ASA 315 under the AUASB, issued the auditing standards for assessment of risk pertaining to material misstatement with understanding of the entity and the environment for financial reporting. This regulation is seen to be pursuant with section 227B of the ASIC and section 336 of the Corporations Act 2001. The assertions made under ASA 315 includes the representations by the management as per the charges against governance pertaining to potential misstatement. The business risk of ASA has been further considered with the risk resulting from the events, circumstances or actions which has adversely affected the ability of an entity to achieve a certain objective along with the execution of strategies in the business. The inclusion of the internal control is designed to implement, design and maintain the charges as per the management and governance to provide assurance on the achievement of objective of an entity. Under the control environment auditor is responsible getting an oversight of the charges against the governance and ensure culture of honesty and ethical behaviour is maintained. The report aims to identify the governance issues raised by ASIC for Commonwealth Bank. The discourse of the learnings has justified the auditor’s responsibility for reviewing the governance on the audit client (Legislation.gov.au, 2018).
|
Issue |
Impact on raising audit risk |
Recommendation |
Reduction in the audit risk because of recommendation |
|
The final report prepared by the ASIC has identified number of key issues which are seen to be considered with several findings and recommendations. The overarching conclusion made by CBA has shown dulled sense of overall auditing of the material aspects (Apra.gov.au, 2018). |
The main recommendation to the company needs to be identified with taking the various type of initiatives which relates to dealing with risk factors as per the previous learning experiences. The consideration of overly collegial and collaborative working environment has reduced the opportunity for constructive criticism and time decision making (Mala & Chand, 2015). |
The focus on the timely decision making will be able to concentrate on the relevant outcomes which are seen with timely decision making along with focused outcomes. |
|
|
Lack of benchmarking |
The panel has observed much over confidence in the operations of both BRC and BAC which has been under the review. The board has further undertaken the number of issues which are associated to the annual assessment of the performance in response to the good governance and APRA’s “Prudential Standard CPS 510 Governance”. The CBA performance assessment shows that there are number of issues for the bank in terms of lack of introspection and constructive challenges which are discussed with the matters pertaining to culture and leadership. |
The board has identified several numbers of scopes pertaining to the decisions which are seen to be associated to the significant nature of the consideration of effectiveness as per focus on the operational performance. In addition to this, there are several numbers of criteria’s identified by the board which are seen to be associated to the delivering of better outcomes for the stakeholders. Some of the other benefits pertaining to the audit team needs to be discerned in terms of the panel’s assessment on the matters concerning reducing the CBA’s vulnerability for further missteps. The risk culture of the board needs to agree to the robust metrics and which are applicable as per assessment of the specific needs of the auditor (Edwards & Chandler, 2014). |
In case the bank adopts the rigorous process for benchmarking then there is considerable amount of scope pertaining to the governance practices as per the CBA performance assessment. This will allow the company to maintain a heightened visibility for promoting clear tone in terms of messaging and action. The process of practicing the auditing of the company is depicted in terms of the alignment of better practice for the risk management. The BAC will be further able to increease the direct engagement and support function owned with the significant issues which are accountable and effective closure of these issues (Kellenberg & Levinson, 2016). |
|
Operational Risk and compliance risk |
The remuneration framework of the company is seen to be lacking considerably in terms of lack of ownerships at the Executive committee level. The weakness of the operational aspects of the company are also depicted in terms of issues which are escalated as per the lack of urgency in the execution of the tasks. The overtly complex and bureaucratic decision making has further able to favour the collaboration and effective outcomes which has reduced the timely operational decisions and detection of risk failure. The remuneration laid down by the company has included several other perspectives which had a little sting for the senior managers and above the poor risk (Firouzabadi et al., 2016). |
As per the present operations constraints affecting the operational decision making in the company. It recommended for the company to proceed with the policies which will be able to focus on the corporate governance practice. The various types of the other actions taken by the company needs to also ensure that the several types of the improvement measures need to be taken into considerations as per the recommendations made by the panel. The CBA operational capital risk requirement is also seen to be play an effective role in improving operational reporting done by the internal auditors (Brierley & Gwilliam,2017). |
The resolution of the aforementioned issues will be able to focus on the number of component which will be acknowledged as per the shortcomings in the governance structure. The direct impact of the improvement measures relating to the risk capital will be considered with risk requirement and this will be responsible reduction in the conflicts in auditing. The capitalisation of the shortcomings will further influence the number of factors which shall be able to significantly bridge the gap between the governance, culture and accountability (Mügge, 2014). |
|
Staffing |
The major issues pertaining to the CBA are particularly raised in three lines of defines. The CBA has portrayed a significant nature of weakness pertaining to issue management and issue resolution. The consequences for this are seen to be steep in auditing. CBA has faced several difficulties related to issue management, issue escalation and issue identification. It needs to be also seen that the significant nature of the be negative impacts in the auditing needs to be focused on the critical issues pertaining to the leadership in organization. Some of the other hindrances pertaining to the auditing for this need to be depicted as per the extracting the information from multiple sources which may lead to considerable amount of problem in the future (Elbayoumi et al., 2019). |
