Embracement Of Enhanced Auditor Reporting In Australia

Background and Context

In this report, audit and assurance program on the Macquarie Media Limited has been chosen for analysing the auditor’s responsibilities and other programs.  Whenever any company carries on the audit function, it has to follow up with a number of compliances. These compliances relate both to the auditor and the directors. These are required to make the operations of the entity as well as the audit function transparent. To evolve transparency, the topics required to be covered include the declaration related to auditor independence, and the matters highlighted by the auditor in his audit report. For developing a real time idea, a company is chosen for the purpose of the report. The name of the company is Macquarie Media Limited. It is considered that a well maintained audit committee along with audit charter is present in the company’s governance model.

Macquarie Media Limited is engaged in the operation of radio stations at the national level. It is a company listed on Australian stock exchange. The operation of the radio stations is in the capital cities of Perth, Brisbane, Melbourne, Sydney and in some of the regions of Queensland. The operation of this company had gained widespread success in Australia and is considered trustworthy (Macquarie Media Limited., 2018).

The audit committee charter is laid by the management of the company. Audit committee is constituted out of the members of the board and comprises of following members as on current date (Goddard,. and Malagila, 2015). The Audit committee is set up to implement the control check-up program in the audit and assurance program. It assists in keeping the business more transparent towards the stakeholders. They work for the stakeholders so that they could get right amount of information.

These above image reflects the all the key persons involved in the board of directors and auditors committee. Looking at the above table it is clearly evident that all almost all the members of the audit committee are non-executive directors of the company (Macquarie Media Limited., 2018).

• Implementation of internal control within the system of organisation.
• Carrying the review of the financial reports prepared for the half year and on the annual basis and making the recommendation for approval of the same to the board.
• Giving their constructive opinion regarding the appointment or removal of the external auditors in form of recommendations.
• To ensure that the external auditors are complying with the independence requirements.
• Gathering records and invoices for the accounted information (Macquarie Media Limited., 2018).
• Overlooking the process followed by the board to comply with laws, regulations and the rest of the statutory and professional requirements (Pizzini, Lin, and Ziegenfuss, 2014).
• To maintain disclosed reporting practice so that it could improve the existing reporting frameworks.

Who Are The External Auditors?

The company has appointed Ernst & Young as their external auditors. Their report is addressed to the shareholders of Macquarie Media Limited (Simione, and Sheikh, 2017).

Have They Given Declaration For Independence?

It is a statutory requirement for all the external auditors to provide an exclusive declaration for their independent functioning. Likewise, the auditors of Macquarie Media Limited have also extended their independence declaration. The same is listed in the annual report also. The independence declaration is given for the entity as well as all the consolidated entities audited along with (Tepalagul, and Lin, 2015). The declaration is provided by the lead auditor of Ernst & Young on behalf of the whole audit team and specifically states the following (Böhm, Bollen, and Hassink, 2016).

• The whole audit team has done no contraventions in respect of the independence expected as per the requirements of corporation act 2001.
• Further, the requirements relating to independence expected as per the applicable professional code has also been complied with (Macquarie Media Limited., 2018).

Research Assessment

Have Any Non Audit Services Being Provided?

As far as it gets evident from the declarations given by the auditors, the report presented by the entity and the remuneration table provided for the auditors, it is certain that there are no non-audit services being provisioned by the auditor. However, even if the auditors would have provided any non-audit services, the entity has to explicitly mention the same under a separate heading in the annual report (Wu, Hsu, and Haslam, 2016).

There are certain services that are clearly ineligible to be provisioned by the auditors to their client. But in the case of given company, no additional services other than audit appraisal are being provided by Ernst & Young. There are several auditors who are indulged in keeping the business more transparent.

What Are The Changes In Remuneration?

The table presented above is showing the remuneration that is paid to the auditors for the assurance services extended by them to the entity. These services are being remunerated as the assurance services. The table is showing that the remuneration paid to the auditors have declined in the year 2017 as compared to year 2016. There is a percentage decline of around 2.85 %.

What Kind Of Audit Opinion Is Expressed By The Auditors?

The auditors have given an opinion that the company has complied with applicable laws and regulation. In the opinion of the auditor on the basis of audit conducted by them there are no contraventions done on the part of the company. The opinion is clean and unmodified. The basis of the opinion is the checking done by the auditor on the consolidated financial statements.

Further, the auditors need to assess the AIS standards and audit assurance program. They have also complied with the independence requirements set out by the AASB stadnards (Su, 2015). These auditors take imperative decisions in the best interest of organization.

Are There Any Key Audit Matters Mentioned?

