determined by an auditor’s perspective. ”through the auditor’s eyes” (Arens et al., 2010).The judgment –based decision-making framework in the new ASA 701 is designed for the auditor to select a small amount of issues from what to communication.
Auditor’s report snapshot 28 March 2017
This shows the KAMs topics that were communicated:
The ABC learning center aimed at providing additional skill and supervision for little children in the pre-school age, also for the aged and disabled.
The concept of the childcare centers picked up in a large way in Australia when the ABC learning centers were started in 1998. ABC centers then became the largest of the daycare centers in Australia since it operated in the as a company and the corporate management gave a hand in its accelerated growth in short period of time.
There was a described way of for the children to staff ratio and it was not possible to generate huge profits margins like others centers in those days by observing the terms of the rules. There was certainly a degradation of the level of education offered by the ABC learning centers since there was never sufficient staff to attend to the children. Some of the learners were disabled and others had others which required attention of a large group of staff which was not possible (Carey,Knechel, and Tanewski, 2013).
Interviewees said that the ABC learning centers have no specialists cleaning staff hence the staffs at these centers are required to perform all the duties such as cleaning as well as care for the learners. The results of this are that the staff has less time to teach and care for the learners.
A number of interviewees raised concerns on how the staffs were treated at some of the ABC learning centers. A number said that they used to complete tasks at home while others said that they did not receive their payments for set up time, clean up time or for evening staff meetings
In the year 2003-04 the financial statements of ABC learning center provided a negative image. Only 56.7 percent of the incomes earned by the firm were to pay the staff dues. The expansion of ABC learning center into such a big participator in the Australian market had been triggered by the policies of the government. The economic and financial problems arose in the wake of the global financial crisis of 2008 which led to the fall of the company (Sánchez-Medina, Blázquez-Santana, and Alonso, 2014).
ABC learning centers’ acquisition led to the recognition of the licenses of operating the daycare centers and large amount of goodwill. In 2006, an unknown complaint came up in concerns with the Australian securities and investment commission about the valuation of the ABC’s daycare licenses.
One of the major things that have contributed to the fall of the ABC learning center is that of financial allegations. According to a representatives in the ACCC, the fall of the ABC learning center has not been the result of increasing competition but it has been due to financial malpractices such as high debts and more than normal acquisition (Azim, 2013). Also the downfall can be attributed by the discrepancies of the financial information provided by the ABC learning centers.
It was known well enough that the ABC learning centers was operating under malpractices in the course of maintaining its accounts. The value of the assets decreased as the question of the malpractice increased. The founders of the ABC learning center, Mr Eddy Groves and Dr. Le Never Groves did not appear in the institution in September, 2008. The new management took over and they aimed at restoring the order in the company. This was by accepting the fact that the firm was operating under the malpractice that have been followed since then.
The AUASB matters in auditing standards ASA 701 which deals commonly with communicating KAM in auditor’s report about the requirement of the law and regulations provisions.
Under section 336 of the laws and regulation of the Australian Government, the AUASB may amend Auditing Standards to handle certain corporation legislation. The Auditing standards contrast from the ASA 701, which have been accorded with the Australian Legislative environment and to keep audit quality where the AUASB has seen the importance of doing so.
The Auditing standards provide application and other material involving the communication of KAM in the independent auditor’s report.
The enactment of ASA 701 shows that the AUASB is fully committed to conform with the amendments to auditor reporting developed by the IAASB.
The Australian Legislative Committee should continue amending the auditing standard frequently to avoid fraud in businesses. This will show the effectiveness and the transparency of the audits made.
The auditors should consider giving the correct judgment which is seen to be professional so that businesses and investors may have the overview of the financial statements of the company.
Business and other institutions are supposed to keep good records of their important information including licenses and financial statements. This will help in getting the correct judgment from the auditor’s report. ABC learning center collapsed due to lack of keeping good financial records hence providing wrong information to the auditors which led to exposure of their malpractices. This shows the importance of the audit (Houghton, and Campbell, 2013).
The new auditing standards ASA 701 communicating KAMs about the independent auditor’s report was developed as a result of global financial crises. This should be adopted and brought to the notice of the public in order to maintain the objective and purpose of the Australian Legislative Committee
Conclusion
In conclusion, the new audit standard ASA 701 communicating key matters in independent auditor’s report shows how the Australian Legislative Committee is committed to enhancing transparency in auditing. Communicating KAMs helps the investors to have an overview of the companies they are investing in. The new auditing standards ASA 701 regulates the auditor’s ability to communicate on key audit matters that is contained in the audit report. The Auditing Standards conforms to the international standards ISA 701 and communicates key audit matter in auditor reports which is independent as issued by IAASB and IFAC. The downfall of the ABC learning center was not attributed by competition, but the discrepancies of the financial information provided and the tendency of keeping books of accounts.
References
Arens, A.A., Arens, A., Best, P., Fiedler, B.A., Shailer, G., Elder, R.J. and Beasley, M., (2010). Auditing, assurance services and ethics in Australia: an integrated approh.
Azim, M.I., (2013). Independent Auditors Report: Australian Trends From 1996 to 2010. Journal of Modern Accounting and Auditing, 9(3), p.356.
Carson, E., Fargher, N. and Zhang, Y., 2016. Trends in auditor reporting in Australia: A synthesis and opportunities for research. Australian Accounting Review, 26(3), pp.226-242.
Carey, P., Knechel, W.R. and Tanewski, G., (2013). Costs and Benefits of Mandatory Auditing of For?profit Private and Not?for?profit Companies in Australia. Australian Accounting Review, 23(1), pp.43-53.
Christopher, J., Sarens, G. and Leung, P., (2009). A critical analysis of the independence of the internal audit function: evidence from Australia. Accounting, Auditing & Accountability Journal, 22(2), pp.200-220.
Cosserat, G.W. and Rodda, N., (2009). Modern auditing. Wiley.
Houghton, K. and Campbell, T., (2013). Ethics and auditing (p. 354). ANU Press.
Ifac.org. (2017). Accounting Standards | Governance | Publications and Resources | IFAC. [online] Available at: https://www.ifac.org/publications-resources [Accessed 18 Sep. 2017].
Sánchez-Medina, A.J., Blázquez-Santana, F. and Alonso, J.B (2014). Do Auditors Reflect the True Image of the Company Contrary to the Clients’ Interests? An Artificial Intelligence Approach. Journal of Business Ethics, pp.1-17.
Xu, Y., Carson, E., Fargher, N. and Jiang, L., (2013). Responses by Australian auditors to the global financial crisis. Accounting & Finance, 53(1), pp.301-338.
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