The financial accounts which are prepared in the company represent the position of the company and for that auditing are required to be undertaken. The same has been carried by ADX energy which is the company listed on ASX and was incorporated in 1987. It is dealing in oil and gas exploration in Western Australia. The company is expanding itself by making the addition to its business activities. All of the concepts which will be providing the assurance regarding the statements are involved in this report. The proper evaluation is made by the auditor of all the information and then by proper study and findings which are obtained they present the opinion in relation to the same. The remuneration is paid to them for all the services and that will be identified and also the key matters which will be covered by them will also be discussed. There will be follow up which will be processed and for that questions will be provided in the last section.
The business is carried out by the involvement of various operations and it is required that operations are made in the correct manner. All of the information which is there in relation to all the activities will be incorporated in the accounts of the company on the basis of which several decisions will be made (Dawuda, et. al., 2015). It will be required that the accuracy of them shall be evaluated in a proper manner and for that, company will be an undertaking of the auditing process. In that auditor will be required to perform the verification of the statements so that they can present the opinion in respect of their true position (Tepalagul & Lin, 2015). For performing the best manner it is required that the auditor shall be provided with complete independence. In that, they will not be restricted by anything and can carry on the process in the manner they wish. There shall be no interest of the auditors in the company as by that the effectiveness of the audit and opinion will be affected (Xie, 2016). If they will be having any kind of personal interest then the opinion will be made in such manner which will be beneficial to them and so this will be affecting the business in an adverse manner. All of the misstatements or errors which arise in the business will be determined and reported in a proper manner so that they are in the notice of all and actions to eliminate the same can be taken by management (Corplaw, 2018).
In the case of ADX energy, the auditors are independent and there is no restriction which is imposed on them. They are allowed to take their decisions as per the best of their knowledge and findings. For the same, a declaration has been made by them in which it is stated that they are independent and all the requirements of corporation act have been met (ADX energy limited, 2018). The professional conduct is also followed and the opinion which is made by them is free from any bias.
The auditor of the company performs the audit services but in the company, there are various other services also which are required and they are classified as non-audit services (Berg & Moré, 2016). Auditor of the company is not allowed to perform any such service by which the independence of them will be affected. This is said because if they will be involved in some other actions then it will develop an interest and by that fair decision and opinion will not be made. There are several services which can be rendered and they involve management services, taxation services, advisory services and various others (Svanström, 2013). It is required that if there is any such service which is involved in the business then it shall be identified and checked that it is approved by management. The amount which is paid in regards to this will also be evaluated. In the given case the ADX limited is not involving any such service which can be termed as non-audit service and this is stated by the auditor in their report (ADX energy limited, 2018).
All the services which are obtained by the business come for a charge that is required to be made by the company to the party providing the services. The payment which is made by the company to the auditor also lies in this scope and is determined as the remuneration (Okolie, 2014). It will be including all the payments which are made to them and this will be covering both the audit and non-audit services. The details of the payment which are made in the current year are as follows:
|
Particulars |
2017 |
2016 |
% Changes |
|
Audit of financial statements |
29500 |
28000 |
5.36% |
In ADX energy limited there are no non-audit services which are provided and so all the payment which is made is in relation to auditing. The remuneration in the current year has increased at the rate of 5.36% in comparison to last year (ADX energy limited, 2018).
The auditor is required to consider all the aspects of the business but there are certain key matters which are more relevant and it is needed that they are considered in a more effective manner. They are to be involved as the opinion which is made by the auditor will be based on this also and so it will be important to have the proper information in relation to them. The procedures are followed so that they can be dealt with in the best manner and there is no issue which is faced due to them in the coming period. For that, they are to be identified and the same in the given case are as follows:
Cash: In the company, there is a high amount of the cash and that constitutes the 92% of the total assets which are held by the company. In the carrying out of all the activities and operations, this is considered to be a most important element. This is one of the most liquid assets and due to this, it is considered that there is no high amount of risk which is involved in relation to it and there is no judgment which is required to be made in relation to this (ADX energy limited, 2018). In the given case this is most important as this will be affecting all the processes involved in the business such as the allocation of the resources and all the other strategies which are made in the company. In the completion of the audit, it will be required that they shall be taken into consideration in an appropriate manner. There are various procedures which are adopted in the company in which the completeness, valuation, and existence of the balance are ensured. There were proper confirmations which are obtained from the client so that the balance which is there can be evaluated (ADX energy limited, 2018). All the disclosures which are made in the reports in this context are assessed so that their appropriateness is considered. Proper entries in relation to them are provided in the notes which are made in relation to them.