The issues in the staffing needs to be resulted with the number of steps which are focused towards the approaches related to the amalgamation of the business units of CBA and different taxonomies (Macve, 2015). |
The resolution to the staffing problems will be able to result in better accounting to the executive remuneration. The significant benefits will be depicted in terms of the breakup of the executive remuneration at the end of each financial year. It needs to be also seen that the reporting of the significant factors associated to overall record of the pay. |
|
Weakness in reporting |
In the past the board has faced several challenges which relates to prepare a comprehensive reporting from the side of the directors which is able to state on the relevant issues pertaining to the critical components in the reporting. In several instances it is observed that the board has failed to maintain large quantities of financial information. The weakness in the reporting was also evident when major operational and compliance issue are not always escalated. There has been considerable amount of information pertaining to the significant details about the operational risk factors and specific individual cases regulatory requirement. This is often depicted as a major concern toward the correction of the key issues which focused toward the association of the risk factors which are having serious reputational consequences for the company (Fisher, Garnsey & Hughes, 2016). |
It is recommended for the board for providing regular update for aggregate losses and risk incidents relating to operations management. This will be able to focus on the considerable amount of the risk factors which are seen to be associated to the significant nature of the factors which will be able to improve the efficiency and effectiveness in the reporting aspects used by BRC. |
The aforementioned criteria has included for the improvement of the present issues which are focussed with the improvement as per the extension of the timely meetings. The recommendations to improve the present issues in the auditing will ensure timely communication between the managers and audit committee. |
|
Insufficient rigour and urgency |
The panel has acknowledged that significant scope of the auditing issues are dismissed with the improper remediation of the audit issues. The BAC was further not seen to be invoking in any sort of the activities which was able to track the various type of the auditing issues. The most evident auditing issues needs to be seen with the shortcomings which are associated to the Anti Money Laundering and matter relating to Counter-Terrorism Financing (AML-CTF) matters. In addition to this, there were three audit reports of the company which highlighted series of repetitive issues. A large number of AML/CTF issues still continue to persist which is identified as a major weakness among the several types of business units of the company. |
The main instruction for the handling of the critical issues at the audit level needs to be addressed with the progress of the resolution plans and procedures. The extension of the remediations needs to be extended to provide the relevant support pertaining to the issues such as sensitivity and evidence of poor risk factors. Some of the other improvement initiatives needs to be taken into account with the various types of the initiatives which will be able to depict high level of focus on the severity of the attention which needs to be given to a particular task. The panels opinion on the risk emerging options needs to be managed with better practice of the business activities which will be able to significantly improve the reporting as per the urgency. |
The significant focus on the urgency of the issues for the task will be allow the company succeed in operational perspective. In addition to this, there needs to be several types of the other initiates taken by the company which will focus on the improvement criteria’s as per the contributing factors relating to the overall risk management and risk mitigation. Most of the global institutions has been depicted to be focusing on the several numbers of the tracking methods which will be able to mitigate the problems related to the operational risk. The maintenance proposal for the improvement activities needs to be further based on the several initiatives for following an appropriate community risk management program (Kamla & Haque, 2017). |
Conclusion:
The report has shown that the Non-Financial Risk of the company are depicted with number of key issues which are seen to be considered with several findings and recommendations. The overarching conclusion made by CBA has shown dulled sense of overall auditing of the material aspects. The key remedies are included with initiatives which relates to dealing with risk factors as per the previous learning experiences. This recommendation will be able to concentrate on the relevant outcomes which are seen with timely decision making along with focused outcomes. The various types of the decisions pertaining to the Lack of benchmarking has been depicted with the much over confidence in the operations of both BRC and BAC which is under the review. Some of the issues are seen with performance factors such as lack of introspection and constructive challenges which are discussed with the matters pertaining to culture and leadership. The recommendation of the company is further depicted with effectiveness as per focus on the operational performance. In addition to this, there are several numbers of criteria’s identified by the board which are seen to be associated to the delivering of better outcomes for the stakeholders. The Insufficient rigour and urgency factor is resolved with the handling of the critical issues at the audit level. CBA needs to implement the steps with extension of the remediations to provide the relevant support pertaining to the issues such as sensitivity and evidence of poor risk factors. The panels opinion on the risk emerging options needs to be managed with better practice of the business activities which will be able to significantly improve the reporting as per the urgency.
