Do Social Ties Between External Auditors And Audit Committee Members Affect Audit Quality?

Auditor Complied with Independence Requirements

Every business at the time of beginning has two major concerns which are adjoined by management and risk. This possesses through the business and gets carry forward in coming years of it. As these two are the key of healthy business, it requires special diligence from different perspective of business organization. In every step which is put forward for well-being or growth of business put forward risks. The nature of every business is zestful, is kept changing that attracts vast size of risk for the company. Every business needs a path to ride on the paths are paved on basis of distinct legal process, sets of standing orders given by concerned team of the organization. This report is designed for a comprehensive scrutiny regarding the role of auditor and the procedure of audit management and practice of standing orders by which belong to financial sector. ( Morawska and Staszkiewicz 2016).

PricewaterhouseCoopers is the independent auditor of Rio Tinto Limited. The report has significant terms used by auditors. In the independent report we and our is replaced for PWC LLP related to UK professional ,legal, responsibilities relating to regulatory and reporting the obligations to the individuals of Rio Tinto plc and PWC is related to Australian legal, Tinto Limited. The report stated that the Rio Tinto plc and Rio Tinto Limited as Parent Company and it are governed by UK companies Act 2006. The amended of ASIC is followed by Rio Tinto Limited. The report stated that the auditor independent opinion was based on the principles based on International Standards on Auditing of UK and Australian Auditing Standards (ASAs). In the annual report under the independence as stated that auditors maintained the ethical standards to be maintained as it is applicable for listed public companies. PWC has full filed the requirements that have been stated by the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants and Corporations Act 2001. These requirements are relevant requirements as per financial report in Australia. All other responsibilities that are ethical as per APES 110 are fulfilled too.( Riotinto.com, 2018)

The independent declaration of auditor stated that Rio Tinto Limited and Rio Tinto plc has not received non-audit services as it was banded by FRC`s Ethical Standard. Only non-audit services are provided in regard to the financial statements to Rio Tinto plc.

Calculation of percentage in Auditors Remuneration
Particulars Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2017	2016	2015	Change in 2017	% change in 2017	Change in 2015	%change in 2016
US$M	US$M	US$M	US$M	US$M
Audit of the Company	6.2	4.5	4.3	1.7	38%	0.2	5%
Audit of Subsidiaries	8.1	9	10.1	-0.9	-10%	-1.1	-11%
Total Audit	14.3	13.5	14.4	0.8	6%	-0.9	-6%
Audit related assurance service	1	0.9	0.9	0.1	11%	0	0%
Other assurance service	2.3	0.6	0.9	1.7	283%	-0.3	-33%
Total assurance services	3.3	1.5	1.8	1.8	120%	-0.3	-17%
Tax Compliance	0.3	0.5	0.5	-0.2	-40%	0	0%
Tax advisory services	0.2	0.1	0.4	0.1	100%	-0.3	-75%
Services related to corporate finance transaction
services in connection with bond issues/ capital raising			0.2
Other non-audit services not covered above	0.7	1.8	1.1	-1.1	-157%	0.7	64%
Total non-audit services	4.5	3.9	4	0.6	13%	-0.1	-3%
Total Group Auditor`s remuneration	18.8	17.4	18.4	1.4	7%	-1	-5%
Audit fees payable to others accounting firms
Audit of the financial statements of the Group`s subsidiaries	2	2.1	1.9	-0.1	-5%	0.2	11%
Fees in respect of pension scheme audits	0.5	0.3	0.2	0.2	40%	0.1	50%
Total audit fees payable to other accounting firms	2.5	2.4	2.1	0.1	4%	0.3	14%

PWC`s remuneration is approved by the Audit Committee. The increase of 6% in total audit and 13% increment in non-audit work approved by committee set by the policy, this increment was done for maintaining the independence of auditor. The increment of non-audit service is related to assurance and regulation related work. The above table consolidated overall payments that are processed in the favors of individual firms of PWC by the companies and subsidiaries of the company. Reduction in tax compliance is seen. The review of tax compliance is done for returns on corporation, income statement taxes on sales and excise. The total remuneration of auditor is increased as compared to other years. Even tax advisory is being given on transfer pricing, employee worldwide mobility and non-recurring acquisition. (Riotinto.com, 2018)

Non-Audit Services

Listed entities auditor needs to include information in respect to the matters where their judgment would contain the most significance audit of the financial report in the present year. Determination of following key matters is done by the auditors for Rio Tinto is as follow:

Assessed impairment that includes indicator and reversal of impairment.
Focusing on exploration and evaluating assets and property, plant and equipment.
Intangible assets that is lived and indefinite regarding Rio Tinto Aluminum.
Provisions for restoration, close down, obligations by environment and uncertain tax positions.
Focus on certain transaction on transfer pricing regarding the commercial center of the group located in Singapore.
Auditors notified defined advantage pension plan surpluses as a shortfall regarding the key matter that was compared with the last year risk of material misstatement. Auditors stated it to be deficits. There were no new risk factors identified for this year.

