HI6026 Audit, Assurance and Compliance

HI6026 Audit, Assurance and Compliance
 
Topic: Auditor’s Public Interest Responsibilities and Audit Quality
 
Background and Context:
 
In a recent interview with ABC news, the now former Chairman of the Australian Securities and Investment Commission (ASIC) Greg Medcraft warned that: 
 
“We don't want to have another Enron. And the key to not having another Enron is making sure auditors do their job and to get assurance that financials are free of material misstatement"
 
 
Expert's Guidance
 
This assignment of Audit, assurance, and compliance has been designed by the Holmes Institute for trimester 3 2018. The framework of this assignment has been developed with the aim to enhance the knowledge of the students in the areas of importance and role of audit, assurance, and compliance within an organization. The assignment mainly consists of four questions which hold the source of different information related to diverse audit concepts. 
 
The first question of the assignment identifies the main key stakeholders of the selected ASX listed company. Further, the assignment will also explore the ways by which the material misstatement of financial statements can impact the different stakeholders of the company. This part of Audit, assurance, and compliance will also provide the discussion related to the risks which are posed to each key stakeholder. Apart from this, the second part of the assignment will include the study of core concepts related to whistleblowing and independence in relation to auditors. Following this, this part will also reflect the concepts of ethics related to the professional accountant's documents.
 
The third part of the assignment will talk about the lessons which are learned from the scandal of Enrin and from the behavior of Arthur Anderson. Furthermore, the last question of the assignment will reflect the study of professional accountant documents in reference with APES 110 code. Apart from this, the last part will also discuss the needs of auditors for addressing the warning noted under the statement drafted by Greg Medcraft. This assignment of Audit, assurance, and compliance of Holmes Institute for trimester 3 2018 has been prepared by the tutors by extracting core information about the multiple concepts of an audit. Moreover, the tutors have made the assignment so explorative that it will be useful to enhance the skills of the students at a greater level. 
 
 
Assignment Question
 
When sub-standard audits are performed and reasonable assurance cannot be reliably ascertained, there are consequential risks for key stakeholders, including auditors. In light of this, perform the following key assignment tasks:
 
1. Perform a key stakeholder analysis for an ASX listed company. Explain how the key stakeholders would be affected if material misstatements are not properly identified, disclosed or adjusted for in the finalised financial statements. What are the key risks posed to each key stakeholder you have identified? (300 - 400 words)
 
Assignment Solution 1. 
 
Key stakeholders of Commonwealth bank
 
The Commonwealth Bank consists of various stakeholders and it includes social environment, investors, employees, clients, government, regulators, business partners, and public organizations. The internal stakeholders will majorly impact the activities of the Commonwealth Bank in comparison to the external stakeholders. 
 
Impact on the key stakeholders if the financial statement consists of material misstatement 
 
The misstatement of financial statements can highly impact the trust of stakeholders. It is likely that shareholders can lose trust and reliability for the company. In case, if the financial statements are disclosed, adjusted, and identified as misstated, then it can impact the financial decisions of stakeholders. The misstatement of financial statements can result in losing the resources and funds which are provided by external and internal stakeholders. The stakeholders have both financial and personal interest within the financial statements of the company as they are responsible to carry out daily operations of the business. The misstatement can decrease the efficiency and interest of stakeholder’s involvement in the company. 
 
Key risks posed to each stakeholder 
 
The misstatement of financial statements can highly manipulate the decisions of investors and shareholders of Commonwealth Bank. Thus, it is the responsibility of the organization to balance its relations with both stakeholders. The managers and employees of the Commonwealth Bank will be exposed to fraud risk as the organization will mislead and provide inaccurate information to the public and government authorities. Apart from this, the business partners will face risks while financing the organizational activities. Hence, it is important for the Commonwealth Bank to monitor the management as well as their financial statements preparation procedure.
 
Also, stakeholders like shareholders, clients, and investors will face the risks related to gaining profitability. Due to which it is likely it reduce their morale towards the organization.
 
2. Consider the concepts of independence and “whistleblowing” in relation to auditors. How do these concepts relate to the public interest requirements mentioned in the APES 110 Code of Ethics for Professional Accountants document? (300 - 400 words)
 
3. What lessons can auditors learn from the Enron scandal and in particular from the behaviour of Arthur Andersen? (750 - 900 words)
 
4. With reference to the APES 110 Code of Ethics for Professional Accountants document and the ASIC website, research “audit quality” and discuss what auditors need to do to address the “warning” noted in the statement made by Greg Medcraft above. (750 - 900 words)
 
 
 
 
 
 

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