AUDITING AND ETHIC DISCUSSION 2022

Running head: AUDITING AND ETHIC
Auditing and Ethic
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ETHIC
Table of Contents
Introduction................................................................................................................................2
Section 1.....................................................................................................................................2
Section 2.....................................................................................................................................5
Section 3.....................................................................................................................................6
Conclusion..................................................................................................................................8
References..................................................................................................................................9

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Introduction
Auditing refers to the process to methodically examine as well as inspect the financial
statements of the companies in order to make sure that there is not any material misstatement
in them. In the auditing profession, the auditors are needed to take into consideration various
crucial aspects; such as use of appropriate materiality level, analytical review, appropriate
audit procedure, formation of the correct audit opinion and others. Consideration of all these
aspects leads to the carry out of a successful audit engagement program (Baker, Bédard &
Prat dit Hauret, 2014). The main aim of this report is to undertake the analysis of the above-
mentioned aspects of auditing in relation to the Bank of Queensland (BOQ). The first part
of the report involves in the determination of the level of materiality of BOQ. The aim of the
second part of the report is to undertake the preliminary analytical review of the financial
information of BOQ while considering the key ratios from the year 2015 to 2018. The last
part undertakes the analysis of the cash flow statement and audit report of the bank.
Section 1
Level of Materiality
Determination of the appropriate level of materiality is considered as paramount in the
audit engagement of a company and there is not any exception of this fact in case of BOQ.
Application of audit materiality can be seen in the audit planning stage along with the time
when the auditors assesses the impact of material misstatement on the clients’ financial
reports. It is the obligation on the auditors to follow three certain steps for the determination
of audit materiality level. They are 1) to select the appropriate benchmark or base, 2) to
determine a specific percentage that needs to be charged on the above-selected base, and 3) to
provide the required justification for the selections (Vîlsănoiu & Buzenche, 2014). It is

3AUDITING AND ETHIC
needed for the auditors of BOQ to undertake these three steps to determine the level of
materiality.
Step 1 – This step involves in the selection of the appropriate benchmark or base and the
auditors should consider certain aspects for the selection. Some of these aspects and the
characteristics of the industry in which the firm operates and the characteristics of the firm
itself. There are certain bases or benchmarks that are largely used such as profit before tax,
total expenses or income, total assets and others (Eilifsen & Messier Jr, 2014). Since BOQ
operates in the Australian banking industry, the chosen base or benchmark for BOQ is Profit
before Tax (PBT) due to its large use in the Australian banking industry which is $493
million (Cox, Dayanandan & Donker, 2014).
Step 2 – The aim of this step is to ascertain the relevant materiality percentage by the
auditors. The judgment of the auditors is a large factors in this case. In addition, the
principles and rules mentioned in AASB 1031 Materiality needs to be considered by the
auditors. AASB provides two quantitative thresholds for materiality determination and they
are as follows:
1. The auditor can select an amount that is more than or equal to 10% of the ascertained
base that is PBT.
2. The auditor can select an amount that is less than or equal to 5% of the ascertained
base that is PBT (aasb.gov.au, 2019).
It is totally dependent on the judgement of the auditors that which option they would
select while considering the relevant factors. Since BOQ operates in the Australian banking
industry, the selected percentage is 5.
Step 3 – This step involves in the determination of the level of materiality for BOQ and it is
shown below while considering the above-discussed factors.