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Auditing assurance and compliance | What is compliance audit

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Auditing Assurance and Compliance Sample Help

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Introduction

Embracing and complying with auditing requirements is one of the most important factors for all Australian listed entities. The Transurban Group is a road operator business, which develops and manages the urban tool networks in both Australia as well as North America (Transurban.com, 2018). Founded in the year igg6, Transurban Group is among the top 20 companies listed under the ASX and aims at providing effectual transportation solutions for supporting the wellbeing and growth of cities (Transurban.com, 2018). In this report, a detailed analysis on how auditor reporting is being embraced in Australia will be analyzed through the examination of the auditor’s report and other auditing matter of a listed company in the country, Transurban Group (TCL). The report is going to analyze the annual report of Transurban Group and relate its Auditor’s role in terms of providing assurance of the control environment and financial statements of the company. A detailed review of all the key matters of audit, the remuneration of auditor, the declaration of auditor’s independence, the functions and composition of its audit committee and the report the independent auditors have written to its members is going to be provided in the report.

Importance of auditing and auditing requirements in Australia

In Australia, auditing of the financial statements of a company is of great significance. Enhancement in auditor reporting has been embraced in the country during the recent past and in the present scenario, it is being focused on largely. Since the yea r 2016, there can be noticed a strong push for the improvement of the quality of audit reporting in Australia. All listed entities in the country now require reporting its “key audit matters” along with improving the way in which material information about the entities are communicated through “plain English”. The IAASB has commenced with its new auditor requirements since December 2016. It can also be noticed that standard setters in various jurisdictions, including New Zealand and Australia, have issued new requirements on audit on the same date, while the others have committed on issuing the standards.

Various key standards have also been set in relation to audit requirements and key audit matters to be disclosed by listed entities. All the requirements and necessary details related to auditing in the country have been done in the portions below. The ISA705, 720, 260, 700 and 701 are the key standards that have been set in order to ensure appropriate auditing of financial statements (Iaasb.org, 2018). Thus, it can be analyzed that auditing and meeting auditing requirements is extremely important in Australian and are needed to be met by all listed entities of the country.

Compliance of the auditor with the independence requirements and independence

Declaration

As stated by Louwers er ol. (2015), independent auditors are either certified public accountants or chartered accountants, who play the role to examine or assess the financial records and transactions of a business to which the auditor Ts not affiliated. In the recent past, different standards have been set for ensuring and determining the independence of auditors in an entity. According to Fakhfakh (2016), ISA 700 is the most significant international standard as per which entities need to have a separate statement within which the auditors of the entity will be stating their independence as well as complying with their ethical responsibilities. In Australia, however, there is a separate declaration to be provided a company’s lead auditor as per Section 307C of the “Corporations Act 2001” (Cpaaustralia.com.au, 2018).

From the analysis of the annual report of the Transurban G roup, it can be noticed that the company has complied with the requirements related to declaration of independence and ensuring independent audit (Transurban.com, 2018). This can be confirmed from the director’s report of the company in which it is mentioned that the audit services performed in the company are compatible to the general standards related to auditor’s independence. There is also a separate declaration provided by the company’s auditor, in which the requirements under Section 307C have been met (Transurban.com, 2018). Transurban Group’s annual report also shows that its lead auditor has declared his independence along with stating that there are no contraventions of the code, which applies for professionally conducting audit.

From further analyzing the annual report of Transurban Group, it can be evaluated that the company’s independent auditor has mentioned that the auditor has complied with all requirements related to independence as mentioned in the “Corporations Act 2001” along with complying with APES 110’s ethical requirements relevant to financial report auditing (Transurban.com, 2018). Therefore, it can be analyzed that Transurban Group has completely complied with the requirements and declaration of auditor’s independence.
 

Independent auditor’s report

The report, which can also be stated as a disclaimer, that the independent external auditor of a company issues to disclose his or her opinion after conducting an audit of its financial statements for stating how reliable the financial statements are, is known as an independent auditor’s report (Kabul, 2018). The interpretation of Transurban Group’s annual report shows that the independent auditor of the company has prepared a separate report stating his independence (Transurban.com, 2018). The analysis of this report indicates the opinion that the auditor has provided after auditing the company’s financial statements. The opinion that the auditor has stated is that the financial statements of the company are showing a “true and fair view” of Transurban Group’s financial position as well as their financial performance at the year ending June 30, 2017 (Transurban.com, 2018). Opinion has also been provided on the compliance of Transurban Group with Corporations Regulations 2001 and the Australian Accounting Standards (AAS) (Transurban.com, 2018). The auditor, in the auditor’s report, has also stated the basis on which the report has been prepared and has mentioned about the audit evidence, which has been obtained has sufficient and appropriate base for forming the opinion.

