Discussion
The report demonstrates the evaluation and summary of auditor’s assurance services provided by the auditors to their clients. For this purpose, the analysis of the auditor’s report and the data relating to the same has been extracted from the annual report of the selected company. The chosen company for the analysis of auditor’s functions is an Apollo mineral limited that is listed on the Australian stock exchange. The main focus of company is to develop the Southern France Couflens project along with progressing the Aurene project in neighboring Spain. Company main objective regarding the Couflens project is to focus on the potential Salau mine reactivation. Several regional exploration programs have been conducted by company that has been identified by the Aurene and Couflens project. There are several areas related to the auditing that have been analyzed in the report that include non assurance services, remuneration, key audit matters, audit committee and audit opinion (Knechel et al., 2016). In addition to this, the effectiveness of material information has been assessed in the report. All the information relating to auditing of Apollo minerals have been extracted from the annual report of the company.
The relevant government authority conducts inspection for indentifying the instances of the environmental non compliance in terms of operations. Auditor of Apollo minerals limited has conducted review of financial report that comprises of the condensed consolidated statements financial position, condensed consolidated statement changes in equity, condensed consolidated statement profit and loss, and condensed consolidated statement comprehensive income as at 31st December, 2017. The auditor to the best of their belief and knowledge makes the declaration that there have been no contraventions of independence requirements of auditors and any code that is applicable to the professional conduct in relation to the review (Khelil et al., 2016).
2) Evaluation of Compliance of auditors with independence requirements:
The external compliance audit is responsible for indentifying any instances of non compliance with the environmental matters. Financial report of Apollo minerals limited complies with the IFRS (International financial reporting standard) and AAS (Australian accounting standard) that is issued by IASB (International accounting standard board) (Tepalagul & Lin, 2015).
3) Nature of non audit services:
The auditor of Apollo minerals limited has not performed any non audit services in the financial year 2017. However, during the financial year 2016, few non audit services were provided by the auditor of Apollo minerals limited. For the taxation services, company made payment of fees to Hall Chadwick of amount $ 1650. Reviewing and approval of all non audit services are done by the directors for ensuring that the objectivity and integrity of auditors is not adversely affected by providing such services. In relation to non audit services provisions, directors are satisfied in terms of the services compatibility with the auditor independence standard. Performance of such services by internal auditor has not compromised the independence of external auditor (Brasel et al., 2016). There is no comprising of the nature of services with the general principles of independence of auditors according to ARES 110.
1) Evaluation of the auditor’s assurance services
5) Evaluation of key audit matters:
Key audit matters are the matters which are considered of great significance in the financial report auditing in the current period in the professional judgment. Addressing of all such matters is done in the context of financial report audit along with forming an opinion. In addition to this, no separate opinion has been provided on such matters. These are the matters that are selected from the matters that are charged with governance. Some of the potential key audit matters areas involve assessment of impairment, certain complex areas relating to recognition and revenue, taxation matters, contingencies and provisions, industry matters, information technology and control system and any arrangements over non controlling interests (Amir et al., 2016).
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Key audit matters |
Addressing of key audit matters |
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Expenditures that have been incurred in the rights acquisition |
For recording and exploring the assets, the group capitalized the expenditures that is incurred and is likely to recover and requires a reasonable assessment of existence of reserves. The ability of organization to continue as a going concern is dependent upon the entity to manage the expenses including the minimum expenditure so that they do not exceed the existing cash reserves. |
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Assets impairment |
Some of the carrying value of evaluation expenditure and exploration has been written down by the company during the particular financial year as depicted in the note i(v). In addition to this, there are certain reserves areas for which there has not been extraction of any reserves. However, it is continuously believed by the directors that since there is not any inclusion of feasibility studies, there should not be writing off such expenditures (Byrnes et al., 2018). At the report date, the carrying value of capitalized expenditure stood at $ 6667645. |
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Deferred tax liabilities and assets. Recognition of deferred tax liabilities and assets are done for the temporary differences in the tax rate that is expected to be applicable when the liabilities are settled and assets are recovered. Such settlements are done based on the rate of taxation that is enacted substantively for each jurisdiction (Gaynor et al., 2016). |
In recognition of deferred liabilities and taxes, judgment of management is required in making estimation of future taxable income that is recognized as key audit matter. The assumptions made by management are assessed for the appropriate current and deferred tax provisions (Cordos et al., 2015). It has been found that the disclosures relating to the deferred tax and income tax balances have found to be appropriate. |
6) Evaluation of audit committee:
For the financial year 2016, there has not been establishment of audit committee by the board and until the time, it has been established by the board that establishing the audit committee is considered appropriate and the auditing charter has been performed by the board. The audit committee of Apollo minerals limited is the committee of the board of company that is entrusted with the specific powers that is delegated in the charter. The composition, functions, authorities and responsibilities along with the mode of operations is set out by the audit charter (Beck et al., 2014). On any external audit arrangements, it is the responsibility of committee to make reporting to the board.
The members of audit committee should be appointed by the board and reviewing of the composition should be done annually. The audit committee of Apollo Minerals limited is comprised of
- at least three members
- a majority of independent non executive directors
- Independent chairman who is appointed by the board and such independent chairman is not boards’ chairman.
