Audit and Assurance: Analysis of CSR Limited's Annual Report

This report analyses the roles and duties of auditors in assurance provision on the financial statements of CSR Limited. It also identifies key audit matters and evaluates the audit partner, Deloitte, in compliance with Australian auditing standards.

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

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Executive Summary
The auditors, in the contemporary periods, play crucial roles in accounting and
financial aspects of corporate scenarios in the global framework. The concerned report, in
this context, tries to analyse the roles and duties which the auditors play in the aspects of
assurance provision on the financial statements of the company into consideration, the CSR
Limited. For the purpose of the same, the important audit issues of the concerned company
are taken for analysis. The auditor in this case being Deloitte, the same has been analysed in
compliance with the Australian auditing standards. The report also emphasises on
identifying the key audit matters of the concerned company in its operational framework.
The report, thus, helps the readers to gain timely and appropriate information about the
auditor’s report quality regarding the concerned company, CSR Limited.

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Table of Contents
Introduction...............................................................................................................................3
Compliance with Auditor’s independence requirements..........................................................4
Services related to non-audit aspects........................................................................................4
Remuneration of the Auditor: Analysis......................................................................................5
Key Audit Matters......................................................................................................................7
a. Valuation of the assets.......................................................................................................7
b. Provision for product liability.............................................................................................8
Auditing Committee...................................................................................................................9
Audit Opinion...........................................................................................................................10
Responsibilities of management, directors, auditors: Differences..........................................11
Material Subsequent Event......................................................................................................11
Material information effectiveness: Assessment....................................................................12
Missing, under-reported or not fully reported aspects...........................................................12
Questions related to follow-up................................................................................................13
Conclusion................................................................................................................................13
References................................................................................................................................15

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Introduction
The global business scenario has developed and has become more integrated,
inclusive as well as interconnected owing to factors like Globalisation, trade liberalisation
and technological and infrastructural developments. With the businesses going global and
becoming more complex, it has become immensely important for the same to have proper
accounting and financial framework, which gets monitored appropriately and regularly
(Kose, Otrok & Prasad, 2012). In this context, the term “Audit” comes into significance and
the same can be referred to as the process of analysis and interpretation of the financial
activities and statements of the companies for the purpose of ensuring accuracy and
appropriateness of the transactions recorded. The auditors, thus, are bestowed with the
role of revealing the relevant information related to the materialistic aspects of financial
activities and statements of the companies (Arens, Elder & Mark, 2012).
This is immensely important in the sense that the information is required by the
different stakeholders, who are associated with the businesses, for their decision-making
purposes. The audit companies pay immense importance to enhancement of the quality of
their reports, especially in the contemporary period of upsurge and complexities in business
activities, such that the stakeholders are increasingly benefitted (Louwers et al., 2015).
Keeping this into consideration, the concerned report aims to evaluate the latest annual
report of the concerned company, the CSR Limited, an Australian company venturing in the
production of building products, in the aspects of auditing, the audit partner of the company
for the year 2018, being Deloitte.

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Compliance with Auditor’s independence requirements
None of the members of the auditing company, Deloitte, were involved in any kind
of business related operations of the CSR Limited, as can be observed from the company’s
latest annual report (2018). There was also no presence of significant role played by any
particular employee in the auditing group, on the auditing actions of the concerned
company, which thus, goes in accordance to the “Section 342A of the Corporations Act
2001” (Javed, 2018). The auditing company also complies with the different requirements
which are present under the “Section 307C of the Corporations Act 2001”, the primary ones
of the requirements being as follows:
 The applicable codes related to the professional conducts, mentioned in the
concerned section of the Corporations Act, have been abided by for the audit related
activities and operations of the CSR Limited Company (J. Clout, Chapple & Gandhi,
2013).
 The requirement of independence of the auditors for the audit related operations in
the concerned organizations has also been abided by as there is no presence of
contraventions recorded in this aspect.
Services related to non-audit aspects
The auditing company, Deloitte, can also be seen to be providing different non-audit
related services to the CSR Limited, as is evident from the 2018 annual report of the
concerned business organization. These non-audit services are as follows:
 Carbon and sustainability related assurance (Bae Choi, Lee & Psaros, 2013)
 Other advisory and assurance related services

