Analysing and Evaluating Key Audit Matters in Independent Auditor’s Report – Commonwealth Organization

This paper is an independent audit report, which evaluates the financial statements of the Commonwealth Bank among the inclusion of other ASX-listed companies such as AMP, ANZ, Bank of Queensland, Westpac and National Australia Bank. In this evaluation, key audit matters will be analysed considering the Auditing Standard (ASA 701) that denotes the relevant key audit matters in an independent auditor’s report.

ANALYSING AND EVALUATING KEY AUDIT MATTERS IN INDEPENDENT
AUDITOR’S REPORT – COMMONWEALTH ORGANIZATION
By Student’s Name
Course Code and Name
Professor’s Name
Institution Affiliation
Date

Executive Summary
This paper is an independent audit report, which evaluates the financial statements of
the Commonwealth Bank among the inclusion of other ASX-listed companies such as AMP,
ANZ, Bank of Queensland, Westpac and National Australia Bank. In this evaluation, key
audit matters will be analysed considering the Auditing Standard (ASA 701) that denotes the
relevant key audit matters in an independent auditor’s report. The financial statements to be
analysis are dated as at 30th June 2018. The fundamental key audit matters entail the analysis
of the accuracy of liabilities of the selected firm considering the Australian banknotes
referencing and accounting policies introduced by the federal government (Qiao, Vo and Zhu,
2019). The valuations are analysed in reference to the Australian banknotes given minimal
banknotes reduced from the exchange. Moreover, the consideration of the foreign funds and
the Australian Dollar Investment is among the vital auditing matters to be analysed in this
paper due to its relative implication in the Commonwealth Bank’s position of accounting
statements.

Introduction
There is a vital change in the audit reporting standard known as the ASA 701, which is
applies to the communication of key audit matters in an independent auditor’s report. This
standard applies to issues emerging when an auditor conveys key review matters and
evaluating key elements of audit, including budget reports of recorded organizations in an
audit report. All aspects considered, this report will display the basis of the standard and an
independent auditing report on an ASX-recorded organization (Commonwealth Bank) in the
financial business.
Rationale of New Auditing Standard ASA 701
The Auditing and Assurance Standards Board (AASB) presented the ASA 701
Communicating Key Audit Matters in an Independent Auditor's Report to manage important
issues and necessities of authoritative prerequisites and substance's key auditing matters. This
board speaks to a statutory gathering of the Australian organization under area 227A
(Australian Securities and Investment Commission Act 2001). In this manner, the body
makes evaluating benchmarks with respect to substances' enactments (Xu, Jiang, Fargher and
Carson, 2011). ASA 701 is another standard incorporated to impart KAM in an evaluator's
report of recorded organizations. Also, it empowers editors of different organizations to settle
on a choice on the incorporation of these key issues in their reports.
Independent Auditor’s Report Opinion
In reference to my assessment, Commonwealth Bank’s budget report and it is oversaw
substance (counting a united element) for the financial year finished 30th June 2018, goes
along necessity presented by the AASB, explicitly the ASA 701. Additionally, the
organization exhibits its budgetary position genuinely identified with its united substance as

at 30th June 2018, including its financial presentation income assessment by that year.
Commonwealth Bank’s fiscal summaries, which have been inspected in this investigation,
involves income profit, assessment of benefits and liabilities, exhaustive activity salary, net
premium pay and important notes clarifying the framing piece of budget reports, including
other bookkeeping data significant for this review report.
Basis for Opinion
The audit analysis has been led dependent on the gauges introduced by the Australia National
Audit Board, with reference from the AASB. Thinking about these benchmarks, an
inspector's commitment is fundamentally broke down in the Auditor's obligations area in this
paper. Thusly, I am free of the solidified company in reference to the relevant moral
contemplations of money related and bookkeeping proficient board's (Codes of Ethics for a
Professional Accountant). Conclusions displayed in these reports are to the degree of
guaranteeing that no contention emerges with the Auditor General Act 1997. Also, this
review report has satisfied any significant obligations agreed to the code.
Key Audit Matters
While attending to key auditing matters, it is significant for an examiner to considers, in
master judgment, the key issues which are essential in inspecting fiscal summaries inside a
particular timeframe (Ratzinger-Sakel and Theis, 2017). These issues were broke down in my
review degree of the applicable budget report, in the arrangement of sentiments dependent on
an element's presentation. This review report is pertinent for the organization and can be
utilized to gauge its budgetary wellbeing, later on, to keep away from potential issues as
apparent from the Lehman Brothers. This gathering, on fifteenth September 2008, was
petitioned for financial protection recording an approximated obligation of $600 billion and a