In the audit process, there are various requirements which are to be met by the auditor and for that, they will be requiring the assistance of the board. In order to fulfill this condition, it is required that there shall be a proper committee which shall be framed so that they can deal with this (Al-Matari, et. al., 2017). It will be possible and for that audit committee is established in which there are members of the board of the company. They will be required to ensure that the auditor is independent and they are provided with all the required assistance which helps them in performing an audit in a proper manner (AICD, 2018). There is the charter which is framed for them in which all the information in relation to the committee and the responsibilities which are to be met by them are presented.
The company which is selected is ADX and it is small in size and there are not much of the operations which are performed by it (ADX energy limited, 2018). Due to this factor, there is no requirement to have the separate audit committee in the company and the tasks will be managed by the board itself. in this, they will be ensuring the integrity and checking all the statements and the requirements will also be fulfilled by them.
The audit is carried in the company so that all of the aspects which are involved and the reports that are made by the company can be evaluated in the most effective manner. They will be reviewing them with the help of the information which is available and then the opinion will be presented by them (Tian & Xin, 2017). This will be specified about the accuracy of the financial information that is provided in the financial statements. There are various opinions which can be framed and if the auditor is of the view that the reports of the company are presenting the true position of the business then the unqualified opinion will be provided (Narvas, 2018). In case of the issues which are there and there is no proper information which is identified in relation to them then the qualified opinion will be framed (Public Company Accounting Oversight Board (PCAOB), 2013). There will be making of the adverse opinion of the situation in which the reports are representing the errors and mistakes and they will be having the adverse impact on the company.
The auditor has provided the unqualified opinion in the current year of ADX energy and for that declaration has also been made. they have accepted and assured that by the financial statements there is the true and fair view which is attained about the position of the company (ADX energy limited, 2018). All of the requirements of the corporation act 2001 has been complied with and also the standards which are framed by the government are also taken into account in the making of the financial statements.
Management responsibility: The main role which is to be played by the management is in relation to the making of the financial reports in which all of the information will be presented with accuracy (Clikeman, 2018). They will be ensuring that they are made by following all the accounting standards and also true and fair view is provided by accounts. They will be evaluating and making such internal control by which proper reporting will be made possible. By the help of evaluation made, it will be confirmed that the financial statements are free from any kind of error and misstatements. The various other aspects which are relevant will also be taken into consideration in this process and that involves disclosures, going concern and other matters in relation to them.
Auditor’s Responsibility: The main aim of the auditor is to obtain the assurance in relation to the accuracy of the financial statements. They will be reviewing that the accounts of the company are free from any misstatements and errors which are caused (Turnkey, 2018). On the basis of the findings which will be made by them, there will be an opinion which will be presented. There is the assurance which will be provided but then also there may be some misstatement which has remained from being detected. There will be the identification of them and then the opinion about the position of the company will be provided in the report prepared.
In the business, there are various activities which are undertaken and out of them some of them take place after the making of the accounts and they are considered as subsequent events (Ozdemir & Gokcen, 2016). It will be essential that the identification of them is made so that they can be dealt with in accordance with the standards which are specified. There will be adjusting and non-adjusting events which take place and the treatment of them will be made accordingly (Al Nawaiseh & Jaber, 2015). By them, the balances in the company will be affected if they will be incorporated in the accounts of the company (ACCA, 2018).
In ADX energy there are some of the transactions which are identified and will be considered as the subsequent events. There is the issue of the shares which has been made after the closing of the accounts (ADX energy limited, 2018). Also, there is the agreement which has been entered by the company, in respect of the investment which is made.
In the company, there are several parties which are associated with it and it is required that interest of all shall be taken into consideration. The third party stakeholders will also be covered and they will be making the use of the information for the taking of right decisions (Drogalas, et. al., 2017). In this, the employees, customers, investors, and government will be included. They are to be provided with the required information so that can use them as per their needs. The government will be ascertaining the tax amount and investors can take the decision in relation to the investment which is to be made. The information will be very important for them and so shall be provided with accuracy.
In the making of the report, all of the areas have been considered in relation to the audit which is taking place. In this process, there is a requirement of a lot of information and sometimes there is such information which is required to be present but is not made (Kipp, 2017). The company is disclosing all the required information in a proper manner and there is no such data seemed to be underreported. All of the data is provided in the required details and is understandable in a proper manner.
