Evaluation Of Auditor’s Assurance Services: Summary And Analysis

Discussion

The report is prepared for summarizing and evaluating the assurance services provided by auditors for Client Company. This include analysis of other pertaining areas of auditing such as non auditing services, remuneration, audit committee, key audit matters, audit opinion, audit committee (Kiss et al., 2015). For the purpose of analysis of auditor’s assurance services, the company that has been selected is Amcor limited. Amcor limited is a global leader in producing and developing high quality and packaging for variety of beverage, food, pharmaceutical, medical device, home care products in a responsible manner. It has been found from the annual report of company that they relies conducting internal second party audits on a three year frequency. The action plan of company addresses continuous efforts for improvement and findings of audit.  Monthly report on compliance with Amcor standards and safety performance is provided by the business group of Amcor to the board of directors.  A global initiative is implemented by organization relating to injuries and conducting audit across all manufacturing units (Alon & Vidovic, 2015). Moreover, report also demonstrates the assessment of effectiveness of material information that is reported by the auditors of Amcor limited.  

The audit committee of Amcor limited is a platform for processing regular reporting about the framework of risk to the board. Management of Amcor undertakes review of independent loss prevention audits and purchasing external assurance whenever it is considered appropriate.  In the current financial year as for the financial report for year 2018, the auditor of Amcor limited is Pwc (PricewaterhouseCoopers) that performed statutory duties along with some other services. The notes to financial statements in the annual report disclose the details of the amount that is paid to the auditor.

Non audit services provided by Pwc is mostly related to compliance services and giving advice on taxation. Advice on taxation matters has been provided by Pwc since year 2000. The non audit services provided by auditor during this particular financial year have been considered by the board according to the written advice provided by the resolution of Compliance and audit committee. The provision made for non audit services by auditors has been satisfactory on part of board indicating that such provisions are compatible and requirement of auditor’s independence of the Corporation Act, 2001 has not been compromised. It was so because all the non audit services were subjected to the procedures of corporate governance adopted by Amcor limited that has been reviewed by the committee for ensuring that it does not have any impact on the objectivity and impartiality of auditors. Approval of all non audit services is done according to the approval frameworks and delegations of non audit services. Furthermore, general principles relating to auditors independence are not undermined by providing non audit services because auditors own work is not audited or reviewed, acting as company advocate for jointly sharing risk and reward and acting in decision making or management (Fuhrmann et al., 2017).

The auditor’s remuneration section includes the additional information that is required by Corporation Act, 2001 and accounting standards. Auditors are paid for audit and other assurance services and other services. They charge maximum amount for other regulatory audit services and for reviewing and auditing of financial reports of the company. For the other services, the maximum amount is charged for taxation services, due diligence and transaction related to taxation advice. Remuneration of auditors service also include making payment for other regulatory services, transaction related taxation advice and other regulatory services of non Pwc audit services. It can be seen from the remuneration section of auditors that there has been decrease in total remuneration paid to auditors from USD thousand 8145 in year 2018 to USD thousand 8897 in year 2017. However, total amount of remuneration paid for audit and assurance services has increased from USD thousand 6422 in year 2017 to USD thousand 7048 in year 2018. On other hand, remuneration for other services has decreased from USD thousand 1939 in year 2017 to USD thousand 917 in year 2018 respectively (Amcor.com, 2018). Therefore, decrement in total remuneration is attributed to a significant decline in other services provided by Pwc.

Evaluation of the auditor’s assurance services

Key audit matters are matters with most significance in financial report audit in the professional judgment for current period. No separate opinion is provided by organization on this matter and they are addressed in the context of financial report auditing. Classification of key audit matters is presented in the table below:

Key audit matters	Addressing of key audit matters
Risk of impairment in carrying value of investment in AMVIG holdings limited. Amcor limited does not exercise any control over in AMVIG holdings limited, although the group have significant influence. The key audit matter in this case is potential impairment of investment of Amcor in AMVIG which has difference in share price Hong Kong dollar price per share that is quoted on different stock exchange. Such audit matter is due to the difference between quoted share price and carrying value of investment (Bepari & Mollik 2016).	· The audit procedure for providing assurance requires assessing the ability of group to develop reliable forecast by comparing the prior year’s performance of AMVIG with that of forecast used in prior year model. · Analyzing the impact of pre tax discount rates and other possible growth rate for performing sensitivity test on the model within a foreseeable and reasonable range (Kassem & Higson, 2016). · The growth rate used in the model is compared with the industry and historical forecast and historical results.
Risk of exposure to material indirect tax in Brazil. An assessment of additional tax is received by group from tax authorities in jurisdictions other than those in Australia. Indirect tax claims and excise from local Brazilian tax authorities are the most significant assessment. This complexity in assessment of tax for determining risk is considered as key audit matter because of change in circumstances that could lead group to make payment for taxation, interest and associated penalties (Louwers et al., 2015).	· The audit procedure for assessing the position of group in relation to excise claims and indirect tax requires holding discussion with statutory audit team of local statutory of Brazil for understanding relevant judicial and regulatory environment development. · The assessment of group regarding the exposures arising from tax assessment and taxation risk is compared with any latest correspondence that is received by group (Moroney & Trotman, 2016).
Risk of not accounting or identifying material income due to exposures of tax across the group. The tax provision is recognized by the group based on estimated probable amount of receivable and payable. It is regarded as key audit matters because of possibility of change in estimates and judgment to affect the provision level recorded in the financial report (Hay et al., 2017). In addition to this, there is no adequate identification of material tax exposure in specific country.	· An understanding of the taxation strategy has been developed by the group for assessing any regulatory changes and identifying tax positions that are uncertain (Soh & Martinov, 2015). · The historical estimates of the group are assessed for accuracy by making comparison of the liabilities required in previous period. · The copies of tax advice provided by lawyers and local tax advisers and selected communications with local authorities are inspected.

