HI6026 Audit- Assurance And Compliance Assessment

HI6026 Audit- Assurance And Compliance Assessment

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HI6026 Audit, Assurance And Compliance Assessment

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HI6026 Audit, Assurance And Compliance Assessment

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Course Code: HI6026
University: Holmes Institute

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Country: Australia

Questions:
Based on your analysis of the auditors’ sections and other areas pertaining to the auditor, as included within the Annual Report, submit a report which summarises and evaluates the auditor’s assurance services performed for the client company.
 
As part of your review of the assurance services provided, consider the following:
 
1. Has the auditor complied with Independence requirements?2. If there were non-audit services provided, what was the nature of such services?
3. Provide an analysis of the Auditor’s remuneration in a table with prior year comparisons. Include percentage changes and explanations of the remuneration.
Answer:
Introduction
Assured services of the auditor play an important part in the company’s annual reports, as they can significantly influence the financial records of the company. An auditor is an individual, who has the right with respect to conduct audit of the overall financial statements of a company, which, in turn, assures profits maximization and loss minimization. In order to pursue an audit of the company, it is necessary for the auditor to look into the company’s operations, identify the financial statements, which are probably wrong, and evaluate any occurrences of important events after the preparation of financial statements. This also includes trying-out whether the company’s internal controls are efficient, write to the directors informing them about any issues, which are connected with the audit and chalk out solutions in order to deal with them. It can be well evaluated the significant role the auditor plays in a company (Gelman, Rosenberg & Freedman, 2018).
A-CAP Resources Limited is located in Botswana and is an ASX listed Resources Company. In addition, it mainly operates in Botswana country in South Africa. The company has the status of being funded well by its shareholders. Furthermore, the company majorly concentrates on the uranium prospect. Moreover, the company also operates in coal projects. The objective of the research paper is to assess along with summarize the assured services that are provided by the auditor of A-CAP Resources Limited in the company’s operations.
Discussion 
Auditor’s Compliance with Independence Requirements
The independence declaration of the company’s auditor is observed in the 307C with respect the Corporations Act 2001. This particular declaration is often perceived to be developed by the director of the A-CAP Resources Limited along with its subsidiaries. It states that there are no instances of infringement relate to the requirement for independence of the auditor relating to the Corporations Act 2001, which is based on the context of an audit. Moreover, it is also stated that there are no instances of contraventions in any applied codes of professional conduct on the basis of audit (A-Cap, 2017).
Over the years, it has been observed that the independence requirements of the auditor have become important while doing the audit. Additionally, the independence of the auditor directly affects the quality of the audit. The quality of the audit directs towards their action of uncovering the breach. In addition, it also helps in directing towards the report of the breach. Thus, it does not require providence of immense importance to the auditor (Lin & Tepalagul, n.d.). Thus, any kind of failure in providing the required independence to the auditor will lead to less or minimal irregularities in the reports observed by the auditor. The independence of the auditor directs towards the mental attitude in which all the issues, which are found in the financial statements are reported by remaining unbiased. This also focuses on seeking all the requirements that are necessary for the wrongs committed. Hence, it can be understood that it is important for a company to provide the auditor with the probable independence requirements (Patrick, Vitalis & Mdoom, 2017).
Presence and Nature of Any Non-Audit Services
Non-audit services signify those professional services, which are provided by a public accountant during the auditing process that is being conducted within the company. It is actually not at all connected to evaluate or audit of the financial statements of the organization (Zhang, Hay & Holm, 2016). In this context, A-CAP Resources Limited provided did not pay a specific fee to any kind of non-audit services to the external auditor, as recorded in the year 2017. 
Analysis of Auditor’s Remuneration In Comparison To the Previous Years
The analysis of remuneration report (refer to appendices, Fig 1), which has been obtained from the company signifies the percentage change that has taken place between the years 2016 and 2017. The percentage change can be observed from the report is that there is a difference of $ 879,225 with respect to two years, which explains the increased rate that has been obtained in terms of remuneration (A-Cap, 2017).
Key Audit Matters Associated with of the Audit Procedure
Key Audit Matters (KAM) indicates issues, which are of high significance according to a professional auditor. The inclusion of these matters in an audit report is highly essential to the financial statements relating to the current period. KAM are chosen from those issues that are communicated by the individual, who is in charge of the company (Arnold, 2017). An auditor in order to determine the key audit matters has to bring some factors into consideration. In this context, it is important to consider key areas, which are often associated with higher risks or conditions of material misstatement. In addition, the factors include important judgments of the auditor with respect to the specific areas of financial statements. This, in turn, includes significant judgment of the management. Moreover, the areas related to the accounting estimates are observed to be engaged in high risks and uncertainty. Furthermore, observing the impact that had been initiated by the occurrences of any kind of events or important transactions, which occurred. The final area is to evaluate the process utilized for addressing the matter in the audit (Arnold, 2017). A-CAP Resources Limited abides by the standards of Australian Auditing Standards to ensure that there are no possibilities of material misstatements during the audit it is ensured that there is no presence of it in the final audit report during the audit process. Misstatements in an audit report can occur due to any kinds of errors or fraud. The most common form of misstatements is material misstatements. It is observed that this type of error can influence the economic decisions of the individuals with respect to financial report (A-Cap, 2017).
The company in its audit tries to execute professional judgment along with skepticism. It also exercises other factors that involve the assessment and identification of the risks, which are imposed due to the presence of material misstatements. The risks are considered to be higher if the presence of misstatement is not detected as compared to the risks involved with the occurrence of the error. Generally, the term fraud signifies forgery, misinterpretations, omissions, override of the internal control, and collusion. In addition, evaluation relating to the appropriateness of accounting policies has been implemented. The audit also tends to check the justification of the accounting estimates, which are provided by the directors of the company. Additionally, it tries to obtain a precise understanding relating to the internal control, which is associated with audit so that an audit procedure can be designed in accordance with the situation. However, all of these are not performed or executed so that declaration can be made with respect to the company’s control over its internal operations. Furthermore, the audit of the company evaluates the overall structure, presentation, along with financial report’s content as well as the disclosures. The audit of the company tends to check the financial report in order to understand whether it represents all the underlying transactions and important events. This has immense importance in the financial presentation. In addition, it acquires the necessary audit evidence concerning the financial information relating to the activities that occurred in the place within the company so that an opinion could be formed relating to the financial report (A-Cap, 2017).
