Audit and Assurance Compliance

The report has been prepared in accordance to analyse the risk for the stakeholders in regard to the material misstatement is not being identified or the auditor does not properly disclose or it is not adjusted while preparing the financial statement. The report focuses on the Enron Scandal and the application of Whistleblowing ensuring the responsibilities of an auditor. The report throws light on the role of an auditor as in how the auditor would perform his duty and shall maintain high degree of professionalism.

Running head: AUDIT AND ASSURANCE COMPLIANCE
Audit and Assurance Compliance
Name of the Student:
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Author Note:
Word Count: 3000

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Table of Contents
Introduction...............................................................................................................................3
Stakeholder Analysis of the company Wesfarmers Limited:.....................................................3
 Government:...................................................................................................................3
 Suppliers..........................................................................................................................4
 Shareholders...................................................................................................................4
 Consumers and Employees:............................................................................................4
Decision of Independent auditor based on Whistle-blow Policy...............................................5
Learning outcome of Auditor from Enron Scandal....................................................................6
Extricating the records:..........................................................................................................7
Quality Standard....................................................................................................................8
Behaviour of Arthur Andersen...............................................................................................9
Steps of Audit and Quality of Audit...........................................................................................9
Conclusion................................................................................................................................13
Reference:................................................................................................................................14
Appendix:.................................................................................................................................17

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Executive Summary
The report has been prepared in accordance to analyse the risk for the stakeholders
in regard to the material misstatement is not being identified or the auditor does not
properly disclose or it is not adjusted while preparing the financial statement. To support
this analysis a company is needed. In this case Wesfarmers Limited is the company to focus
on the stakeholder’s analysis. The other part of the report focuses on the Enron Scandal and
the application of Whistleblowing ensuring the responsibilities of an auditor. The report
throws light on the role of an auditor as in how the auditor would perform his duty and shall
maintain high degree of professionalism.

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Introduction
The objective of the report is to focus on the significant aspects that is being related
to Enron case along with the concept of whistle-blower as well as its applicability in
reference to Australian regulation. The case of Enron has been the popular case of fraud in
the corporate sector. This gives the broader explanation of the accounting misstatement in
the books while recording has taken place. The case critically analyse the different aspects
of the fraud.
Apart from this, the analysis in this report also includes an assessment of the concept of
whistleblower and the form and extent of current institutionalised whistleblower protection
in Australia. The analysis is also focused towards evaluating the effectiveness of Australian
whistleblower in achieving protection and this would be analysed through the application of
relevant case examples. The findings from the entire analysis would then be summarised in
the conclusion section of the report. The report has discussed the concepts of APES 110 so
as to analyse the whistleblowing policy subjected to public interest. The report is concluded
stating the suggestions founded on the G. Med craft for the superiority as well as phases
that is to be preserved and engaged by an auditor.
Stakeholder Analysis of the company Wesfarmers Limited:
The below mentioned are the stakeholders of Wesfarmers Limited for reviewing in relation
to material misstatement.
 Government:
The entity decided to approach the government body at both levels central and state
regarding the issues popping up in the due course of their operational activities. Sue to

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time constraint, Wesfarmers managers were unable to reach and solve all the
requirements to remove the problem to the governing system. The only issue can
persists relating to government that is reflected from the fiscal statement of the
company is regarding tax. The inaccurate tax computation reflects the chance of
material misstatement. This calls government to show the active participation relating to
such problems. (Wesfarmers.com.au., 2018).
 Suppliers
If the company faces any liquidity loss or the working condition of the company is not at
a good position along with that the result of this affects the retail sector of Australia.
This impacts on the company at the time of clearing it write off. The objective of the
company is to provide suppliers advantage of clearing the debts till longer period.
Through this sustainability can be maintained. The material misstatement prevails when
the liabilities are grouped for long-term, valuation of non-current asset because these
are the core areas for which managers concern persists.
 Shareholders
The company shares are under inspection by the Computershare Investors Service Private
limited. Wesfarmers conducts general meeting on annual basis like other companies to
communicate with their valuable shareholders. Investors join the briefing session twice a
year at six months interval. The interest shown by the investors are in retailing capital
allocating and Cole’s separation. This is the main area that has the significant impact of
identifying the material misstatement as investors decision on investing is purely dependent
on the information that is been given in the fiscal statement. (Newton, 2013).