The company will be required to have the follow up for the shareholders in which they will be provided with the opportunity to clarify the doubts which they have. For this, they will be interacting with the auditor in the annual general meeting and asking them with the required questions. Some of the sample questions are provided hereunder:
Conclusion:
The report that is presented above elucidates all the requirements which are to be met in the audit of the company and kept in the notice by the auditor. For that the evaluation is made about the independence of the auditor and also the remuneration which is paid to them is taken into consideration. It is identified that there are no non-audit services in the business and also the audit committee has not been formulated. The key audit matters which are involved in the audit process are also determined and explained in an effective manner. The subsequent events which took place have also been reported in an adequate manner. The responsibility of the auditor and management is also ascertained and mentioned in the report.
References
ACCA. (2018). Subsequent events [Online]. accaglobal.com. Available At: https://www.accaglobal.com/in/en/student/exam-support-resources/fundamentals-exams-study-resources/f8/technical-articles/subsequent-events.html [Accessed: 14 September 2018]
ADX energy limited. (2018). Annual Report [Online]. ADX energy limited. Available At: https://adx-energy.com/documents/annual-report-December-2017.pdf [Accessed: 14 September 2018]
AICD. (2018). Role of the Audit Committee [Online]. aicd.companydirectors.com.au. Available At: https://aicd.companydirectors.com.au/resources/all-sectors/roles-duties-and-responsibilities/role-of-the-audit-committee?no_redirect=true [Accessed: 14 September 2018]
Al Nawaiseh, M. A. L., & Jaber, J. (2015). Auditing subsequent events from the perspective of auditors: a study from Jordan. International Journal of Financial Research, 6(3), 78.
Al-Matari, Y. A., Mohammed, S. A. S., & Al-Matari, E. M. (2017). Audit Committee Activities and the Internal Control System of Commercial Banks operating in Yemen. International Review of Management and Marketing, 7(1), 191-196.
Berg, S., & Moré, C. (2016). The Effect of Non-Audit Services on Auditor Independence: A study on 11 food retail and wholesale companies in the United Kingdom.
Clikeman, P.M. (2018). Managers’ and Auditors’ Responsibilities for Evaluating Going Concern. Journal of Corporate Accounting & Finance, 29(1), pp.107-116.
Corplaw. (2018). Importance Of Auditor Independence [Online]. corplaw.ie. Available At: https://www.corplaw.ie/blog/bid/369348/Importance-Of-Auditor-Independence [Accessed: 14 September 2018]
Dawuda, A., Aninanya, G. O., & Alnaa, S. E. (2015). The Organizational Independence of Internal Auditors in Ghana: Empirical Evidence from Local Government. Asian Journal of Economic Modelling, 3(2), 33-45.
Drogalas, G., Pazarskis, M., Anagnostopoulou, E., & Papachristou, A. (2017). The effect of internal audit effectiveness, auditor responsibility, and training in fraud detection. Accounting and Management Information Systems, 16(4), 434-454.
Kipp, P. (2017). The Effect of Expanded Audit Report Disclosures on Users’ Confidence in the Audit and the Financial Statements.
Narvas, J. (2018). Understanding Audits: The 4 Types of Audit Reports [Online]. dvphilippines.com. Available At: https://www.dvphilippines.com/blog/understanding-audits-the-four-types-of-audit-reports [Accessed: 14 September 2018]
Okolie, A. O. (2014). Auditor tenure, auditor independence and accrual-based earnings management of quoted companies in Nigeria. European Journal of accounting auditing and Finance Research, 2(2), 63-90.
Ozdemir, Z., & Gokcen, B. A. (2016). Auditing of Subsequent Events: A Survey of Auditors in the City of Istanbul in Turkey. Accounting and Finance Research, 5(2), 42.
Public Company Accounting Oversight Board (PCAOB). (2013). The Auditor’s Report on an Audit of Financial Statements when the Auditor Expresses an Unqualified Opinion. PCAOB Release No. 2013-005.
Svanström, T. (2013). Non-audit services and audit quality: evidence from private firms. European Accounting Review, 22(2), 337-366.
Tepalagul, N., & Lin, L. (2015). Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1), 101-121.
Tian, J., & Xin, M. (2017). Literature Review on Audit Opinion. Journal of Modern Accounting and Auditing, 13(6), 266-271.
Turnkey. (2018). What is the role of an internal/external auditor? [Online]. turnkeyconsulting.com. Available At: https://www.turnkeyconsulting.com/what-is-the-role-of-an-internalexternal-auditor [Accessed: 14 September 2018]
Xie, F. (2016). Competition, Auditor Independence and Audit Quality (Doctoral dissertation, [Honolulu] the:[University of Hawaii at Manoa],[December 2016]).
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