- The members that are considered relevant to the functioning of audit are the member having sufficient experience and financial skills (Roy et al., 2016).
Providing assistance to the board in fulfilling the responsibilities relating to the reporting and accounting practices of company is the audit committee primary function (Barua et al., 2016). In addition to this, the audit committee performs the following listed functions.
- They are entitled to determine the effectiveness and independence of internal and external auditors of Apollo minerals limited.
- Audit committee is required to coordinate, oversee and appraise the quality of audits that is conducted by the internal and external auditors of company.
- Reviewing of the accounting control and the adequacy of reporting is required to be done by audit committee.
- For reviewing the financial information that is submitted to the board by management for issuing to the regulatory authorities, shareholders and general public are done by the audit committee that serve as objective and independent party.
- The exchange of information and views is facilitated by maintaining open lines of communication between internal and external auditors and board for exchanging information and views along with confirming their respective responsibilities and authorities (DeZoort & Taylor, 2015).
However, it is not required by audit committee to personally conduct audit and accounting reviews and they rely on the professional advisers and employees of company.
It is required by audit committee to promote an environment that is consistent with the financial reporting that is best practiced. Committee in particular is required to perform several responsibilities that are listed below:
- They are responsible for monitoring the effectiveness and integrity of the financial reporting process.
- For external reporting, audit committee should conduct an independent review of the financial information presented by the management. Such activities incorporate conducting reviews of annual financial statements, director’s report, annual report and other externally produced financial report (Christ et al., 2015).
- Assessment and reviewing of the external audit arrangements should be done by the auditors.
- Audit committee should ensure that the adequate systems are in place and established policies are appropriate and assessing the related party transactions propriety.
- The internal audit arrangements is reviewed, appointed and assessed by audit committee and they are required to take into account responses of management, findings of internal audit and related actions (Crockett & Ali, 2015).
7) Audit opinion expressed:
The independent auditor of Apollo minerals limited is Deloitte that has made independent declaration about the financial report. It has been concluded by the auditor based on the review that they have not been acquainted with any matters that made them believe that financial report have not been prepared according to the requirements of Corporation Act, 2001. They have concluded that the financial report of Apollo minerals limited have complied with the AASB 134 accounting standard interim financial reporting and the financial position of the consolidated entity gives a true and fair view in reference to the financial report ending financial year 2017 (Sultana et al., 2015). Furthermore, an attention to the note 2 in the financial report for financial year 2017 have been drawn by auditors which is indicative of the fact that organization has experienced a net cash outflow from operating activities and has incurred a net loss. The matters set forth in the notes and the conditions are indicative of the fact of existence of material uncertainty about the consolidated entity to continue as going concern (Alzeban & Sawan, 2015). In respect of this matter, there has not been any modification in the conclusion made.
2) Evaluation of Compliance of auditors with independence requirements
8) Difference between the responsibilities of management and auditors:
The responsibility of the directors and management of Apollo minerals limited is involve in the preparation of the financial report that provides users with the true and fair view of the financial statements. Such true and fair view of the financial statements should be according to the requirements of the Corporations Act and Australian accounting standard. In addition to this, directors of organization are also entitled to implement the appropriate internal control system which is considered essential for the preparation of the financial report. Such internal control system helps in ensuring that the financial statements are free from misrepresentation and they are not materially represented due to the occurrence of fraud and errors.
On other hand, the responsibility of the auditors of Apollo minerals limited is to express an opinion on the financial report presented and make conclusion on the review of the management about report that is of great assistance to users in their investment decision making. The review of the financial report has been conducted according to the auditing standard on review engagement ASRE 2410 of the reviewing financial report. Such reviewing is done by the independent auditors of the Apollo limited. Auditors are entitled to report if the financial report is not prepared according to the Corporation Act, 2001 and they do not provide true and fair view to the users (Lisic et al., 2016). As per the requirement of ASRE 2410, the auditors of Apollo minerals should comply with the ethical requirements that are significant to the auditing of the annual report or financial report of the company. Reviewing of the annual report requires auditors to make enquiries of the persons who are responsible for accounting and financial matters along with reviewing of procedures and applying analytical. A review conducted that is considered to have lesser scope does not lead to obtaining of assurance that they would become acquainted with the matters that are identified in the audit (Power & Gendron, 2015). According to that, no opinions have been expressed by the auditors.
Conclusion:
The current study elucidating on determining the effectiveness of the role of auditors in providing assurance services to the Apollo minerals limited have found that they play a significant role in assessing the financial statements in relation to its fair and true presentation that is free from any material misrepresentation. Several assurance services have been provided by auditors along with some non audit services in previous financial year. However, no such services have been provided in the current financial year. The audit committee which is established by the board is entrusted with various roles and responsibilities in relating to audit engagements. In addition to this, it has been found that there is considerable difference between the responsibility of auditors and management towards the financial report. In addition to this, the report has also outlined several key audit matters that is requires the judgment of the management of Apollo minerals limited. Auditors have expressed the opinion that the financial statements give a true and fair view but there exists materiality in relation to the amount of loss incurred and net cash outflow.
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