Summary And Evaluation Of Auditor’s Assurance Services: BHP Billiton Company

Auditor’s Independence

With the ramified economic growth and complex business structure, each and every organization needs to get their accounts audited from the qualified auditors. In this report, BHP Billiton Company has been selected to determine the auditor’s opinion, work functions and auditor’s responsibilities as well. Auditors need to analysis whether the accountant of the company has complied with the international accounting standards while preparing the financial statements or not. After analysing the annual report of BHP Billiton Company, it is found that auditors have focused on providing the auditing and non-auditing services to clients.  In the audit report, it is revealed that company has followed all the listing rules and regulation and also complied with the applicable corporation laws and regulation. This report focuses on the auditor’s responsibilities, acts, roles and opinion given on the financial statement prepared by company. This report helps in analysing the auditor’s responsibilities and roles and director’s roles and responsibilities toward the company and stakeholders. The current auditor of the company is KPMG who has undertaken the auditing and assurance program in the business functioning of organization (Porter, Hatherly, and Simon, 2008). 

It is analyzed that audit committee should also be convinced by auditors that the auditors are independents in their operations (Sirois, Bédard, and Bera, 2018).

The auditor’s independence is based on the relation of the auditors and undertaken business transactions undertaken by the auditors. It is analyzed that auditors acts in the best interest of the stakeholders which assists stakeholders to identify the true and fair view of the recorded books of accounts (Štangová, 2017).  It will also help in keeping the financial statements transparent to the stakeholders. As per the listing rules and regulation, every auditors needs to submit the independence of the eligibility of the auditors before appointing as auditor in company.  The KPMG is the carrying the independence auditing eligibility intent with the company as it has not been indulged in any pecuniary relation with the company. All the auditors who are the member of the KPMG have no direct and indirect relation with the business functioning of Organizaiton (BHP Billiton Company. 2016). The auditors of the company have been KPMG.  All the declarations both from the side of the management and the entity are evident in the annual report. The main focus of the study is on the aspects related to the independence of the auditor, the audit opinion, remuneration of the auditors, audit committee and key audit matters undertaken in BHP Billiton Company (Ingerman, Hynes, Benjet, and Neff, 2015).

 The KPMG being in the fiduciary position towards the stakeholders take all the required acts so that it could find any discrepancies and issues in the financial statement prepared by BHP Billiton Company. As per the section 307C of the Australian corporation act 2001, every auditor who wants to audit the financial statement of company needs to submit the eligibility form before appointing as auditors. This form will divulges all the required details and cases which will showcase the relation between the auditors and company (BHP Billiton Company, 2017).

Provision of Non-Audit Services

Auditors of the company are allowed to offer auditing and non-audit services to its clients. It is analyzed that in case of BHP Billiton Company, KPMG has been offering auditing and non-auditing services to its clients. In this case, auditors have taken additional amount of consideration from the company for the non-auditing services provided by company. It is analyzed that as per the corporation act 2001 and listing rules and regulation, all the auditors are liable to offer non-audit services to company if they are paid for that. However, the consideration given to auditors should be at arm length price. The KPMG auditors of company has offered tax legal compliance services in which BHP Billiton company was advised the possible methods which they could use to avoid the possible issues in their tax legal compliance program and setting up the effective level of the harmonization in its domestic and international reporting frameworks. It is analyzed that auditors have also given the insurance services program advice to company which will allow it to secure its business from the possible business risk in effective manner (BHP Billiton Company, 2017).

                                                                      (BHP Billiton Company. 2016)

The audit remuneration is the amount given to auditors for the audit services performed by auditors. Audit remuneration is given to auditors for the auditing and non-audit services given by the auditors to company. The KPMG company has received remuneration for all the services which it has offered to company such as offering advice to clients, tax planning services and advising the clients about the possible business changes (BHP Billiton Company. 2016).

The below given table assist in analysing the audit remuneration given to auditors (BHP Billiton Company, 2017).

The audit assurance and program has been considered as audit series and the same have been paid to auditors. In addition to this, fees and other remuneration given to KPMG for the tax planning and other services (BHP Billiton Company. 2016).

There are several k which is followed by the auditors to keep the business and financial transaction of the BHP Billiton Company more transparent to stakeholders.  The audit assertion test and observation have been followed by KPMG auditors to identify whether company has shown the right value of the assets and liabilities recorded in its books of account (Ramsay, 2015).