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 Consumers and Employees:
The customer support of Wesfarmers are very supportive. The support system of the
company provide support assistance through phone calls, emails, live chat, messages,
websites. Feedback on the query is responded within the working days on the level of
query. The employees of Wesfarmers are engaged in the decision making. The decision
opinion of the employees are taken through conducting the survey for their comfort ability.
Dependence of decision rely on the report of financials the decision of customer and
employees depend the report so there should not be any misstatement.
(Wesfarmers.com.au., 2018)
Decision of Independent auditor based on Whistle-blow Policy
In demand to examine the procedure and extent of existing established whistle-
blower security in Australia, it is important to originally analyse the perception of Whistle-
blower. Whistle-blower is an imperative idea that specifies the defence of an establishment
from every unethical performs or duplicitous performs by manner of revealing the material
in the attention of the community. A whistle-blower is principally an individual that is
accountable for revealing the delinquency that is captivating residence in an administration.
Any classes of unproven actions, deceitful or lawful actions that are captivating residence in
an administration are being revealed with an interpretation to guarantee that they don’t
have a most important impression on the presentation level of the establishment.
The characteristics of independent external auditor is based on the aiming
perspective inclined to audit procedure. The concepts states about the objective
achievement while maintaining independency in order to full fill the audit. The profession of
an auditor is ruled by the ethics relating to accounting based on independence along with

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whistle blowing of auditors. Independency gives the auditor full authority of highlighting
misstatement at the very moment it is being detected. To fulfil the objective of audit
profession is solely resist upon independent opinion. The opinion of auditor has straight
forward impact on whistle blow policy. Opinion given by the auditor would indicate the
intentions of the policy.
The regulation APES 110 Code of Ethics for Professional Accountants issued by
“Accounting Professional and Ethical Standards Board (APESB)”.
The prescribed section 210.11.1 of APES 110, the appointed auditor needs to take
the permission of the client in order to communicate with the auditor who was as the
appointed auditor. The present auditor would not communicate if there is a negative
response from the client. On the positive as the permission is granted all the requirements
shall be in writing by the last appointed auditor so that the true and fair view can be
concluded by the present appointed auditor. This rule has been introduce so that the
misconduct can be reported and same is to be informed to the government. This rule is
framed to protect the whistle blow policy. This also protect right of speech, freedom
regarding the particular situation. The person having the evidences that can prove the
breach of contract is resting with the right of filing the complaint.
In respect to “Section 100.1 of APES 110” had guided in providing assurance of
freedom regarding speech and contract. The breach can consist of-
Excess of Gross fund
Authority being exploited
Act, rules and regulation
Hazards being caused in considerable and precise manner to community welfare.

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Learning outcome of Auditor from Enron Scandal
Enron is recognised as the biggest scandal in the corporates worldwide. The
outcome result of auditors learning is discussed below:
Extricating the records:
The business book is noted as the right illustration as to replace the operative capital
market. Enron in his interview stated that the entire business has been responsible for the
fraud. The accountant that was engaged in the paper work of had been found convicted in
manipulating the facts regarding the accounts of Enron. The internal intentions regarding
the work among the employees compiled to fight. The shareholders in order to get the true
picture regarding the financial position of the company has appointed the auditor. The
records related to accounts have been altered while allocating the facilities to the
consumers as well as starting from time to time. Top level management appoints examiners
from outside to examining the fact. This require a bold acceptance on the part of audit team
so that the concern regarding the indifferent scrutiny confidant of different a favourable
project.
In this situation auditor appointed by the government would be beneficial. This
indicates the inherent risk on the part of auditor as it also cannot ensure the capability of
the auditor appointed by the government for the same line of problem. It is mandatory to
protect to interest of auditors not being manipulated by the upper level. In its abode, the
administration group would appoint the auditors erected on the score on the circumstance
by the organisation that would hand on come into contact with the audit reward.
This alarms for a strict sets of guidelines for the professionalism in performing audit
consisting of high powers. Providing of consultancy facilities to the clients would be banned