The Company’s audit report also provides a statement that verifies the fact that the institution has abided by all the requirements of the auditor’s independence so that there are no such issues raised against the issue. After informing the directors of the significant matters, the most significant is determined for a current time period. This indicates the key audit matters of the company. A-CAP Resources Limited describes the KAM in the report presented by the auditors does not disclose it until and unless there is an order provided for doing so. Another situation in which the key audit matters are not included in the report is when the probable outcomes are adverse in comparison with the benefits provided to the interest of the public (A-Cap, 2017).
Evaluation of Audit committee and its Various Parts
A-CAP Resources Limited does have an audit committee. In addition, there are non-executive directors in the audit committee. This includes John Fisher-Stamp, Chenghu Zhu, Michael Liu, Henry J. Stacpoole, and Jijing Niu (A-Cap, 2017). In addition, there is an audit committee charter, which is engaged in designing the roles and responsibilities of the audit members in a specific way.
Structure of the audit committee members involves a rule, which focuses on stating the involvement of four members is board of the company. In addition, among all, three will be independent directors. Among the four members, at least one has to bear the required experience and qualification for providing proper guidance and insights at the time of crisis. Occasionally, non-committee individuals could be invited in the meetings held by the committee, only if it is considered apposite (A-Cap, 2018).
The roles of the audit committee involve many significant factors. The first role of the audit committee members includes supervising along with assessing the integrity of the entity’s financial report. In addition, they also involve in evaluating important financial reporting judgments. In addition, the auditor committee also scrutinizes along with evaluates to comply with respect Company’s whistleblower policy and Code of Conduct. Assessment of the internal financial control as well risk management is also done by the audit committee. Reviewing along with monitoring, and administering the functions of external audit includes matters that concerns the appointment and salary, independence & non-audit services. Additionally, the audit members are liable to perform other specific functions, which are instructed by the Company’s Constitution and law or the board of the company (A-Cap, 2018).
The responsibilities, which are assigned to the audit committee members of the company, are explained precisely below:
The responsibility of the members toward the internal controls and financial reporting comprises properly evaluating annual, half-year, and even quarterly financial statements. Secondly, reviewing the report presented by the external auditor is appropriate or not for satiating the needs of the shareholder. This further includes scrutinizing the selection of the management with respect to the accounting principles and policies. Furthermore, it also considers the internal controls and Company’s policies and procedures so that financial risks can be assessed (A-Cap, 2018).
In case of annual meeting with the auditor, the audit members of the committee remain assigned with responsibilities. The first responsibility is to discuss the choices made by the company with regard to the accounting methods and principles along with changes to be recommended. The second responsibility includes discussion of any kind of disputes or disagreements that are encountered by the management during the audit process. In this context, the issues can be in terms of restrictions or right to use any required information. Another essential responsibility of the members is to discuss the capability and potential of the company’s capability for controlling the internal matters (A-Cap, 2018).
In case of the external auditor, the responsibility of the members involves scrutinizing the overall procedure in the process of selection, rotation along with recruiting external auditor. The members are also highly responsible for assessing the performance of the external auditor. In addition, they also recommend the Board to either appoint or eliminate the external auditor or to support the conditions in which he/she is working. In addition, they are liable for confirming external auditor’s independence related to the non-audit services of the company as well as fees (A-Cap, 2018).
Internal communications along with reporting is another dimension in which the audit members of the company need to report, which is explained in the clause 5 relating to Audit Committee Charter. Additionally, for ensuring that the board is all alert of the matter that impacts the financial aspects of the company. Additionally, the audit members are also engaged in updating the board regularly with the activities of the committee and provide recommendations that are required (A-Cap, 2018). Another responsibility involves verifying the committee’s membership on the basis of the Audit Committee Charter. It also focuses on examining and accessing the action points and Audit committee charter. Additionally, their role also comprises reviewing the independence relating to the committee members on the basis of the Company’s policies, which engages in determining the independence of directors. In addition, the audit members are also involved in developing and overseeing the procedures related to the complaints or any kind of issues associated with the employee of the Company. This may include auditing issues, inside accounting controls, accounting, and violation of the organization’s code of Conduct (A-Cap, 2018).
Type of Audit Opinion 
The directors of the company in its audit opinion declared that the financial statements are based on the Corporations Act 2001. This includes complying with the accounting standards of Australia along with Corporations Regulations 2001, which provides combined financial position as on 31st December 2017. Moreover, the directors of the A-Cap Resources have presented an opinion in the audit that the company is capable of paying off their debts as and when required (A-Cap, 2017).
Differences of Auditor’s Responsibilities and Director and Management’s Responsibilities 
There are differences between the responsibilities of the management and the directors of the company relating to its financial report. In addition, it is observed that directors are legally accountable for filing the company’s annual return along with the account at the right time. They are also liable for ensuring that the details of the company are updated. Moreover, the information that is provided by him will be enlisted in a public register, which will be viewed during the public inspection (Companies & Intellectual Property Commission, 2018). The responsibility of the manager in relation to the financial report is that they are entirely liable for preparing based on the provided financial framework. In addition, the directors are also responsible for evaluating the company’s ability for determining whether the company can continue as an ongoing concern. In this context, the utilizing and disclosing matters of the ongoing concerns are to be evaluated by the management alone. Finally, the responsibility of the auditor is to conclude the overall suitability with respect to the ongoing concern on the basis of accounting. Thus, this involves initiating the formation of the financial statements. Moreover, through the audit, the auditor explains any kind of material uncertainty that exists within the financial report. This might disrupt the ability of the company as an ongoing concern (International Federation of Accountants, 2018).
Presence of any Material Subsequent Events in the Company
There have been no records relating to subsequent events within the organization (A-Cap, 2017).
Assessment of the Effectiveness of the Material Information 
The material information, which has been provided by A-Cap Resources Limited Company, is that preparing financial statements are conducted based on accruals and are entirely based on the historical costs, which are verified when required for the measurement of financial assets, non-current assets along with financial liabilities (A-Cap, 2017).
The probability of Missing Any Material Information in the Provided Information 
The information that is provided by A-Cap Resource Limited includes all the significant aspects, which are required for the audit. This helps identifying the fact that there is no information that remained unexplained in the process (A-Cap, 2017).
The follow-up questions to be asked to the Auditor

