In recent times, it has become important for a company to assure that it operates its activities transparently. Transparently into the business activities can lead to trust and confidence on the part of stakeholders. All the information regarding the company is revealed to its stakeholders through the Annual report. The one important information includes the details of audit functions which will be undertaken by Ernst Young for setting up strong audit and assurance program for the financial statement of company. The annual report has the information of auditors, their remuneration system, and any non-audit services if provided by auditor to the company. The report also has the information regarding the formation of audit committee with the audit charter and the perception that each auditor. The opinion of the auditor suggests improving or enhancing the profitability of the organisation. This report brings out the discussion of independence of auditors, their responsibility, non-audit services, and other auditor functions to know the material details of key audit matters of Flight Centre Travel Group Limited. This report has also shown the key understanding on the auditor’s independence and their responsibilities for setting up strong audit and assurance program (Flight Centre Travel Group Limited, 2018).
The auditor of Company is Ernst & Young who has been offering audit and assurance services. The auditors have announced their independent declaration to acknowledge the report of audit to the management of Flight Travel Limited. The auditors have stated that they never tried to intervene and disturb the regulation imposed on them by the Corporation Act, 2001. Moreover, the auditors neither contravene the code of professional conduct nor their independence as per stated in the Act. The key function of auditors is to reflect the compliance program that is stated in the audit report of the company. Flight Centre Travel Group limited appointed the audit committee to analyse the fair value of assets and liabilities regardless of undervaluation recorded in the financial statement of the company (Flight Centre Travel Group Limited, 2015).
The principles has stated in the APES 110 Code of ethics for the Professional Accountants relates the non-audit services with the auditor`s independence. A set list of non-audit service includes tax compliance and other services. It goes without saying it is difficult to hire the human resource as the requirement, especially professional auditors. The non-audit services offered by auditors are also accordance with the corporation act 2001. In order to derive and extract maximum benefit from the auditor`s potential, Flight Centre Travel Group tries to exploit the potential that the auditor have. The benefit from the auditor is only possible if company starts getting professional assistance even in non-audit matters. To get the assistance from the auditors even in the non-audit matters, the Company take care and respect his independence. The company should not impose provisions that can hinder auditor`s independence that is able to satisfy the audit and risk committee. Managing the current tax compliance, several adjustment, and audit functions are the ways through which it can be analysed whether the auditor is performing well to explicit the fair valuation of recorded details (Flight Centre Travel Group Limited, 2017).
The remuneration is paid to the head of audit committee. The committee comprises a number of auditors as its member. The payment made to the lead auditor for all the services such as audit services, non-audit services, the advice related to tax, and compliance is paid in the consolidated form to the Audit committee. The remuneration is return payment that is generally fixed in the annual general meetings (Murphy, & Hogan, 2016). The boards of directors appoint the first auditor and further the first auditor has the team of auditors. The expense of remuneration will include service expenses incurred in connection to those audit services that are provided by the auditors (Flight Centre Travel Group Limited, 2016).
|
AMOUNTS RECEIVED OR DUE AND RECEIVABLE BY ERNST & YOUNG FOR: |
JUNE 2017 ($) |
JUNE 2016 ($) |
% change |
|
1. the audit and assurance services offered by Ernst Young to company |
189.45 million |
187.25 million |
12.12% |
|
2. The tax services extended by Auditors |
205.42 |
245.74 |
10.11% |
|
Other non-audit services given by Ernst Young |
71.1millon |
77.5 million |
5% |
The aim of engaging the audit matters in an organisation is not to modify the financial statements of the company. The key audit matters focus on the auditors as the professionals and inform the stakeholders as auditors keep the check on the operational of the organisation. From the annual report of the company, various key audit matters can be identified that helps in evaluating the performance of the auditors and fairness of books of accounts that are shared by the company (Flight Centre Travel Group Limited, 2018).
