Code of Ethics and ASX Corporate Governance Principles for Auditors

This report aims at discussing the code of ethics and the principles of it which an auditor has to follow before accepting an audit engagement. Further, this report aims at throwing light on the relevant principle 4 of the ASX corporate governance, accounts that should be assessed for risks, the business risks that the company is exposed to, and the principal assertions with regard to these accounts.

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ADVANCED AUDITING AND ASSURANCE

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Executive summary:
This report aims at discussing the code of ethics and the principles of it which an auditor has
to follow before accepting an audit engagement. Further, this report aims at throwing light on
the relevant principle 4 of the ASX corporate governance, accounts that should be assessed
for risks, the business risks that the company is exposed to, and the principal assertions with
regard to these accounts. With regard to the accounts that had to be taken for the purposes of
assessing audit risks, Fixed Assets, Sales and Expenses have been taken. The key assertions
in audit include completeness, verifiability, recording etc.

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Contents
Introduction:...............................................................................................................................4
Application of ethics on auditors:..............................................................................................4
Business operations of the company:.........................................................................................4
Rules and regulations that the company has to follow:..............................................................5
Business risks:............................................................................................................................6
Accounts that are exposed to risks:............................................................................................6
Fixed Assets:..........................................................................................................................6
Sales and Accounts receivables:.............................................................................................7
Expenses:................................................................................................................................7
Principle 4 of ASX Corporate governance:...............................................................................8
Planning materiality:..................................................................................................................9
Conclusion:................................................................................................................................9
References................................................................................................................................10

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Introduction:
The code of ethics lays down the rules and the regulations that the auditors are duty bound to
follow. It is based upon trust. These include integrity, objectivity, confidentiality,
competence. Mayne Pharma Limited which is engaged in the field of developing
pharmaceuticals has been undertaken for review.
Application of ethics on auditors:
The code of ethics is the statement of the principals and the expectations that govern the
behaviour of the individuals and the companies when it comes of conducting the internal
auditing. It comprises of the full text of the code of ethics of the company. The main aim of
this code is the promotion of the ethical culture of the auditors during the course and the
profession of internal auditing. These are the ethics that are necessary and are very apt for the
profession of internal audit. It has been formed on the trust which is based upon the objective
of assurance about the risk management, control and governance. These ethics comprise of
integrity, objectivity, confidentiality, and competency (Exemplar global, 2019).
The following ethics govern the engagement of an auditor:
 Integrity which means that the internal auditors would have trust and would provide
the basis for reliance on their judgment. They shall perform the work with an utmost
honesty, diligence and responsibility.
 Objectivity is that the auditors shall provide and indicate the highest level of
professional objectivity when it comes to gathering, communicating the desired
information about the activity or the process which is being examined. The auditor
shall disclose all of the material facts and the events to the client and he shall not hold
nay bias towards the client and shall disclose all facts related to the business
operations in the most pat manner
 Confidentiality. This in the sense that he shall not disclose the facts or the knowledge
that he has gained to anyone outside the management of the company. And he shall
not disclose the facts with the appropriate authority unless there is a legal obligation
to do so.
 Competency. This is that he shall apply all the skills, experience that he has gained in
discouraging his duties in the most apt manner. He shall engage himself in the
activities that have to be conducted as per his competence only (IIA, 2019).
Mayne Pharma Group Limited:

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Business operations of the company:
The company undertaken for review is Mayne Pharma Group Limited which is an ASX
company dealing in the industry of pharmaceuticals and helps in the developing of new drugs
in order to commercialise branded and the generic medicines. The company also provides the
contract development and the manufacturing services to more than 100 of the clients (IIA,
2019). The technology that the company uses is mainly driven by the products that it
manufactures. The company has many pipelines and has a reach to all counties across the
globe. The customer’s include Australia, North America, Europe and Asia. Also, the
company has its product development and manufacturing facilities in many places such as
Salisbury, Australia etc. the company employs about 200 scientists across the globe (Mayne
Pharma, 2019).
In respect of the nature of operations of the company, it earns and generates the sales and
earns the gross profit mainly from the manufacturing of its products in the country of
Australia and also through the sale of the branded and the generic pharmaceuticals all across
the globe. The company also provides contracts for the manufacturing of the services to the
third party customers within the country of Australia.
Rules and regulations that the company has to follow:
The following are the desired rules and the regulations:
 Private Health Facilities Regulation 2017
 Public Governance, performance and Accountability Act 2013
 The Human Services (Medicare) Act 1973
 Health Insurance Act 1973
 Dental Benefits Act 2008
 Veteran’s Entitlement Act 1986
 Health and Other Services (compensation) Act 1995
 Privacy Act 1988
 Privacy Amendment (Enhancing Privacy Protection) Act 2012
 Aged Care Act 1997
 Private Health Insurance Act 2007
 National Health Act 1953