References:
Apra.gov.au. (2018). APRA releases CBA Prudential Inquiry Final Report and accepts Enforceable Undertaking from CBA | APRA. [online] Available at: https://www.apra.gov.au/media-centre/media-releases/apra-releases-cba-prudential-inquiry-final-report-accepts-eu [Accessed 17 Aug. 2018].
Brierley, J. A., & Gwilliam, D. (2017). Human Resource Management Issues in Accounting and Auditing Firms: A Research Perspective: A Research Perspective. Routledge.
Commbank.com.au. (2018). Retrieved 17 August 2018, from https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-reports/annual_report_2017_14_aug_2017.pdf
Dumay, J., de Villiers, C., Guthrie, J., & Hsiao, P. C. (2018). Thirty years of Accounting, Auditing and Accountability Journal: A critical study of the journal’s most cited articles. Accounting, Auditing & Accountability Journal, 31(5), 1510-1541.
Edwards, J. R., & Chandler, R. A. (2014). Recurring Issues in Auditing (RLE Accounting): Professional Debate 1875-1900. Routledge.
Elbayoumi, A. F., Awadallah, E. A., & Basuony, M. A. (2019). DEVELOPMENT OF ACCOUNTING AND AUDITING IN EGYPT: ORIGIN, GROWTH, PRACTICE AND INFLUENTIAL FACTORS. DEVELOPMENT, 53(2).
Firouzabadi, A. M., Heyrani, F., & Nayebzadeh, S. (2016). An evaluation of the relationship between the organizational ethical climate and professional/organizational conflicts and the effective organizational commitment in auditing and accounting institutions in Yazd City. International Journal of Humanities and Cultural Studies (IJHCS)? ISSN 2356-5926, 1(1), 272-289.
Fisher, I. E., Garnsey, M. R., & Hughes, M. E. (2016). Natural language processing in accounting, auditing and finance: A synthesis of the literature with a roadmap for future research. Intelligent Systems in Accounting, Finance and Management, 23(3), 157-214.
Fisher, I. E., Garnsey, M. R., & Hughes, M. E. (2016). Natural language processing in accounting, auditing and finance: A synthesis of the literature with a roadmap for future research. Intelligent Systems in Accounting, Finance and Management, 23(3), 157-214.
Kamla, R., & Haque, F. (2017). Islamic accounting, neo-imperialism and identity staging: The Accounting and Auditing Organization for Islamic Financial Institutions. Critical Perspectives on Accounting.
Kellenberg, D., & Levinson, A. (2016). Misreporting trade: tariff evasion, corruption, and auditing standards (No. w22593). National Bureau of Economic Research.
Legislation.gov.au. (2018). ASA 315 – Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment – October 2009 . [online] Available at: https://www.legislation.gov.au/Details/f2009l04079 [Accessed 17 Aug. 2018].
Macve, R. H. (2015). Fair value vs conservatism? Aspects of the history of accounting, auditing, business and finance from ancient Mesopotamia to modern China. The British Accounting Review, 47(2), 124-141.
Mala, R., & Chand, P. (2015). Judgment and Decision?Making Research in Auditing and Accounting: Future Research Implications of Person, Task, and Environment Perspective. Accounting Perspectives, 14(1), 1-50.
Mügge, D. (Ed.). (2014). Europe and the governance of global finance. Oxford University Press, USA.
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