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on the organisation. The auditors have found the way for being safe from the regulation
that is being made on them through dominating powers. The rotational auditor rule for
every four years interval is sound enough as it would not allow auditor to be biased awhile
taking judgement. The problem occurs basically when external auditor becomes employee
of the company and is being able to assist the external auditor. This shall be prohibited by
The Australian Securities and Investments Commission.
Quality Standard
It is to be noted from the Enron scandal that the difficulties that prevails is with the
accounting standard. The acute attention is needed in the audit process by the firm
including the areas of applicability of accounting standard and the treatment of balance
sheet item in US. The reason of neglecting the standard is that the standard is being very
narrow. The intention of articulate responsiveness had crushed the enhancement of
accounting standard the challenge taken by FASB. This bounces the suggestion in the
direction of the condition of adaptable body to put on stern regulations that guarantees
principles for rigorous development of labor. This would be supplementary pertinent if the
ethics are recognized universally. The calamity of Enron keen out the absentminded of
competent supremacy in high MNC. In the coming eras each diverse kind of sense of
balance beside with outflows have been settled in command to trust the manager of the
firm. ( Newton, 2013). They perform the character of executives for the stakeholders, are
executing the identical in actuality. The supremacies of doing so powers remain with CEO
for site out the compensation limit as for each the stock holding depths.
The system shall be more focused towards the interest of shareholders. This calls for
the role of non-executive directors as to provide accurate amount of attention on the basis

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of remuneration of audit committee and independent audit committee. This would very well
explain the role of job for each one. To attain this the business need rules and standards
that can be complied with for active business operations.
Behaviour of Arthur Andersen
Arthur Anderson also frolicked a decisive character in the scandal of Enron. The
auditor is responsible for presenting the true and fair view about the matters that is
presented in the financial statement. It’s the auditor duties to identify any errors that is
suspected due to intention or unintentionally existing in the statement. But in the given case
of Arthur Anderson the auditing firm appears to have not accomplished its obligation in a
principled way. The circumstance investigation of the let-down of Enron designated that in
attendance has existed dynamic role being frolicked by Arthur Anderson in the falsified
activities that were passed out in its records of accounts. It is crucial that the reviewing firm
ought to action in a self-regulating way, since there are numerous significant shareholders
of the administration that unswervingly makes use of the estimation as on condition that by
the inspectors. But the scrutiny of the Andersen in reverence to Enron specifies that it has
not represented in an autonomous manner, and in attendance are selected administrators
of Andersen that have acknowledged professions from Enron. Andersen also futile to
request Enron in amplification its multifaceted businesses partnership beforehand
confirming the fiscal declarations. Altogether these turns of Andersen specify that it has
underwrote in the direction of Enron’s decease. (Australian Broadcasting Corporation,
2019).

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Steps of Audit and Quality of Audit
No global definition was presented in the context of quality of auditing, the facilities
that were given to external audit a global identity. It was considered as that its gives
reliability of severe audit inspection following the applicable accounting standard. The
conclusion driven from the audit procedure is that the information that satisfies the user of
financial statement. The auditor capability to prove that each and every standard has been
complied while preparing the statement is also appreciated.
Gerg Medcraft suggested the big four auditing firms to amend the accounting
standards or otherwise the world would face more scandal like Enron. The individuals of the
company even registered their complaint against non-maintains of proper record that was
being audited by the auditor. This rang the bell of danger towards monetary.
If the above mentioned issues are not noticed and the remedies for such issues are
not put forward the cases like Enron will increase in number. This calls for an responsibility
and alertness in the part of auditor`s duty. As per APES it is the duty of the auditor to
present the true and fair view that he or she of getting from the inspection of books. Lack
of effective audit and its procedure resulted in Enron scandal. The outcome of the scandal
advice the role of an auditor shall be more efficient as well as auditor shall be more alert in
discharging its duties.
The article that was recently published it indicated the review of ASIC on the samples
of Key Audit till December 2016. This is formulated by the big four auditing firm- PWC,
KPMG , E&Y and DE Lottie. The sample regarded that the percentage of assurance of true
and fair view about the financial statement was twenty three percent only. The outcome
indicated lack of professionalism on the part of auditor as well the auditor is not that

