How is it being embraced?
Deloitte is one of the big four accounting organizations and one of the largest professional service network in the world. Deloitte provides consulting, financial advisory audit and tax. Auditing means analysing the monetary statement of any organization in order to make sure that is a presence of accurate and fair transactions record. Therefore, it is very necessary for the auditors to reveal all important information which are related to the material aspects of the monetary statements. In that case the auditors should be responsible in order to make the audit report upgraded. The method of inspection along with examining by an auditor which is also followed by physical checking of the inventory in order to make sure that all the different departments have been following the documented segment of recording the transactions (Zhang, Yang and Appelbaum 2015). Auditing is done usually in order to make sure that the accuracy of financial statements which is provided by the organization is maintained. Auditing is usually done by the employees or by the heads of any concerned departments. The are also presence of four main steps for auditing.
All the crucial information which are provided by the auditors should be given to the stakeholders of the organization in a very simple language. In the present situation, the auditors make sure that the quality of the audit report is much more improved (Vasarhelyi 2018). The following paper examines the currant annual report of CSR Limited which is related to different aspects of auditing of the financial statements. CSR is one of most trusted industrial company of Australia which provides building products. Here, the Audit partner of CSR Limited here is Deloitte for the year 2018
The report of CSR Limited shows that none of the employees of Deloitte were there during the business operations and also none of them played a major role in the group audit of CSR Limited. Deloitte has also obeyed all the necessary conditions under the “section 307C of the Corporations Act 2001” which includes the following:
- Absence of any kind of violation which is related to the requirements of the audit.
- The codes which are used are connected to the CSR Limited audit operation.
From the currant report of the CSR Limited it has been found that two different kinds of non-audit services have been provided by Deloitte to CSR Limited (Kend, Houghton and Jubb 2014). The non audit services takes into account the services takes into consideration different kinds of services related to advisory
The Risk and Audit Committee states that the directors have ben contended with the service that has been provided by Deloitte have maintained all the general standard which have been imposed by the Corporations Act 2001 (Titulaer 2017). The non-audit services however, are been provided by not including the requirements of the auditor. All the regulations of corporate governance have been considered for the service of non-audit. It has also been made sure by the board of directors that the non-audit services do not consider the work of the auditors for taking management decisions.
Table 1: Remuneration to Deloitte in 2017 and 2018
(Source : Deloitte, L.L.P., 2016)
The table above shows that the audit service payments which is related to the financial statements of Australian business of CSR Limited. The table above shows that the company CSR Limited has decreased its remission for audit in 2018 by the rate of 5.89% when compared to the year of 2017. Although, the assurance service which is related to carbon and sustainability has gone up by 32.94 in the year 2018. However, there had been a decline in the other assurance and advisory services by the rate of 77.83% (Zhang, Yang and Appelbaum 2015). The carbon related services and the sustainability services relates to the service of other assurance and advisory. The table above also shows that due to decline in the advisory services, the remuneration of auditor of CSR Limited has also gone down by 6.64%.
Deloitte and auditing
In case of computation of any kind of financial report, the audit is seen as one of the m. According to the annual report of CSR Limited in the year 2018, there is a presence of two key audit matters, the way of minimising and categorising the procedures of audit can describe below.
The CSR Limited in 2018 states that the liability provision of around $289 million have been found which needs significant amount of judgement in order to settle the amounts which has been claimed for future (Deloitte 2016). The provision estimate also gets affected by the assumptions of the movements of foreign exchange rate along with the rates of discount.
In order to deal with this kind of issue, the independence of the experts used n the report has been examined by Deloitte. It also examines how much the assumptions and methodology are suitable in the reports. This considers the productiveness of the methodology that has been used for provisions, the criterion of the rates of discount and the assumptions that has been used for projecting future claims. Sample testing is also been used by Deloitte in order to make perfect consideration of claims which is related to the asbestos of the management’s liability database (Vasarhelyi 2018). As the provision which is computed is based on the reports of CSR Limited, therefore the above measure is important for the procedure of audit. The auditor has also enquired the experts and both the internal as well as the eternal legal counsel of the CSR Limited.
The latest report of the CSR Limited shows that it has a goodwill of around $98.1 million. It comprises of intangible assets of around $45.8 million along with plants and equipment of worth $834 million. Substantial amount of judgement is needed while analysing the defects in the asset balances which takes into account various assumptions related to discount, inflation, estimating changes in the cycle of business, rates of growth and the cash flows of the future. It has also been found out that the Viridian cash generating unit needs impairment evaluation. An impairment of the trigger assessment has been computed by the management of the CSR Limited for analysing the cash generating units which will consider the impairment (Kend, Houghton and Jubb 2014). The cash generating unit needs evaluation as it has brought lowest return on capital employed. This particular issue has been taken into account as an important matter because of the judgement related to the estimation of future cash flows and choosing assumptions.
For dealing with this kind of audit matter, the process of the management of CSR Limited have been analysed by Deloitte to discover the money generating units which needs advance assessment of impairment. The auditor has acquired critical understanding on the consistency of the segmental report, financial performance of the year and goodwill allocation of the cash generating machines for impairment testing of the company. The method of sample testing has also been used in order to check the mathematical exactness of the cash flow models (Soh and Martinov-Bennie 2015). Finally, Deloitte has predicted the disclosures which are appropriate in the financial reports of the organizations.