Has audit’s scope altered from the past years? If yes, then in which specific areas?
How will the Company’s risk be managed with respect to the financial accounting?

What audit issues have been identified to have high risks and how will they be solved? (BDO Canada LLP, 2015).

Conclusion
The auditors play important role in each company’s operation, as that it suggests the issues, which are related to the financial statements of the organization. In A-CAP Resources Limited’s annual reports, the company’s auditor has identified all the evidence that is required for proper evaluation of the audit process. It has also presented details relating to organization’s audit for describing the impact of KAM in its formation. Basically, without an auditor, a company cannot sustain in the industry, which has been precisely explained by the annual report of the company.
References 
Gelman, Rosenberg & Freedman, 2018, What an auditor does and doesn’t do, Resources, viewed 12 September 2018,
Lin, L. & Tepalagul, N. K, No Date, ‘Auditor Independence and Audit Quality: A literature review’. Boston University, pp. 1-54.
Patrick, Z. I.mVitalis, K & Mdoom, I., 2017, ‘Effect of auditor independence on audit quality: A review of literature’. International Journal of Business and Management Invention, vol. 6, iss. 3, pp. 51-59.
Zhang, Y., Hay, D. & Holm, C., 2016. ‘Non-audit services and auditor independence: Norwegian evidence’. Cogent Business & Management, Vol. 3, No. 1215223, pp. 1-17.
Arnold, C., 2017, Auditor reporting standards implementation: Key Audit Matters, Auditor Reporting Standards Implementation: Key Audit Matters, viewed 12 September 2018.
Bédard, J., Gonthier-Besacier, N. & Schatt, A., 2014, Costs and benefits of reporting Key Audit Matters in the audit report: The French experience. In International Symposium on Audit Research, viewed at 12 September 2018,
A-Cap, 2018. Audit committee charter. A-Cap Resources Limited, viewed 13 September 2018
A-Cap Resources LTD, 2016, ‘A-Cap Resources Limited and its controlled entities’. Half-Year Repor, pp. 2-22.
International Federation of Accountants, 2018, ‘Auditor Reporting—management and auditor responsibility statements,’ IAASB Main Agenda (September 2014), pp. 1-4.
A-Cap, 2017, ‘Report 2017’, A-Cap Resources Ltd, pp 2-64.
Companies & Intellectual Property Commission, 2018, Companies & Intellectual Property Commission, Legislation, viewed 13 September, 2018
BDO Canada LLP, 2015, 10 essential questions you should ask your auditor, BDO, viewed 14 September 2018.

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