Executive Summary
Within a fiercely competitive business surrounding, certain approaches are implemented by the audit committee in order to make certain the quality of the audit report is enhanced Estia Health Limited is considered in the recent report and the annual report of the company is evaluated for gathering several financial statements auditing factors. The paper explained that the non-audit services offered by Estia Health Limited financial statements includes assurance services those are carbon based, sustainability along with assurance services. Moreover, the audit committee of the company is associated with analyzing certain processes that entertains the integrity of financial reporting and analysis of influential dynamics for attaining better commercial incomes. The paper summarized that Ernst & Young acts as the audit group for the company that has considered various material factors along with certain important information abiding by the auditing compliance standards followed in Australia.
Barniv and Myring (2015) elaborated auditing to act as an investigation along with analysis of the yearly report of the organization that also makes sure of the accuracy with the fairness of certain predetermined recorded transactions. Due to such fact, the auditors are deemed to have responsibility in improving the reporting quality of the auditors reports by means of signifying all the vital information related with the company’s financial statements and related material aspects. Such kind of data is needed to be provided by the stakeholders of the organization in a clarified along with easy language. Within a fiercely completive scenario, certain approaches are implemented by the audit committee in order to make certain the quality of the audit report is enhanced (Bepari and Mollik 2015). In account with such explanation, Estia Health Limited is considered in the recent report and the annual report of the company is evaluated for gathering several financial statements auditing factors. Estia Health Limited is positioned as an Australian healthcare company that is involved in the business operation of leased and owned residential added care homes within the nation. It is also gathered that Ernst & Young is the audit partner of the organization for the year 2018.
The financial statements of Estia Health Limited explained that in the year 2018, the members associated with the audit process were related with the company’s business activities (Brawley et al. 2015). In addition, very less number of Ernst & Young audits committee member’s ahs an important function in serving as the audit group of the company. “Section 342A of the Corporations Act 2001” declaration is also observed to be considered by the audit authority. In addition, Ernst & Young has abided by every need explained in “Section 307C of the Corporations Act 2001” which takes into consideration certain important factors.
Compliance with Auditors Independence Requirements
One of such factor considers that no contraventions are deemed to be present related with independence needs of the auditors in alignment with the audit practice (Bryce, Ali and Mather 2015). Another factor that is considered is that every professional activity relied on applicable codes are carried out in alignment with the audit processes followed in Estia Health Limited.
The financial statements of Estia Health Limited in the year 2018 explained that Ernst & Young has provided two different types of non-audit services to the organization. This includes carbon assurance services, sustainability and some assurance and audit based services. For the non-audit services Ernst & Young is deemed to attain $76,128 and $ 8,000 amount considerably for Estia Health Limited. This has also resulted in attaining more than 10% of the overall remuneration report of the auditor. However, necessary compliance is also entertained from behalf of the organization along with auditor while providing along with obtaining non-audit services (Vidot et al. 2016). “The risk and audit committee” has provided a written advice relied on which directors of Estia Health Limited are satisfied and the general independence standard is also implemented in consideration to the “Corporations Act 2001”.
The services those are recognized are offered by not encompassing independent requirements of auditors because of the mentioned accounting standard in alignment with the service nature, materiality of accounts and developed processes in order to evaluate independence of auditors. In addition, Estia Health Limited’s board of directors has ensured that the company will maintain non-audit services. This is therefore gathered that auditors independence cannot be interrogated through considering all the factors (Xu, How and Verhoeven 2017).
The non-audit services offered by Estia Health Limited financial statements includes assurance services those are carbon based, sustainability along with assurance services. It is also gathered that the payments related with audit service is related with analyzing the financial statements of the organization. It is evident from analysis of Estia Health Limited annual report that the company has decreased all its payments for reviewing its annual reports and audit conducted by Ernst & Young by 13`5% in the year 2018 in contrast to the prior year (Stagg et al. 2018). However, an increase is indicated in the carbon-based services as well as sustainability by 11.5% in the year 2018. More considerable drop has been observed within the assurance services of Estia Health Limited’s remuneration by 12.5 % in the year 2018.
Non-Audit Activities
The important audit concerns those are taken into account are explained through auditing the financial reports of Estia Health Limited. Based on the company’s annual report for the current year, two major audit matters have been explained for minimization and categorization of product liability provision and asset valuation. However, necessary compliance is also entertained from behalf of the organization along with auditor while providing along with obtaining non-audit services. “The risk and audit committee” has provided a written advice relied on which directors of Estia Health Limited are satisfied and the general independence standard is also implemented in consideration to the “Corporations Act 2001”.
Estia Heath Limited has recognized certain provision of $189 million at the end of the year 2018. This provision is related with foreseeable as well as disclosed future claims related with the health care s. This has also made sure that with consideration to the external experts’ advice by USA and Australian based management. Such provision requires necessary judgment for sentiment of the amount with future profitability claims. Moreover, there are certain estimations associated with foreign exchange rate movement and the discount rates are deemed to have considerable impact on provision being a vital mater of audit. For dealing with this issue, Ernst and Young have analyzed sample testing for certain consideration with evaluating claims related with health care s in the database of management’s liability.
Ernst and Young has analyzed the processes of Estia Health Limited’s management for dealing with certain audit matter in entertaining the cash generating units that need impairment evaluation. In such condition, the auditor have achieved an explained viewpoint on business segment relied on yearly financial performance, external situations of the industry along with consistency reporting within the process of impairment testing. Moreover, the auditor has also considered conducting a detailed analysis of methodology related with impairment mode and estimations relied on vital factors. Moreover, sample testing was used in order to analyze the mathematical accuracy related with the models of cash flow. Ernst and Young have analyzed the efficiency of necessary disclosures in the financial reports of the organization.