CSR Limited’s audit report and 2018 remuneration to Deloitte
The report of the CSR Limited states that the board of directors has built Risk and Audit Committee in order to review the methods and policies. The audit committee intended to check the policies and procedures which are connected to the internal control in order to protect the business assets and liabilities and supporting unity of financial reporting. There are a presence four non-executive directors in the Risk and Audit Committee of the CSR Limited which includes John Gillam, Matthew Quinn, Penny Winn and Mike Ihlein (Deloitte 2016). The committee analyses the methods for assuring unity of financial reporting, assessing the dynamics which are used for commercial incomes and reviewing the framework which is relevant to audit risk management. Although, there is absence of any kind of evidence which is related to the audit committee charter of the CSR Limited.
The remuneration report of the CSR Limited has been prepared under “section 300A of the Corporations Act 2001”. It has also been stated by the auditor that CSR Limited has developed various financial reports by adhering the rules under” Australian Accounting Standards Board (AASB)” and “International Accounting Standards Board (IASB)” (Knechel and Salterio 2016). The auditor had also made sure that monetary reports of CSR Limited does not include material misstatements and therefore, it shows the relevant financial health of the organization in the market. Therefore, it can be said that Deloitte expressed the audit which is not qualified after the financial statements are audited.
There are lots of differences between the responsibilities of the management and the directors along with the auditors which is used for development and presentation of financial reports. Both the management and directors are responsible for conducting the monetary reports of the CSR Limited by maintaining the regulations and the accounting standards of Australia. The directors of the organization also need to look after the potential of the organization in order to pursue as a going concern by using accounting as a basis of the going concern. Therefore, different kinds of responsibilities are to be performed by the auditors both from the management and directors (Kend, Houghton and Jubb 2014). It is therefore the responsibility of the auditors to give effective assurance such that the monetary statements of any organization does not contain any kind of material misstatements which can take place due to any kind of error, deficit or any kind of issues that requires the opinion of the auditor. The other kinds of liability of Deloitte are as follows;
- The policies related to accounting needs to be analysed
- Examination and detection of the risks that can arise from misstatements of materials
- Enough amount of audit evidence needs to be gathered.
- The internal control needs to be understood.
- Analysing the suitability of the going concern accounting which is used by the directors.
- The representation and formation of the financial statements are to be evaluated.
It is to be noted that currant reports of the CSR Limited of 2018 comprises of two material subsequent events of which one is related to the sale of excess land at a place called Horsley Park in New South Wales which is going to take place on the 3rd April 2018 (Knechel and Salterio 2016). The selling terms states that it is required for the organization to identify around $30 million of income before tax in the income statement till 30th of March 2019. It is expected for the settlements to take place in April 2019. A dividend of about 13.5 cents per share have been announced by the organization which also contributes a dividend of about $68.1 million. The date of payment has been on 3rd July 2018 which is to be provided on the part of CSR Limited.
Key audit matters and plain English
On the basis of the third-party stakeholder it can be concluded by saying that the members of audit of Deloitte have examined the information pf VSR Limited accurately and effectively. The auditors of Deloitte have maintained the regulations and principle that are needed to be maintained under the Corporations Act 2001, APES 110, Australian Auditing Standards along with the others (Kend, Houghton and Jubb 2014). However, the two key audit members of the CSR Limited has been disclosed by Deloitte and they have also taken steps in order to resolve the issues. While taking into consideration all the aspects it can be stated that the auditor, Deloitte is very efficient to deal the material information evidence which is present in the monetary reports of the CSR Limited.
The latest report of the CSR Limited in 2018 states that Deloitte audit group has considered various material characteristics and different information which can produce material misstatement risk on the monetary reporting of the institution (Soh and Martinov-Bennie 2015). The auditor also takes into account appropriate description and disclosure of all the required information which confronts the material factors of the CSR Limited. It is apparent that the auditor has considered all the material information or else have delivered reporting of materiality aspects.
There has been presence of numerous questions at the annual general meeting relevant to the auditing process which can be asked to the auditor who reviews the financial statements of that particular organization. the following follow up questions can be enquired to the auditor, Deloitte of CSR Limited which includes:
- What was the scope of the planned audit?
- Are there in presence of external auditors for the concerned organization?
- Have you discussed the issues related to auditing and accounting with the management at the beginning?
- Was there presence of any kind of complexities in audit of the presence year?
- What were the different kinds of risk management that have been used?
- Is there any way of enhancement of then concerned organization in order to lessen the time spent for the audit work?
- Is there presence of any kind of questions which is needed to be solved based on the audit of the previous year?
- Did the management face any kind of issues while controlling the process of business?
- How much effective is your scope of audit for examining different material errors, illicit acts, material deficiencies or fraud in internal control?
- Is there presence of any kind of subsidiaries that is not required to be audited which represents operational and financial risk?
Conclusion:
It is to be concluded that the analysis which has been done above by the auditor, Deloitte maintained all the regulations under the corporation act of 2001. It also maintained the regulations that is under APES 110 and IFRS and many other different accounting standards. However, the two important audit matter have been identified in the context of CSR Limited which is dealt adequately by Deloitte with the help of suitable process of auditing. The report helps to provide the users the currant auditor report of the CSR Limited. The dependency therefore can be maintained when audited the monetary statements of the organization CSR Limited. The significant part of the report states that the auditor’s remuneration has decreased in the currant year. However, in the previous year of 2017 it was more. The various sections of the audit from the currant report of the organization is to be considered. The report above covers different types of segments of auditing where a significant part of auditing is needed to be considered
The non-audit services have been provided with the highest level of ethics that have been laid down by the auditing Australian standard. By examining the remuneration of the auditor of the CSR Limited, it has been found out that there has been a downfall in the overall wages by -6.64% in the year 2018. Lastly, the follow up questions have been enquired to the auditor during the time of annual general meeting.
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