The below given table reflects how auditors have followed the key audit matters with the given audit procedures (BHP Billiton Company, 2017).

It is analyzed that company has complied with the coronation act and listing rules for the preparation of the financial statement. The auditor’s opinion has also been analysed to identify the issue in keeping the business more transparent (Salvioni, and Astori, 2015).

Audit Remuneration

The audit committee and charter have been appointed to determine whether managers and accountants are not manipulating the financial data of company and keeping the business more transparent.  The audit committee is managed by the four auditors and one two auditors indulged in the business audit charter. The matters relating to the auditor report involve his opinion, key audit matters, and the declaration given for the responsibilities of management and the auditors (Blowfield, Karam, and Jamali, 2017) The details relating to the audit committee are also reported. Further the remuneration has also to be shown separately for both audit and non-audit services presented by the auditors to the company. Moreover, the audit committee has to check whether the provisions off the non-audit services extended by the auditors to the company have been in line with the independence requirements of none They have gathered all the sufficient and appropriate evidence required to form a base for the opinion set Analysing whether there are any changes that are possible to happen in the assumptions made by the entity that could indicate requirement of impairment (Louwers, et al.  2015).

The structure of the audit committee is designed on the basis of the listing rules and laws given in the corporation act. It is analyzed that audit committee is managed by the four auditors and one two auditors indulged in the business audit charter. These members identify whether company has made any discrepancies in recording the books of accounts and evaluate the business transparency of the company. The auditors of the KMPG are indulged in providing its auditing services in the best interest of the stakeholders (Knechel, and Salterio, 2016).

The structure of the audit committee of company is determined as fellow. The Lindsay Maxsted is the chain of the audit committee and the member of the audit charter. The Malcom Broom is also head of the executive audit member who is also member of the audit committee. Andrew few and Marlay would also be auditor for the company along with the other auditors (BHP Billiton Company, 2017).

                                                                          (BHP Billiton Company. 2016)

The main function of the auditors is to offer the audit services and assist company to maintain the transparency in the financial statement.  It helps company to keep the business sustainable in long run and also comply with the applicable laws and regulation (Thompson, 2018).

• Evaluation the appropriateness of the going concern assumption made by the directors. Along with other audit evidences, gathering sufficient and appropriate audit evidence regarding this assumption also.
• Evaluation of the disclosures made in the notes regarding the intangible assets to determine the adequacy of judgements and estimates
• To check whether the presentation made in the financial reports thrives for fairness or not.
• To formulate the opinion and to express the same, gathering sufficient and appropriate audit evidence. These evidences must make the auditor certain to a level that enables him to provide a reasonable assurance regarding the business activities of the entity.
• Overseeing the proper implementation and existence of the internal control function in the entity (BHP Billiton Company, 2017).
• Compliance with the internal audit functions within the organisation.
• Ensuring whether the internal audit function is headed properly and is working as per the requirements.
• Undertaking the oversight function of the management risk persisting in the organisation.
• To look whether all the statutory requirements and accounting standards are being complied with in the entity (BHP Billiton Company, 2017).

It is analyzed that the responsibilities of the auditors is based on the audit and non-audit services which KPMG has offered to company (Clark, et al.., 2017).

• Auditors need to take the management representation letter from the directors of company for the all the financial information recorded in the books of accounts of company.
• Auditors’ needs to analysis the whether company has made any fraud, errors and misstatement while recording the financial details in company.
• Auditors need to identify whether company has complied with the Australian listing rules and regulations while undertaking particular actions (BHP Billiton Company, 2017).

After analysing the audit report given by the auditor of BHP Billiton company, it is found that company has maintained strengthen legal compliance reporting frameworks and KPMG has given non-qualified audit report. However, the clean report is also not an absolute assurance regarding the fairness of the financial statements. There are chances that some internal frauds and misstatements are forged deep intentionally that cannot be levelled up with the procedures that the auditor performed. Every kind of work that the auditor is doing in his professional capacity is bound to follow the independence requirements. The auditor has also maintained its independence while auditing the financial statement company. As per the declaration of the auditors, company will sustain its business in long run (BHP Billiton Company, 2017).

Key Audit Matters

The follow up question which I would ask form the auditors at the general meeting would be whether they took management representation letter for the information shared with him by the directors when he was auditing the financial statement. 