similar sum in resources. Be that as it may, the key review matters to be tended to from the
organization's budget summaries are:
• Liabilities exactness in according to the Australian Banknote: This key issue has been
referenced from the bookkeeping approaches whereby the parity of the Australia banknote
issued means the valuation of all the applicable banknotes on risk and resources determined
to be 42,4% of the total sales in all-out resources and 39.7x in capital intensity as
demonstrated in Table 1 below. This valuation is investigated in thought to the relative
Australian banknotes gave insignificant banknotes deducted from the trade (Qiao, Vo, and
Zhu, 2019).
Table 1: Balanced Sheet Analysis
The Australian banknote at issue describes straightforwardly to Commonwealth Bank’s key
commitments, the issuance of financial standards, which guarantees high-loan fees to
investors of the substance's budget report. Also, the organization's gross salary is essential
with respect to Commonwealth Bank’s fiscal summary and position, while the precision of
advantages and liabilities assessment referenced from the Australian banknote issued is
dependent on the end that the alliance banknote at issue retails all its lawful status to delicate.
● Valuation of remote financial standards and the Australian dollar venture: This key
review matter has been referenced from the board's Financial Risks and Instruments
and The Accounting Policies notes (Sheraga and Caster, 2014). The assessment of

remote financial forms and the Australian dollar speculations are key inspecting
matters in view of their pertinent effects in reference to the organization's situation of
fiscal reports, incorporating the complexities obvious in examining of wide-extended
ventures information which require the use of valuation systems (Hodzic and
Gregovic, 2016). The organization's speculation portfolio chiefly includes the
Australian dollar benchmarks and securities, repurchasing understanding, remote
financial forms securities, evidence with other ASX top 100 recorded accounting
related organizations and outside financial standards swapping contract. Every one of
these speculations has been surveyed at a reasonable aspect aside from its
repurchasing understanding and affidavits which are assessed dependent on amortized
costs.
How the audit addressed the matter
Considering the Australia banknote at issue, the accompanying systems were utilized to
perform and address the key issue.
● Undertaking a trial of key controls: These controls are important to encourage the
exact innovation to boosting profits on banknotes and its issuance (Jackson, 2018).
These incorporate General IT Control utilizing the notes controlling frameworks.
● Agreement to Liabilities: This methodology reflects on the Australian banknote at
issues, which is recorded by an element's fiscal summaries over adjusted assessed by
the notes controlling frameworks as at 30th June 2018.
● Assessment of the Australian banknote development: The banknotes at issue ought to
be evaluated over recorded near patterns. The requesting part of the banknotes is
recovered, in a section by basic financial exercises, especially the element's general

suppositions use given by the Australian Bureau of Statistics estimating the
consumption in a family unit.
● Review of development examination: It is significant to think about the present year
of banknote development over prior year’s designs before propelling an examination
concerning basic fluctuations.
Table 3: Financial Ratios
The use of this bookkeeping concern is key except if the organization's administration either
considers exchanging the substance or stopping its business tasks, including the assessment

of whether it has recorded any practical choices to execute these exercises or not. As a part of
this review report of in reference to the merged financial explanations, it very well may be
reasoned that the administration's utility of the going concern bookkeeping structure is
fittingly executed in understanding to the gathering's solidified financial articulations (Ha,
Lee and Park, 2018). The gathering's administration has not yet recognized any material
vulnerability which may show any impressive questions on the organization's capacities to
continue as a going concern. Brilliantly, it is negligibly uncovered of material vulnerabilities
in the related financial proclamations of the element. In any case, the reviewer and the
administration can't guarantee of the substance's abilities to continue as a going concern.
Other Information
Table 3: Commonwealth Bank Financial Profitability
Commonwealth Bank
The account related experts are obliged for other data, which is recovered upon the arrival of
the review. This data incorporates wages, capital administration, intentional compensations
exposure and circulations for the period finished 30th June 2018. Be that as it may, the data

avoids fiscal summary and this review subsequently. Other budget summary data
incorporates:
● The element's statutory operating margin of up to 50% TTM
● Pretax margin approximated 50% TTM
● Net profit margin added about 30% TTM and averaged 5 years.
AMP
The profitability of the AMP signifies a significant drop, with approximately 35% to about
$680 million dated in 2018. In reference to the costs evident from the royal communication
board, the company’s portfolio reviews has increased the chances of the firm being subjected
to firm. According to the financial evaluation recorded in the previous year and the costs
analysed as at 14th Feb, the firm has provided an updates to its shareholders concerning its
dividends and earnings reported on 31st Dec 2018.
ANZ
The ANZ considered announcing its gross profits following the period of taxation ended 30th
Sep 2018, which approximated to $6.4 B. This was flat relating to the cash profit and a
comparable period on a continuous basis of about $6.5 B down to 5%.
The Bank of Queensland
The Bank of Queensland reported an overall profit of about $336 ended in Dec, 2018. Assets
quality metrics are a key audit concern in the BOQ.
Westpac Bank