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 Drug and Poisons Act and Regulations applicable in the States and Territories
 National Health (Pharmaceutical Benefits) Regulations 2017
 Dental Benefits Act 2008 ("Department of Health | Health Professional Compliance",
2019).
As per the Private Health Facilities Regulation 2017, the following are some of the rules:
As per section 39(1) of the above stated Act, the licensee of the private heath facilities is duty
bound to appoint he medical advisory committee for the facility of the private health and
would contain one medical practitioner that has some pecuniary interest in that private health
facility.
As per section 45(d) of the Act, any member who was at one time the member of the root
cause analysis team is duty bound to communicate the information which has been required
by this person as per the provisions of the following stated Acts:
(a) The Special Committee Investigating Deaths Under Anaesthesia (SCIDUA),
(b) The Collaborating Hospitals’ Audit of Surgical Mortality Committee (CHASM),
(c) The NSW Maternal and Perinatal Mortality Review Committee,
(d) The NSW Mental Health Sentinel Events Review Committee.
Also, the licensee at all times of the private health facility would put in display the order
which has been made by the Council under section 124 of the Local Government Act 1993 or
under section 121B of the Environmental Planning and Assessment Act 1979. This is done to
ensure that the secretary is notified of making such an order, the failure of which would
attract a penalty of 5 penalty units ("NSW Legislation", 2019).
Business risks:
The following are the business risks that the company is exposed to:
(a) In respect of the internal development of the products, the company is exposed to the
risk of establishing the bioequivalent and to conduct the clinical trials in the most apt
way. The company is exposed to the risk of expensive development of the intellectual
property and may end up developing its products at increased costs. The products

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being manufactured by the company may not be commercialised which may require
the amount that was spent which was requiring a capitalisation to be written off.
(b) In terms of pricing of its products and competitive intensity, the company is exposed
to the risk of products becoming unfavourable for it, the sales of the products could be
affected due to the continuing consolidation of the customer base. The new
competitors could enter into the market or there could be an increase in the market
share of the existing competitors. The company could fail or be delayed in obtaining
the satisfactory prices from reimbursement from the government bodies etc.
(c) In respect of customer relationships, the company could lose its key customers, it
could have the ability of not renewing the existing contracts with its customers. The
company may fail to honour the payment obligations and could also fail to attract the
new customers.
Accounts that are exposed to risks:
The following are the accounts that the company may pose a risk into:
Fixed Assets:
The following are the key assertions:
Existence: the risks with regard to their existence and to be reported in the final
accounts have to be checked. The physical observation will have to be done for these
assets.
There is an assertion that the records of these assets have to be complete. There must
be an adequate listing of the fixed assets.
The valuation of these assets have also to be checked. These have to be reported in the
final accounts on the basis of their respective market values. There is a risk of an
overstatement of these fixed assets.
The correct reporting of these assets have to be checked since the assets that are
usually prepared before and after the date of reporting are usually reported in the
wrong manner in the final accounts.
There has to be a classification of the fixed assets from the current assets.
There has to be relevant provisions with regard to these assets ("Property, Plant and
Equipment & Cash", 2014).
Sales and Accounts receivables:

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The following are the relevant assertions:
That the receivables exist
That the receivables have been properly valued (CPA Hall talk, 2019).
Revenues have occurred and taken place
Revenues that have reported at the correct prices in the final accounts.
For the above, walk through could be done at the clients place. Further, the transfer of the
amounts to the subsidiary ledgers has been done shall be checked along with the method
which has been used for the purposes of computing the allowance. The relevant authorities
that authorise the approaches have to be checked. The relevant documents and the reports
have to be checked (Corporate finance institute, 2019).
Expenses:
The following are its key assertions:
Whether these expenses actually existed (CPA Hall talk, 2019).
Whether these have been reported in the final accounts
Whether they actually occurred
Whether they are complete and have been adequate in the final accounts
The above could be achieved with the help of walk through, by checking the documentation
of the above expenses, the reports that contains the expenses for the month. The numbering
of the purchase orders, reconciliation of the subsidiary and the ledger accounts etc could be
checked (Brain scape, 2019).
Principle 4 of ASX Corporate governance:
The ASX Corporate Governance principle 4 deals with the remunerations, duties and the
responsibilities of the directors. The role of the board is to oversee and provide its guidance
to the group. The main aim of the group is to protect and enhance the interests of the
shareholders and take into account the interest of the company. The board is responsible for
the purposes of identifying the areas that the company is exposed to and list down the actions
that would be undertaken to manage those risks. The board is responsible for the purposes of

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setting the direction of the company and also, in the establishing of the goals for the
management and to monitor its achievements.
The following are the responsibilities of the board as the whole:
(a) The board and the senior management have the responsibility of appointing,
delegating authority to and review the performance of the Chief Executive Officer.
They have to approve the appointment of the senior most management, reward them,
ensure that the board is successful when it comes to succession planning, and assess
the companies and the performance of the CEO. In terms of business strategy and
financial matters, the responsibilities include approval of the budgets and strategic
plans, evaluation of the performance of the company as against the set strategies.
(b) The business plans so as to monitor the performance of the functions that are
delegated to the management and also, assess the sustainability of the overall strategic
and the resource allocation to the departments. Further, the responsibilities include the
alterations to the budget of capital expenditure, approval of the major mergers,
acquisitions etc. the approval of significant leases are also included. It further includes
the capital expenditures, operating expenditures and the major transactions that are
not included in the budget or that exists in the normal course of the business. The
approval of the annual accounts along with the accounting policies are also included
in this. Also, the approval of the internal and the external plan relating with audit shall
be included.
(c) In terms of risk and compliance, they have to make sure about the approval and the
monitoring of the strategies that the company applies when it comes to the
management of risk
(d) Further, the review, monitoring and the complying with the regulatory and the legal
requirements shall be looked into
(e) Also, the various communications to the shareholders including the agreements for
the annual general meeting and other such meetings must be overseen. The reports
related with the disclosures and as have been required by law shall be reported.
From the above, it could be stated that the company has complied with the relevant ASX
corporate governance principle (Mayne Pharma, 2018).

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Planning materiality:
The fixed assets have been considered for the purposes of an audit since a major amount of
money is invested into them and these are used for the purposes of generating revenue for the
company. Also, sales revenue is being assessed for risk since each company functions for the
purposes of earning profits and then expenses have been assessed since if the company incurs
more expenses in relation with the sales, then it would end up incurring losses.
Conclusion:
In the nutshell, the company conducts the research and develops the pharmaceuticals. The
company is engaged in many rules and regulations of various acts. Some of these relate with
the license requirements, displaying these licenses within the premises of the healthcare
facility etc. further, the company duly complies with all of the Corporate Governance
principles. The 3 risks that the company is exposed to includes the customer relationships
development of the products and pricing of the products. Also, the 3 accounts in respect of
which risks have to be assessed are fixed assets, sales and accounts receivables and expenses
incurred by the company.

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References
Brainscape.com. (2019). Assertions for Payroll Expenses and Payroll-Related Accruals
Flashcards by Kathy Shelledy | Brainscape. [online] Available at:
https://www.brainscape.com/flashcards/assertions-for-payroll-expenses-and-payro-4895986/
packs/7042408 [Accessed 20 Sep. 2019].
Corporate Finance Institute. (2019). Audit Assertions - Guide of the Different Assertions in
Auditing. [online] Available at:
https://corporatefinanceinstitute.com/resources/knowledge/accounting/audit-assertions/
[Accessed 20 Sep. 2019].
CPA Hall Talk. (2019). Auditing Accounts Payable and Expenses: The Why and How Guide.
[online] Available at: https://cpahalltalk.com/auditing-accounts-payable/ [Accessed 20 Sep.
2019].
CPA Hall Talk. (2019). Auditing Receivables and Revenues: The Why and How Guide.
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Sep. 2019].
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