The main responsibility of the auditor is to analysis the whether company has made any fraud, errors and misstatement while recording the financial details in company. They all have to make sure that they have maintained effective audit and assurance program while auditing the financial statement of company. To erase out the scepticism that the users might develop for the information published by the organisation, it becomes necessary for the entity to hire external auditors to get the books audited. The directors are responsible to maintain an internal environment that is consistent with the ethical standards. The opinion of the auditor needs to be based on certain evidences that count to be sufficient and appropriate. There are many ways to conduct an audit the way all material information is reported in the report and the transparency of the actions make it a very effective presentation. Director’s needs to make sure that there are no latent representations that might have been hidden from the auditors (Mock, Ragothaman, and Srivastava, 2018). 

BHP Billiton Company has recorded several subsequent events which have also impacted the profitability, liquidity and business efficiency of company. The annual report has reflected that company has changed its business profit and faced loss of US $ 7.6 billion in the current year. However, the main losses have arisen due to the increased business costing and interest expenses payment to lenders. In addition to this, tax implication has also one of the reasons for the low amount of return on capital employed to company. The material subsequent events have shown that company needs to work on its legal compliance program and strengthen its business functioning to make its business more sustainable in long run (Chan, Chiu, and Vasarhelyi, 2018). There is no such other information which have been hidden from the stakeholders. 

Conclusion: 

There are several subsequent events auditors program which have resulted to the increased business transparency to the stakeholders. It is analyze that BHP Billiton should establish the harmonization in its domestic and international reporting frameworks if it wants to keep its business more effective in long run. Nonetheless, there is also need to arrange the document which could reflect that all the transaction with the auditors have been entered at the arm length price.  It is inferred that if company wants to win the trust of its stakeholders then it will have to keep its business more transparent. The auditor’s roles, responsibilities and auditing legal compliance are the some of the important parts which are followed by auditors in the best interest of the stakeholders.

References: 

BHP Billiton Company. (2016). Annual report. Available at https://www.bhp.com/investor-centre/annual-reporting-2017., Accessed on 19^th September, 2018

BHP Billiton Company. (2017). Annual report. Available at https://www.bhp.com/investor-centre/annual-reporting-2017., Accessed on 19^th September, 2018

Blowfield, M., Karam, C. and Jamali, D., 2017. Introduction. Corporate social responsibility in developing countries: a development-oriented approach. In Development-Oriented Corporate Social Responsibility: 2(1) 15-26). Routledge.

Chan, D.Y., Chiu, V. and Vasarhelyi, M.A. eds., 2018. Continuous Auditing: Theory and Application. 2^nd ed, Australia: Emerald Publishing Limited.

Clark, C.H., Hurkmans, C.W., Kry, S.F., of Radiation, T.G.Q.A. and Group, T.C.T.H., 2017. The role of dosimetry audit in lung SBRT multi-centre clinical trials. Physica Medica, 44(1), pp.171-176.

Ingerman, B., Hynes, M.D., Benjet, B.H. and Neff, K., 2015. Not just a compliance program, but an effective compliance program: SEC, DOJ issue strong reminders. Journal of Investment Compliance, 16(4), pp.4-5.

Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk.3^rd ed, Australia: Routledge.

Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015. Auditing & assurance services. 2^nd ed, Australia:McGraw-Hill Education.

Mock, T.J., Ragothaman, S.C. and Srivastava, R.P., 2018. Using Evidential Reasoning Technology to Enhance the Audit Quality Assurance Inspection Process. Journal of Emerging Technologies in Accounting, 15(1), pp.29-43.

Porter, B., Hatherly, D. and Simon, J. (2008). Principles of external auditing. Chichester, England: John Wiley.

Ramsay, D., 2015. Legal risk what, why and how?. Governance Directions, 67(2), p.90.

Salvioni, D. and Astori, R., 2015. Sustainable development and global responsibility in corporate governance. 11 (4), pp.4-5.

Sirois, L.P., Bédard, J. and Bera, P., (2018). The informational value of key audit matters in the auditor’s report, Evidence from an Eye-tracking study. 2^nd ed, UK: Accounting Horizons.

Štangová, P. (2017). Financial Audit as a Tool for Management Control. Account and Financial Management Journal. 30(1), pp.101-121

Thompson, D., 2018. Contemporary Challenges in Audit. In Contemporary Issues in Accounting, 2^nd ed, Australia: Palgrave Macmillan,

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