On the other hand, the Westpac reported a gross annual profitability, which has edged about
1% considerably to about $8 B. The firm’s preferred profit margin was relatively flat and at
the same level compared to other banks.
The National Bank of Australia
The National Australia Bank has its financial income reading A$5.7 B for a financial year
ended on 30th Sep in reference to the book-keeping of about A$b.6B in profits over the fiscal
year.
Financial Authority's Responsibility for the Financial Statements
The bookkeeping expert and the senator in Australia are obliged, under the Public
Governance, Performance and Accountability Act 2013, to get ready and present genuinely
all the yearly reports on substances' funds. These reports ought to be drafted by the Australian
money related principles and rules introduced in the Act (Kuziev, 2011). The government is
commanded for these inward controls of financial explanations, which are free from
materiality misquotes that may be because of potential blunders or extortion. In the
arrangement of fiscal summaries, the administration is obliged to resource the joined
organization's capacities to continue as going concern thinking about whether its activities
will conceivably stop because of the board rebuilding or other potential reasons.
Auditor's Responsibilities for the Audit of the Financial Statements
As a financial evaluator, it is indispensable to get extensive certification concerning whether
the significant budget reports, all things considered, will be allowed from materiality
vulnerabilities (Laing and Perrin, 2014). This is because of potential mistakes or
misrepresentation, and presents an examiner's assessment, which incorporates reviewing
supposition. The impressive certification is a crucial and abnormal state confirmation yet

does not by any stretch of the imagination ensure that the finished review in reference to the
Australian National Auditing Office totally identifies materiality vulnerabilities at whatever
point it happens. These misquotes might be apparent from potential blunders or
misrepresentation and thought to be material whenever accumulated independently, which
may significantly be hypothesized to the animated money related choice of important
investors dependent on the accessible financial proclamations.
As a part of inspecting referenced from the Auditing office and its standard, it is essential to
show master judgment, while keeping up proficient negativity all through this review report.
In this manner, it is important to:
● Estimate the distinguished risks of materiality vulnerabilities of the, generally
speaking, fiscal summaries, that are apparent because of potential mistakes or
misrepresentation before structuring and performing evaluating methods receptive
utilizing these dangers to get adequate examining proof fitting to showing an expert
supposition. The issue of not distinguishing these vulnerabilities resultant from
misrepresentation is more noteworthy contrasted with dangers acknowledged from
mistakes (Lin and Graham, 2017); this is because of the suspicion that extortion
includes phony, conspiracy, information error, purposeful derivation and abrogating
the element's interior control (Zalata, Tauringana, and Tingbani, 2018).
● Accomplish full comprehension of the substances in side control, which is principal
for the general review that is intended to structure a satisfactory examining method.
These systems are important in different money related conditions, however not
proposed to introduce review sentiments on the viability of a coordinated
organization's inner controls.

● Considering the assessment of money related arrangement adequacy connected,
including the reasonability of the important financial approximations and
corresponded revelations by the pertinent bookkeeping experts.
● Complete on the rightness of bookkeeping specialists' importance dependent on the
going concern bookkeeping structure, including the premise of evaluating sign gave.
This incorporates an assessment of whether the materiality vulnerability happens
corresponded to conditions and occasions throwing principal doubt on the coordinated
organization's capacities to continue as a going concern. Reasoning that the
materiality vulnerabilities win, it is pertinent to attract critical responsiveness this
present inspector's investigation to associated revelations in the fiscal summaries or,
regardless of whether these exposures are inadequate to change this review
assessment. The discoveries are focused on reviewing proof until the date of this
review examination. In any case, future conditions and levels may conceivably
influence the incorporated substance to end its progression to continue as a going
concern (Fakhfakh, 2015).
● Assessing the aggregate structure and introduction of the announcement's specific
circumstance, which incorporates budgetary divulgences, and if the bookkeeping
proclamations connote foremost occasions and exchanges intended to achieve
reasonable information introduction, and
● Obtaining viable review proof concerning the pertinent money related information of
different top 100 firms recorded by ASX inside the financial business to give the
master feeling on financial reports. These companies include AMP, ANZ, Bank of
Queensland, Westpac and National Australia Bank. Along these lines, this review
involves an introduction of future headings, execution, and supervisions purposed on

the united organization review, which draws the significance of remaining totally in
charge of feelings displayed in the review. In addition, keeping up correspondence
with the experts entrusted with administration of key issues, premediated timing and
review degree are basic for displaying proficient review ends as exhibited by Alali
and Romero (2013), which involves any significant vulnerabilities in the substance's
inner control distinguished in this review (Lu, Shan, Wright and Yu, 2018).
Conclusion
Key auditing matters introduced in this free review report are imparted considering other
pertinent issues accused of administration. This report has introduced the issues that were of
most extreme ramifications in the activity of reviewing the organization's money related
reports as of 30th June 2018. In this manner, these key issues ought to be imparted because of
the present issues, which may significantly affect the substance's financial presentation,
obvious in the financial business.
Recommendations
Companies should consider consulting auditors to evaluate and implement the key auditing
concerns, review financial plans from the introduction of the standard to the end. Also,
organizations are prescribed to consider assessing potential vulnerabilities in their assistant
controls, which have been found out in this examination. It is fundamental to give (the
experts obliged with administration) with proclamations implying that all the moral
contemplations concerning free are pursued. These contemplations, including key issues
which may sanely be viewed as of huge autonomy, ought to likewise be conveyed to
important experts where appropriate.

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