Yes, Amcor limited has Audit and compliance committee. The member of committee should involve three directors which should include non executive directors who should meet the independence requirements The Audit and compliance committee of Amcor limited has one member who was the non executive director in his previous company (Farooq & de Villiers, 2017). Furthermore, Amcor limited has an audit committee charter of which the responsibilities calendar forms chart.

The membership of audit committee consists of three director at least of who should include non executive directors. Independence requirements that are established by applicable laws and board should be met by number of directors along with the listing requirements (Soh & Martinov, 2015). The judgment of board requires involvement of each member as they have the ability to understand the financial statements. Committee should be of sufficient independence and size in the judgment and the member has financial and accounting expertise along with sufficient understanding of the industry in which Amcor carry out its operation.  Such understanding is essential for enabling the committee to discharge their duties effectively in accordance with the recommendation of ASX Corporate governance principles. The chairperson and member of committee should be appointed by the board and chairperson should not be the board chairperson and must be an independent director (Braam & Peeters, 2018).

The function of audit committee is to carry out their role that is delineated in the responsibilities calendar of Audit and compliance committee. Items to be considered for auditing might vary by the management with the approval of audit and compliance committee. It is the responsibility of management to ensure that correct recording of financial statements have been conducted and explaining the financial performance and position. The committee is not entitled to conduct the auditing activities and giving true and fair view of financial statements in accordance with the generally accepted accounting principles and assuring standards of company on internal control system. In addition to this, authority can be delegated and formed by company and such authority delegation can be done to any designated member of committee (Aguolu et al., 2018).

The audit committee provided a platform for processing regular reporting to the board on their status of framework of risk. Audit committee provides assistance to the board of directors so that they fulfill their responsibility of maintaining the integrity and quality of auditing, accounting and financial reporting.  The main objective of Committee is to oversee the process of financial and accounting reporting. Scope and adequacy of internal and external audit plans are reviewed by the audit committee. Process of company to manage the financial risk along with auditing of the financial statements is overseen by the committee (Zhou et al., 2018). It is the direct responsibility of committee for the rotation, compensation, oversight and appointment of external auditors. External auditors of Amcor limited are required to make reporting directly to the committee. The necessary dismissal and appointment of the vice president of the group of internal audit should be approved and reviewed by the committee (Chiu et al., 2013). The report assessed by the Vice president of the group of internal audit is directly reported to the committee and any member can be requested to call for meeting.  

Compliance of auditors with independence requirements

The report on auditing of financial report of Amcor limited presents the opinion that the accompanying financial report of controlled entities of Amcor limited and the company itself has been prepared according to the requirement of Corporation Act, 2001. Assessment of the report opines that the financial statements of company give a true and fair view of the financial position of Amcor limited as on 30^th June, 2018. The audit approach used by auditor of Amcor limited involved designing an audit to provide reasonable assurance about whether the financial stamen is free from material misstatement due to occurrence of fraud activities or errors (Simnett et al., 2016). Any object is considered material if they have reasonable expectation to influence the user’s economic decision based on financial report. The main focus of audit conducted by group involves making subjective judgment such as uncertain future events and assumptions. In addition to this, they have also expressed that the financial statements complies with the Corporation regulation, 2001 and Australian accounting standards. Auditing has been conducted according to the Australian auditing standards and it is believed that appropriate and sufficient audit evidence has been obtained that forms the basis of opinion (Seguí et al., 2015).

The responsibility of management and board of Amcor limited is considerably different from that of auditors. Concerning the financial report audit, the responsibility of director is to read information presented and determine whether there is consistency between the information presented and knowledge obtained from financial report and financial report and any other information that appears to be misstated materially. Moreover, it is the responsibility of directors to prepare the financial report of company that gives a true and fair view according to the Corporation Act, 2001 and Australian accounting standard (Simunic et al., 2017). The internal control system enabling the financial report preparation in way that gives a true and fair view indicating absence of material misstatement is determined by director. It is the responsibility of directors when assessing the financial report to make the assessment of group’s ability to continue as going concern and disclosure of all matters relating to going concern and using the accounting rules relating to it. The going concern accounting rules are implemented unless there is no intention of director to cease the operations or liquidate the group (Martínez & García, 2018).

The objective of auditors is obtaining reasonable assurance about the financial report whether it is free from any material misconduct or misstatement due to errors or fraud along with issuing of audit report based on their opinion. Such assurance given by auditors does not give a guarantee, although they are a high level of guarantee about detecting any existing material misstatements. This is so because such audit is conducted according to the Australian auditing standards. Misstatements in the financial statements can be regarded as material on an aggregate or individual basis that is expected to influence user’s economic decision that is formed on the basis of financial report (Auasb.gov.au, 2018).

The historical knowledge of auditor is considered as material value to company. There are some significant items that are excluded from the computation of return on assets and earnings per share and such items might be the material events outside the normal operational activities of business. In view of the risk associated with material misstatement, a materiality level that is lower than the materiality of overall group is applied through occurring business groups (Bédard & Courteau, 2015). However, materiality has been identified in tax exposures material income, indirect tax exposure materiality and impairment risk associated with investment carrying value.

Nature of non-audit services

Conclusion:

The assessment of the effectiveness of material information reported by the auditor of Amcor limited is presented under this section. Materiality identified by the auditor is regarded as effective because of the adequate reasons and justifications made by auditors.  Concerning the impairment risk associated with investment carrying value, it is considered material because of deficit between quoted share price and investment carrying value. From the analysis of annual report of Amcor limited relating to auditors opinion on the financial performance, it can be inferred that the financial report has complied with the requirement of Corporation Act and Accounting standards. 

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