Non-Audit services performed by the Auditor

As stated by Knechel & Salterio (2016), those professional services that qualified public accountants provide during the span when he or she is engaged for audit in an organization but are not related to reviewing and auditing financial statements are called non-audit services. Assurance services, preparing audit schedules, tax planning, payroll preparation, tax preparation, budget preparation, financial services and other basic accounting services fall under the category of non-audit services. From the evaluation of the annual report of Transurban Group, it can be derived that the company has a policy for the independence of external auditor, which has been develop with the intention of supporting the external auditor’s independence through regulating the provision of services that the external auditor provides (Transurban.com, 2018).

It can also be seen that the company has mentioned that it will not engage its independent auditor for performing any service, which may be impairing or perceiving to impair the independence or judgment of the external auditor. A clear mention has been made on the fact that the external auditor is going to provide only a permissible non-audit service where there exists a persuasive reason to do so (Transurban.com, 2018). Due to this reason, the onIy non- audit service that Transurban Group has received or availed from its external auditor is assurance services. The figure that has been provided below shows the amount that has been paid by the Transurban Group for the assurance service, which is a non-audit service that the company has availed from its independent auditor -
 
Auditing, assurance and compliance
 
 

Auditors' Remuneration

Auditors conduct the audit of tne financial statements of an entity in return of a certain amount of remuneration (Osman et ol., 2016). The interpretation of Transurban Group’s annual report shows that there is a separate portion in the company’s report in which the remuneration that it has paid to its auditor, which is the Pricewaterhouse Coopers has been mentioned (Transurban.com, 2018). The remuneration that has been provided to its auditor has been fixed in its annual general meeting as per the decisions of its board of directors. The amount includes payment for both reviewing and auditing the financial reports of the Transurban Group. However, interpreting the annual report also shows that the remuneration that has been paid to its independent auditor in the current year is different from the previous year. The illustration made below consists of the breakdown of the auditor’s remuneration of the Transurban Group and the changes, which have taken place in its auditor’s remuneration -
Auditing, assurance and compliance
 
Therefore, from the calculation done above, it can be determined that the total remuneration that the Transurban Group has provided to its independent auditor has increased by 12.49°4 from 201s to 2017, thereby showing a change in its auditor’s remuneration in the last one year.
 

Roles, functions and composition of the Audit Committee

One of the operating committees consisting of the board of directors of an entity is the audit committee. As stated by He et al. (2017), an entity’s audit committee holds the charge of overseeing the financial report as well as the disclosure of financial information in its annual report and plays various roles within it. The audit committee also plays a wide range of significant functions. From the interpretation of the Transurban Group, it can be derived that there is a separate Audit Committee in the organization. The main role that this committee plays is to oversee the procedure in which the financial reporting is done and financial information is disclosed (Transurban.com, 2018). Another role that the company’s audit committee has to play is to monitor the choice of the Transurban Group in selecting the policies and principles, which the company will be using for preparing financial statements.

The Transurban Group’s audit committee is also responsible for performing certain functions such as reviewing the mechanisms of financial reporting as well as control. The following are the other functions of Transurban Group’s audit committee -
Ensuring the integrity of financial reporting
Ensuring the effectiveness of internal control and financial risk management
Reviewing external and internal audit functions
Analyzing its risk profile and supporting risk management systems

The annual report also shows the composition of this committee. It will be consisting of a minimum of four members decided by the board. The non-executive directors of the Transurban Group are a part of its audit committee as well. For example, Mr. Lindsay Maxsted, Robert Edgar, Christine O’Relly Bbus and Peter Scott are the non-executive directors but a member of its audit and risk committee as well (Transurban.com, 2018). Similarly, Nell Chatfield is another non-executive director but the chair of Transurban Group’s audit committee (Transurban.com, 2018). There is also a sepa rate audit charter, an extract of which has been provided in the appendices section.
 

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