The key audit matters shown in the auditor’s report has reflected that auditors needs to implement the audit risk model to control the inherent, control and detention risk while auditing the financial statement of company (Murphy, & Hogan, 2016). The Key audit matter will be associated with the several details such as analysing the key discussion, compliance program of company and committee engaged in analysing the financial matters of company (Flight Centre Travel Group Limited, 2015).
|
KEY AUDIT MATTER |
AUDIT PROCEDURE PERFORMED |
CLASSIFICATION OF AUDIT PROCEDURE |
|
1. Control the audit and detention risk in the financial statement |
The internal audit program will be set up and hold in each and every general meeting of company. The audit risk model will be set to identify the risk associated with the financial statement. |
· Assertion test would be used |
|
2. Recovery from the receivable and bad debts |
The credit rating of the debtors and recoverable test would be implemented to identify the risk associated with the process (Flight Centre Travel Group Limited, 2018). |
· Observation and external control test would be used. |
|
3. Valuation of the assets |
Use of the impairment test as per the IAS 136 would be used (Murphy, & Hogan, 2016). |
· Substantive test with the analytical procedure. |
Flight Travel Limited has formed its own audit and risk committee. All the members of this audit and risk committee are no longer the executive members of the management. Flight Centre Travel Group Limited has formed the audit charter committee that shows that all the efficient audit charters help in evaluating the risk involved in items of financial statements. The audit committee keeps a check on the audit members to evaluate whether the company has made default in complying with the accounting standards and laws. It will help in mitigating the chance of trading that occur inside the company to maintain the long-term sustainability of the business (Flight Centre Travel Group Limited, 2018).
Every organisation has its own pattern of executing and achieving its objectives. The internal audit committee of the company has a secretary and audit officers. The number of audit officer depends on the size of operation of the business and the need of the company. The structure of Audit department is determined on the basis of non-executive and executive auditors in the organisations. Non- executive chairman includes John Eales, Robert Baker, and Colette Garnsey who are not the part of executive directors of Flight Centre Travel Group Limited. Auditors of the company are responsible for analysing the annual report of the company and maintaining the proper harmonisation between the national and international accounting standards (Flight Centre Travel Group Limited, 2018).
To advice, appoint, and recommend a most suitable external auditor. Existing auditors of the company also assist the company to make remuneration policies and advice to remove any independent auditors (Flight Centre Travel Group Limited, 2018).
The auditors of the company announce unbiased and clear opinion of financial situation of Flight Centre Travel Group Limited. As per the knowledge and experience of the auditors, the financial statements of the company are made as per the law and compliance requirement. According to the audit procedures, books of accounts and the financial statements are maintained as per the provisions of Corporations Act, 2001. The auditors accept in their report that regulations stated by Australian Accounting Standards and the Corporations Regulations 2001 are followed properly. There are no misstatements as of now that came into the knowledge of the auditor from the regulations performed. Moreover, the auditors have appreciated and embraced the required independence delegated by the directors. Auditors expect this independence throughout the audit. Despite auditor`s independence, the audit report mentioned that the company meets all the ethical requirements as per the APES 110 code of ethics for Professional Accountants. The perception of the auditor’s report reflects that it is able to comply with applicable accounting rules and standards. The financial report discloses each applicable rule and standard. Further and at last, a qualified annual and audit report generated by the auditors assist the stakeholders to look into the performance and derive several information of different situation of the organisation (Hammer, 2015). This information reflects the fair and true value of assets and liabilities. This audit report becomes a source through which stakeholders can assess the operations and make decision regarding financial investments. It is understood once the company reports are checked by such experts and efficient auditors, the company becomes confidence regarding its financial statements. Moreover, Auditor`s supervision boost the confidence of stakeholders and lead their investment decisions (Mala, & Chand, 2015).
The directors of the company are the first owners of the company although; the aim of directors is to make a business plan to expand the business operations. Nevertheless, it is the duty of the director to intervene the preparation of financial statements. The directors have to check whether the law requirements of the Corporation Act, 2001 and accounting standards has been fulfilled or not. Moreover, the director has the responsibility to assess the capability of consolidated group of auditor`s committee. The director`s responsibilities defines the extent to which a director is liable to losses if the company fails due to its inability to comply with laws and accounting standards (Murphy, & Hogan, 2016).