Tests of Controls: Provisions for close-down, restoration and environmental obligations were assessed through tests of control. Detail testing of 8 reporting units was performed by the auditor regarding the selected units. Auditors examined the mathematical accuracy for monitoring discounting rate through our valuation expert.
Substantive Tests of Detail: Provisions for uncertain tax positions were assessed through this process. The auditors occupied their tax specialist to study and understand the present picture of tax assessments. Monitoring developments caused in outgoing conflicts. Going through the current rules and communication with local tax authorities, as well as exterior opinion received by the Group where pertinent, to satisfy that the tax provisions had been suitably recorded or attuned to replicate the latest exterior developments. (Tsipouridou and Spathis 2014)

Risk Management framework and internal control of both the Group’s system that studies the reliability of the financial report presented by the Group. This vital failure to notice the role is full filled by the audit committee on behalf of Rio Tinto board.( Riotinto.com, 2018)

PWC in office an external auditors is not been permitted by the regulations for tendering in regard to their tenure’s length. Audit committee has put stress on enabling the new service provider for non-audit services. Identification of defining the roles, responsibilities, planning the scope of tendering the services and providing the information to the firm and selection criteria for management and committee. Auditors have compared the lead prospective with the other audit firms. Audit Committee has monitored the different aspects of areas that need to be audited such as sources of assurances. The committee suggested the company for continuing the business on a going concern basis. The audit committee had perilously analyzed the projections of upcoming time’s cash flow as per distinct scenarios also comparing these with the cash balance and the facilities that were committed to the Group. Reviewing the management projections that followed testing of stress of the Group’s planning the medium-term business.( Riotinto.com, 2018)

The audit firm stated that the company’s financial statement presents a true and fair view. The statement has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. It stated that Rio Tinto plc has prepared its financial statement in accordance to GAAP. Even the Group has presented its financial statement in accordance with IFRS and ASSB. It was Unqualified Opinion given by the auditor.( Tsipouridou and Spathis 2014).

Responsibilities of the Directors

In the annual report it stated the responsibility of directors for preparing the financial statements and report as per the guidelines of framework. It is director’s responsibility to state that the statements are free of material misstatement, whether due to deception or fault. While preparing financial report and statement it is director’s responsibility to assess the parent company and Group’s potential for continuing as a going concern. Disclosing matters related to going concern even using basis of going concern for preparing accounts until the director decided to wind up, cease the operations or there is no other choice is available for doing so for the Parent company or the Group.

Auditor Remuneration Comparison

Auditors’ Responsibilities

Auditor’s main objective is to obtain the reasonable assurance that the financial report and statements are liberated from the material misstatement in regard to fraud or error. Reasonable assurance is considered to be of high level assurance where audit conducted in accordance with ISAs (UK) and ASAs that would detect material misstatement where it lies. Misstatement detected from fraud and error is considered material if they are reasonably found to influence the economic decision in average or through individual as the base of financial statement and reports.

How Does Company ensures the investors understood its policy and performance?
As the US market is unpredictable, how is the performance of the company’s stock in compare to overall market?
How much ratings the company has received by the other parties on corporate governance?
What were the majors issued identified by the board last year?
What are the recruitment strategies adapted by the company for directors? Does the company forms committee for nominating the independent director as member of board?
Does any relationship exist between the CEO, chairman and current members of the board?
What policy is adopted by the company for payments of dividends?
What is the auditor’s opinion on valuation of company’s stock? Is it fairly valued?
At the meeting were the entire director was present?
How election of the members for audit committee is done?

Conclusion

The report is constructed in order to bring a comprehensive view of the practice of following the audit and assurance guidelines structured by the international accounting standard and audit and assurance board. The auditor stated that if companies go for liquidation then the agreement of share that is provided for a valuation that is obtained from the surplus assets of both the companies. If the additional assets obtainable for allotment by one corporation on each of the shares held by its shareholders go above the additional assets available for allotment by the other corporation on each of the shares held by its shareholders, then an equalizing compensation between the two companies shall be made, to the degree allowable by appropriate law, such that the quantity available for allocation on each share held by shareholders of each corporation conforms to the Equalization Ratio. The purpose is to guarantee that the shareholders of both companies have correspondent entitlements to the assets of the joint Group on a per share foundation, taking account of the Equalization Ratio. The Sharing conformity does not endowment any enforceable privileges to the shareholders of whichever company upon insolvency of a company. (Riotinto.com, 2018)

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