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efficient to overcome the challenges like Enron Scandal. If the attention is not provided in
scandal and on the responsibility of auditor the scenario of coming time can be worse.
(Newton, 2013).
The scandal of Enron in the year was totally a case of fraud even the auditor Arthur
Andersen was involve in the fraudulent activities. As soon as the matter came forward to
ASIC relating to the valuation of assets of 2016. The valuation of asset was recorded by
Seven West Media and Nine Entertainment Company.
ASIC carried the investigation and banned hundreds of firms. They even carried
seven thousand surveillances. More than eighty individual auditors were arrested in order
as they submitted incomplete returns to government. The criminal charges were put on
them. This was highlighted by the government and the high authority of inspectors.
From the announcement of Medcraft, it is faultless that as soon as the firm consist of
just few personnel possessing the obligatory acquaintance alongside with evidence to attain
the accountabilities of the examination companion, circling them effectiveness not potential
reasonable insurance, as acknowledged in APES 110 as for each recommended section. In
event, the self-governing superintendent has quantified an segregation from acquaintance
revolution in the suitable consultant, it changes believable for a discrete to trip as a crucial
audit acquaintance for above seven long ages. Though, there necessities to be the presence
of alternate defences like self-overriding external assessment. (Accounting Professional and
Ethical Standards Board, 2018).
APES 110 Section(100(1)), vouch for the accountant to provide his superlative to
help the attention of community would be tenable. The responsibility of an inspection firm
affiliate is to achieve the belief concerning the attention of community for their reassurance.

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Section 100(2c) describes protection as the indispensable to be hard-headed so that the
threats could be eradicated or they could be minimised to an acceptable shade. In exact,
protections are accurate when it is analysed that the threats are above your head the
expected equivalent when close is no collaboration complete with the leading rereading
viewpoints. (Chou, 2015).
As a vile on the declaration of Medcraft, there is unplanned to evade the calamity
concerning economics. This can be solitary complete if the Australian examiners pace on the
principled trail to release their accountability. He or she shall retain the assistances and
information to overwhelm such encounters. APES 110 guides the accountant to preserve
affable connection among occupation and individual. They remain not allowable to escape
out the personal materials about the corporation they are directing audit. ( ASIC - Australian
Securities and Investments Commission, 2019). They must be impartial though they border
their estimation. Their estimation shall contemporary true and fair view around the
appearance of the financial statement. It is essential on the portion of the accountant to
trail the procedures given to emancipation their accountabilities so that they can
contemporary dispassionate result.

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Conclusion
Wesfarmers stakeholders has different level and provides different requirement
from the company. The impact on the stakeholders would result negative if there is material
misstatement present in the financial statement. The opinion of auditors would highly be
valuable and inspected as well as supported with the evidences. The independency of
accountant along with whistleblowing has been demonstrated to be the straightforward
rule of reviewing as a profession. Accountants were talented to recognize abundant
understanding from the Enron scandal. Those scandal necessitates strict act as healthy as
circles of rubrics for an examiner so that the shared attention of battle can be circumvented.
At last the estimation of Greg Medcraft was studied. Greg Medcraft, existing his understood
of concern that in coming era Australia may face cases like Enron. To circumvent such
occurrence accountants shall essential to device their true and fair view lengthways with
accomplishment impartial audit. As the auditors have been tinted and have added the first
place than the corporations. Therefore, it is suggested that the accountant shall achieve and
accept principled means of clearing their responsibilities and lecturing impartial as well true
estimation.

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Wesfarmers.com.au., 2018. [online] Available at:
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Appendix:

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