The financial statements of Estia Health Limited in the year 2018 represented that the company’s board of directors has developed an effective risk and audit committee (Malone, Tarca and Wee 2016). The responsibility of the audit committee is centered on evaluating certain policies as well as maintaining suitable internal control for safeguarding the company’s assets and liabilities and by maintaining integrity of the financial reporting. Estia Health Limited’s non-executive directors include vital members those take decisions on business audit process. For such reasons, the audit committee is associated with analyzing certain processes that entertains the integrity of financial reporting and analysis of influential dynamics for attaining better commercial incomes. This also considers structure analysis related with the audit risk management (Ricketts, Riley and Shortridge 2018). In addition, very less evidence is present that is observed in the audit committee charter for the current year.
Evaluation of Auditor Remuneration
The independent audit report for Estia Health Limited also indicated that the organization has prepared its remuneration report in accordance with the “Section 300A of the 2001 Corporation Act” (Popatia 2017). The auditor of the company has also provided a view that the organization has developed and explained all important aspects within its annual reports by complying with regulations within the “Australian Accounting Standards Board (AASB)”, “International Accounting Standards Board (IASB)” and “International Financial Reporting Standards (IFRS)”. Considering the same, it can also be revealed that the yearly financial reports as well as important notes associated with Estia Health Limited Company’s accounts aligned with the fieldwork in evaluating their efficiency (Sedki, Smith and Strickland 2014).
In the year 2018, the financial statements of Estia Health Limited explained that there exist some variances existing within the responsibilities of the directors, the management and auditors in representing and explaining the financial statements. The directors and the management of the company are deemed to be accountable for preparing the financial statements through complying with the regulations and accounting standards in Australia (Kurmis et al. 2015). Moreover, the directors needs to evaluate the capability of the organization attain understanding of the concerns related with accounting. Conversely, the auditors conduct different responsibilities in contrast to that of the directors and management. The auditors are considered to be accountable in providing better assurance related with developing financial statements that that does not include material misstatements. This can take place die to fraud, error as well as concerns which require auditor’s opinion (Groomer and Murthy 2018). The major responsibilities of the company’s auditor “Ernst & Young” includes collecting audit evidences, analyzing financial statements representation and development, obtaining internal control understanding and observing uncertainties taking place from certain material misstatements.
It is considered to be vital to analyze that Estia Health Limited’s annual report for the year 2018 has certain material based events. With these, one of such event is associated with surplus sale of land which was announced by the business organization in new oath Wales (Estiahealth.com.au. 2018). Based on such selling conditions, the business organization needs to recognize that in Estia Health Limited’s income statement more than 25 million of income tax needs to be existing at the year end of the year 2019. Dividend declaration is observed to be one more important material based event in the organization. The organization has announced a dividend of approximately 13.5 cents per share which leads to an increase dividend along with related payment on 4th August, 2018. The amount of dividend is deemed to be provided by Estia Health Limited (Christensen, Lee, Walker and Zeng 2015).
Major Audit Subject
From the perception of the third part stakeholder it has been evidenced that the audit individuals belonging to Ernst & Young have analyzed the material information associated with Estia Health Limited in a suitable and better manner. In this condition, the auditor has abided by the important regulations as well as principles explained within the “Corporations Act 2001, Australian Auditing Standards along with APES 110” (Chen, Gavious and Lev 2017). Moreover, it has also been gathered that Ernst & Young considered disclosing two major audit matters associated with Estia Health Limited along with that necessary steps needs to be taken in order to decrease the same. By means of taking into consideration all such factors it can also be deemed that Ernst & Young “The auditors” is increasingly effectively in addressing all the vital material information which is considered in case of Estia Heath Limited (Cheng 2016).
From analyzing the facts collected from Estia Health Limited financial reports for the year 2018, it is explained that Ernst & Young acts as the audit group for the company that has considered various material factors along with certain important information (Carr et al. 2016). This can result in the uncertainties related with material misstatement indicated in the company’s annual report. The auditor has also included explanation of all the necessary information disclosure which confronts all the material aspects associated with Estia Health Limited. In consideration to same, it is explained that the auditor has reduced material information along with offering materiality factors within partial reporting (Chen, Gavious and Lev 2017).
Auditing process based questions can able makes within the general meeting to the concerned auditor of the company who is accountable for evaluating the annual report of Estia Health Limited (Burnett, Gordon, Jorgensen and Linthicum 2015). Certain important follow-up question that can be asked to Ernst & Young that is the auditor of the organization is indicated below:
- Does the organization have some subsidiaries or conducts that will not be audited for recognizing uncertainties associated with operational and financial activities?
- What is the planned audit responsibility?
- Who is the external auditor of the organization?
- Does the organization have some subsidiary or conducts that cannot be audited which signify uncertainties associated with operational and financial activities?
- Can you identify any significant complexities in the year 2018 within audit process?
- Did the audit consider getting involved within discussion regarding accounting and auditing issues associated with previous years audit report?
- What are the risk analysis processes employed by the auditors of the company?
- Is there any concern found from the previous year’s auditor report that requires being addressed?
- Is there any improvement chance for Estia Health Limited in reducing time spent by auditor in conducting audit process?
- Does the management deal with issues related with control of vital business processes?
Conclusion
Estia Health Limited was considered in the recent report and the annual report of the company is evaluated for gathering several financial statements auditing factors. It was gathered from the paper that the financial statements of Estia Health Limited in the year 2018 explained that Ernst & Young has provided two different types of non-audit services to the organization. This includes carbon assurance services, sustainability and some assurance and audit based services. It was also concluded that the major responsibilities of the company’s auditor “Ernst & Young” includes collecting audit evidences, analyzing financial statements representation and development, obtaining internal control understanding and observing uncertainties taking place from certain material misstatements.
References
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