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    Audit

    Auditing

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    Auditing


    Question 1: Prepare a report

    The primary target of each auditing standard is to safeguard the firms from the risk of financial fraudulence or mismanagement. ASA315 is one of such standards of Auditing applicable to the firms in Australia that provides a safeguarding framework to the entities in respect to material misstatement or fraudulence. In this context, it is important to be mentioned that ASA315 suggests the auditor's review and manage the material misstatement risk by considering the type of business that the entity deals with and its environment. Mihret and Grant (2017) stated that while following the standards of ASA315 the primary target of the auditors should be assessing the material misstatement risk of the firm to understand whether the material misstatement has taken place due to an error or due to fraudulence case. Asare et al., (2018) mentioned that the ASA315 provides the basic risk assessment framework to the entity. On the other hand, Canning and O’Dwyer (2018) mentioned that the application of ASA315 requires proper information that the management of the client firm must provide to the auditors. The ASA315 also clarifies that at the time of risk assessment, the auditor may use and consider either the information provided by the client firm or the auditor may use or consider any information that is relevant for the risk assessment of the firm.

    Therefore, considering the rules under the ASA315, the following roles and responsibilities of the auditors can be understood:

    a) The auditor is responsible for reviewing the financial information of the firm critically to understand whether there is any material misstatement in the financial reports of the firm.

    b) The auditor is also responsible for reviewing the financial information by considering the nature and environment of the business.

    c) The auditor is also responsible for reviewing the internal control system of the firm

    If the focus is made particularly on the ASCI’s report on the governance at Commonwealth Bank of Australia, it can be identified that the main issue identified by the auditors’ panel is related to the non-financial factors of the business. In the report, the following governance issues have been identified:

    a) The board and its committee at Commonwealth Bank had a weak framework to deal with the non-financial risks of the business. 

    b) The accountability of the executive team members at CBA is not clear and there is a lack of ownership over the key risks at the executive level of the company.

    c) There is also a lack of understanding of the urgency of the identification of the risks in the business and identifying the solutions for the same. 

    d) The bureaucratic decision-making process at the bank is very complex, which delays the risk mitigation and decision-making process. This enhances the chances of generating risk in the business.

    e) The operational risk management framework of the bank is efficient only in the papers; however, the practical application of the framework is very weak.

    f) The bank did not have a strong remuneration policy for the senior management team members, which is also affecting the activity level of the business.

    Therefore, the above are the key issues present in the non-financial framework at Commonwealth Bank of Australia. Moreover, the auditors’ panel has also mentioned that the company or the bank needs to improve its internal culture to resolve the non-financial issues properly.

    Report

    Sub: Auditors’ responsibilities towards the management of corporate governance risk

    Considering the findings of the audit done by ASCI over the business of Commonwealth Bank of Australia, it can be stated that it is the responsibility of the auditors to review the corporate governance framework of the client firm to ensure a better future for the business. the auditors are responsible for reviewing whether the client has disclosed all material information through financial and non-financial reporting. In order to perform this responsibility, the auditor is free to use any information that is relevant (Mihret and Grant, 2017). This responsibility is highly justified because this allows the auditors to understand the reason behind the particular situation that the company is facing. In the context of CBA, it can be identified that the company was facing trouble for a long time in terms of the public image regarding its services. While auditing, the auditors found out that the internal control system of the business is very weak and the senior management team has no specific accountability towards the business (Canning and O’Dwyer, 2018). These findings helped and influenced the auditors to provide better recommendations to the bank for improvements in the future. Moreover, in this context, it is important to be mentioned that the roles and responsibilities of the auditors help to identify the risks, the impacts of those risks, and the recommendations for the improvements (Asare et al., 2018). Considering the particular case of Commonwealth Bank of Australia, the following table has been developed to understand the risks and the recommendations that the auditors have made for making improvements at Commonwealth Bank.