Audit and Assurance

Running head: AUDIT AND ASSURANCE
Audit and Assurance
Name of the Student:
Name of the University:
Author’s Note

AUDIT AND ASSURANCE
1
Table of Contents
Introduction......................................................................................................................................2
ASA 701: Rationale.........................................................................................................................3
Improvement in the Principle of Going Concern............................................................................4
ASA 701: Discussion.......................................................................................................................5
Key Audit Matters (KAM) of Australian Mining Industry.............................................................6
Amcor Ltd....................................................................................................................................6
BHP Group Limited.....................................................................................................................7
Rio Tinto Limited........................................................................................................................8
Evolution Mining Limited...........................................................................................................9
Conclusion and Recommendations..................................................................................................9
Reference.......................................................................................................................................10

AUDIT AND ASSURANCE
2
Introduction
The profession of auditing is an integral process in financial reporting process as they
provide assurance that the financial statement is showing true and fair view regarding the
financial items which are shown in an annual report of the company. The auditors are guided by
auditing standards when the conduct audit of a business for collecting audit evidences and it is on
the basis of such evidences that an opinion is formed regarding the accuracy of the financial
information presented in the annual reports of the business (Lennox, Schmidt & Thompson,
2018). The investors and various users of the financial statements depends on the auditor’s
opinion for taking major decisions. However, over the last few years audit process has suffered
from malpractices and quality issues which has also affected the users of the financial
statements. The malpractices or application of due diligence in an audit process has led to
downfall of corporate houses as well as the auditing firm itself.
The overall quality of audit has declined affecting the users of the financial statements. In
order to restore the quality and integrity of the profession, amendments were made in the
auditing standards of ASA 701 Communicating Key Audit Matters in the Independent Auditor’s
Report (ASA 701). The standard has replaced the key guidelines of ASA 570 Going Concern and
also several other standards (Kachelmeier, Schmidt & Valentine, 2017). The new standard has
been introduced in order to make improvements in the quality of audit and also disclose more
information in the financial statements of the business. This report would be focusing on the
changes which have been brought about by ASA 701 and how the same have been implemented
in different industries (Auasb.gov.au., 2019). The report would be considering a mining industry
and reveal the changes which the auditor made in reporting of items after the amendments were
made (Auasb.gov.au. 2019).

AUDIT AND ASSURANCE
3
ASA 701: Rationale
The introduction of ASA 701 has been made due to a variety of reasons and the same has
also been due to corporate failure where the auditing process lacked proper disclosures and
effectiveness. The fall of Lehman Brothers cases can be considered as an instance where the fall
of the businesses giants was also due to failure of auditing process but the same was mainly due
to mismanagement practices and unethical conduct in the operations of the business
(Auasb.gov.au., 2019). The officials of the company were engaged in unethical conduct of
altering the repo rate which resulted in strengthening the balance sheet of the business and
therefore representing an appropriate financial position of the business (Brasel et al., 2016). The
discrepancies which was noticed in the financial statements by the auditor amounted to $ 50
billion. Even after this, the auditor of the business just issued a unqualified report. This ignorance
of the auditor towards unethical conduct of the business resulted in the downfall of the company
on an ultimate basis. The downfall of the company also contributed to the Global Financial crisis
of 2008 which affected several other businesses.
The above analysis of the cases provides an ample reason for introduction of ASA 701 and
implementation of the same. The introduction of ASA 701 provides guidance to the auditor
regarding the disclosures and audit procedure which needs to be applied by the auditor for
ensuring that quality is maintained in the audit process (Gimbar, Hansen & Ozlanski, 2016). It
can even be argued that if ASA 701 was present the case of Lehman brothers might not have
taken place. On other reason for introduction of ASA 701 is to reduce the audit gap. ASA 701
also promotes transparency in reporting for key information in the financial statements of the
business. The new amendment would require the auditor to disclose any item which is subjected
to or might be subjected to risks of material misstatement and appropriately report on the same