There are times when the auditor expresses an unmodified or clean opinion but raise certain matters which they think are of high significance for the shareholders. These matters do not mark any qualification but are carrying extreme value in the judgement of the auditor. These matters have not been provided with a separate opinion though. The auditors perform audit procedures on these key audit matters to remove any risk and doubt they earlier had placed on the same. These matters are expressly stated in the audit report along with the audit procedure performed on them (Segal, 2017). The following table provides an overview of the key audit matters raised by the auditors, the audit procedures performed on the same and the classification of that audit procedure. It is considered that overlooking the process followed by the board to comply with laws, regulations and the rest of the statutory and professional requirements is also found by using the key audit matter mentioned.

About The Company And Audit Committee

Responsibility Of Directors And Management

The following are the responsibilities of the directors and management in relation to the preparation of the financial reports (Macquarie Media Limited., 2018).

• Preparing the financial reports that accumulate in them the requirements set out by the corporations act 2001 and the Australian Accounting Standards.
• Following the requirement of presenting the financial information that gives a true and fair view (Macquarie Media Limited., 2018).
• Promoting and creating an environment that inhibits such internal control that leads to preparation of true and fair financial reports.
• Assessment of the ability of the entity as a consolidated group to continue its operations and business in the future as a going concern.
• Giving an opinion and assertion on the going concern ability of the entity, i.e. the entity does not intend to cease or stop its operations in the near future (Armstrong, et. al 2015).

Responsibility Of The Auditors

The auditors are required to provide an assurance of accounts prepared and presented by management of the entity. This assurance however is reasonable amounting to certain inherent limitations of audit. The auditors are required to do the following in order to provide a reasonable assurance:

• To identify and make an assessment of any sort of risk that may call for material misstatements in the financial statements whether due to any fraud or error done due to the mistake of entity (Macquarie Media Limited., 2018).
• Obtaining an understanding of the internal controls present in the entity to analyse his position on identifying the material misstatements. There is no expression of opinion on the internal controls.

Are There Any Material Subsequent Events?

The only subsequent event recognised after the date of the financials for financial year 2017 is the sale of its sub unit Satellite on 31 July 2017. The sale is made for $5.9 million to Stingray Digital International.

The same event is treated by the company by adding it as specific note in the notes to financial statements. The treatment for the consideration is also mentioned in the note itself. The treatment for the same is done in accordance with the accounting standards. Furthermore, auditors have also complied with independence audit program as per the code of ethics and Australian listing rules (Su, 2015).

Conclusion

The company’s presentation of the financial information is opined by the auditors to be true and fair. As a layman’s vision, the same view is perceived. The entity has voluntarily made disclosure of all required data. Further, there is no visible intention on part of the entity wanting to have hidden any material information. All the requirements of the Corporations Act 2001, Corporation Regulations 2001, and Australian Accounting Standards have been followed. Auditors need to give their constructive opinion, appointment, or removal of the external auditors in form of recommendations so that company could keep the business more transparent and easily comply with the applicable laws and regulations. The auditors needs to analysis whether the company is disclosing the proper details to stakeholders. They have to take best efforts for the benefits of the stakeholders not organization.

References

Armstrong, C., Guay, W.R., Mehran, H. and Weber, J., (2015). The role of information and financial reporting in corporate governance: A review of the evidence and the implications for banking firms and the financial services industry, 20(2), pp.19-22.

Böhm, F., Bollen, L.H. and Hassink, H.F., (2016). Audit committee charter scope: Determinants and effects on audit committee effort. International Journal of Auditing, 20(2), pp.119-132.

Goddard, A. and Malagila, J., (2015). Public sector external auditing in Tanzania: a theory of managing colonising tendencies. In The Public Sector Accounting, Accountability and Auditing in Emerging Economies, 2^nd Ed, USA: Emerald Group Publishing Limited.

Macquarie Media Limited., (2018) Available at https://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=mrn&country=ausAccessed,  on 17^th September 2018

Pizzini, M., Lin, S. and Ziegenfuss, D.E., (2014). The impact of internal audit function quality and contribution on audit delay. Auditing: A Journal of Practice & Theory, 34(1), pp.25-58.

Segal, M., (2017). ISA 701: Key Audit Matters-An exploration of the rationale and possible unintended consequences in a South African. Journal of Economic and Financial Sciences, 10(2), pp.376-391.

Simione, K.A. and Sheikh, A., (2017). REVIEW OF AMG’s QUARTERLY FINANCAL STATEMENTS: A SHORT CASE ABOUT AUDITOR RESPONSIBILITIES AND REQUIREMENTS. Journal of the International Academy for Case Studies, 23(4), pp.1-13.

Su, L., (2015). Do the auditors bear the consequences of corporate failures? The case of failed New Zealand finance companies (Doctoral dissertation, Auckland University of Technology). 20(2), pp.119-132.

Tepalagul, N. and Lin, L., (2015). Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1), pp.101-121.

Wu, C.Y.H., Hsu, H.H. and Haslam, J., (2016). Audit committees, non-audit services, and auditor reporting decisions prior to failure. The British Accounting Review, 48(2), pp.240-256.

Yahoo finance, (2018) Available at  https://in.finance.yahoo.com/., Accessed on 17^th September 2018

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