The responsibility of auditor is to do appraisal of the financial statements prepared by the organisation. Subsequently, the internal control in the organisation can provide reasonable assurance. Nevertheless, if in case they still find discrepancies and issues of the financial statements, they will hold liable for the losses. It assists in affirming that whether right value of assets and liabilities is being revealed or not (Sirois, Bédard, & Bera, 2018).
Impairment and Testing of Goodwill and Other intangible assets
The matter of testing goodwill is the key audit matter in judging the auditor`s activities. It is because there is a huge balance of loss on amount of total assets.
Audit Procedure- Impairment of Assets is preferred as a requirement in the AASB 136. To check and assess the level of accuracy of cash flow statement and valuation of assets, a valuation specialist is appointed to determine the scope of accuracy. There are certain methods to forecast and assume the price of the asset such as book value, realisable value, and present value. Auditor has to undertake a deep analysis of each method of asset valuation. The procedure that is carried to execute the audit process can be fetched into the test of control.
Business Acquisitions
A large number of business acquisition and collaboration has made it necessary to undertake an efficient key audit matter (Worth, 2009).
AUDIT Procedure- The audit procedure carries the assessment of the procedures that are followed by the entity within the laid down rules, regulation, and compliance of applying accounting standard. The adequacy and estimation of valuation of asset is checked.
The audit procedure assists stakeholders to estimate the worth of an entity in the corporate world through efficient test of control (Tepalagul, & Lin, 2015).
The audit procedure is preferred to be undertaken to estimate the fair value of the assets and liabilities recorded in the financial statements (Wu, Hsu, & Haslam, 2016).
The material subsequent events include the events such as dividend declaration and large takeovers, acquisition made during the year. It is undertaken to check whether the overtaking and collaboration has been conducted successfully by complying all the necessary policies and procedures. It also helps in increasing the transparency in the operation of Flight Centre Travel Group Limited. A company conduct these events confidently only because the organisation is aware it is reflecting the true picture of its operations in front of its stakeholders. Material subsequent events reflect how efficiently the organisation performs with complying the necessary applicable accounting standards and rules (Yew Wong, (2015).
Conclusion
From the above discussion, it can be concluded that while going through the annual reports of the Flight Centre Travel Group Limited, Auditor`s performance seemed perfect. No material information was unnecessarily manipulated or modified. All the necessary information is well presented and can be easily interpreted to estimate the worth. There were no questions, which were not answered properly by the auditors. The report is based on auditors independence stand apart in maintain the transparency of the business operation of the business. Moreover, auditor should undertake its analysis responsibility seriously to undertake and increase the overall outcome and efficiency by adding an effective audit program to it.
References
Eilifsen, A., Hamilton, E. L., & Messier Jr, W. F. (2017). The Importance of Quantifying Uncertainty: Examining the Effect of Audit Materiality and Sensitivity Analysis Disclosures on Investors’ Judgments and Decisions.
Flight Centre Travel Group Limited, 2015 retrieved, from https://www.fctgl.com/investors/annual-reports/.,
Flight Centre Travel Group Limited, 2016 retrieved, from https://www.fctgl.com/investors/annual-reports/.,
Flight Centre Travel Group Limited, 2018 retrieved, https://www.fctgl.com/investors/annual-reports/.,
Hammer, M., (2015). What is business process management?. In Handbook on business process management, 3rd ed, Springer, Berlin: Heidelberg.
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.
Murphy, L. & Hogan, R., (2016). Financial Reporting of Nonfinancial Information: The Role of the Auditor. Journal of Corporate Accounting & Finance, 28(1), pp.42-49.
Sirois, L.P., Bédard, J. & Bera, P., (2018). The informational value of key audit matters in the auditor’s report: evidence from an Eye-tracking study. Journal of Accounting Horizons. 14(2), 12-50.
Tepalagul, N. & Lin, L., (2015). Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1), pp.101-121.
Worth, R. (2009). Communication skills (1st ed.). New York: Ferguson.
Wu, C.Y.H., Hsu, H.H. & Haslam, J., (2016). Audit committees, non-audit services, and auditor reporting decisions prior to failure. The British Accounting Review, 48(2), pp.240-256.
Yew Wong, K. (2015). Critical success factors for implementing knowledge management in small and medium enterprises. Industrial Management & Data Systems, 105(3), 261-279.
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