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For the former non-audit related service provided by Deloitte, the company has
received $77,108 from the CSR Limited and for the second service, Deloitte has received
$9,000 from the concerned client company. The amounts, in total, is nearly 10.40% of the
total remuneration amount which has been received by Deloitte for auditing the financial
aspects of the CSR Limited in the current year (2018). Both the organizations (the CSR
Limited as well as Deloitte) can be seen to be complying by the standards in the aspects of
receiving as well as providing the above-mentioned non-audit services.
As the non-audit services have complied to the general standard for the same (which
can be seen in the Corporations Act, 2001), the same has satisfied the directors, as per the
Risk and Audit Committee’s written report. It has also been ensured by the Directors of the
concerned client company, the CSR Limited, that the non-audit services provided by
Deloitte, does not include any kind of self-work review of the auditing personnel regarding
the aspects of management decision undertaking and similar domains (Junior, Best & Cotter,
2014). The regulatory framework present in the aspects of the corporate governance in the
domain of non-audit services have also been strictly followed and abided by the concerned
organization. These aspects, cumulatively, has made the role and the independence of the
concerned auditor in case of the latest auditing of the CSR Limited, unquestionable (Knechel
& Salterio, 2016).
Remuneration of the Auditor: Analysis
The remuneration received by Deloitte, for providing services to the CSR Limited, in
the period 2017-2018, can be seen to be as follows:

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Table 1: Deloitte’s remuneration from the CSR Limited (2017-2018)
(Source: Csr.com.au, 2018)
The above table highlights both the audit related service payments and the
payments for non-audit services, which have been received by Deloitte for its services
provided to the CSR Limited. The non-audit services provided by the concerned company,
from the above table, can be seen to include the carbon and sustainability related ones as
well as the assurance and advisory ones. From the above table, it can be asserted that the
payments related to auditing services and reviewing of the financial statements of the CSR
Limited has reduced by nearly 5.89% from 2017 than in 2018 (Csr.com.au, 2018). This can
also be seen to be the case in the payments received by Deloitte, from the CSR Limited, in
the aspects of other assurance and advise related services, where the payment decreased
by nearly 77.83% from 2017 in 2018. However, the payment received by the concerned
auditing company, for the non-audit service, related to sustainability and carbon, can be
seen to have increased by 32.94% from 2017 to 2018. Together, cumulatively, these
dynamics in the service related payments has resulted in a total decrease of the payments
received by Deloitte, by 6.64% from 2017 to 2018 (Goulding, 2013).

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Key Audit Matters
The key audit matters, in general, refer to the significant aspects which exist in the
domain of auditing and financial activities of an organization and which are thus needed to
be taken into consideration (Bédard, Gonthier-Besacier & Schatt, 2014). In this context, two
particular key audit matters can be seen to be observed, as per the 2018 annual report of
the concerned organization, the CSR Limited, which are discussed as follows:
a. Valuation of the assets
The annual report of the CSR Limited, 2018, highlights the presence of the following
assets valuation for the concerned company:
 Goodwill amount – $98.1 million
 Intangible assets (others) - $45.8 million
 Plant, equipment and property- $834 million
Considerable clarity in the judgements is required for the purpose of analysing the
presence of any kind of impairments in such assets and their balances. For judging the same,
the aspects like discount tasks, inflation, growth rates, changes in building cycles as well as
the future cash flows estimation need to be incorporated in the judgement (Kachelmeier,
Schmidt & Valentine, 2017). For the purpose of detection of any kind of impairment in these
cash generating units, the CSR Limited can be seen to have designed an impairment
triggering assessment. The Viridian cash generating ones can be seen to be generating very
low returns on the capital employed, which in turn indicates towards the fact that further
evaluation of impairment is required in these cash generating units (Holm & Zaman, 2012).
Thus, due to the presence of the judgement related to the future cash flows in the

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concerned organization, this can be seen to be considered as one of the key audit matters of
the CSR Limited.
The auditing company, Deloitte, can be seen to be considering this key audit matter
and for the purpose of dealing with the same, it can be seen to analyse the management
process of its client company, with the aim of pointing out those cash generating units in
which further impairment assessment is required. In this process, insights about the annual
financial performance, consistency in segmental reporting, external market situations as
well as goodwill allocation to the cash generating units (especially those requiring further
impairment assessment) have been gained by the auditor, who in turn, can be seen to have
critically analysed the impairment model and impairment assessment methods and
assumptions of the company (Bell & Griffin, 2012). The accuracy and mathematical
efficiency of the cash flow models can also be seen to be examined with the help of sample
testing, thereby analysing the appropriateness of the aspects of disclosures in the
concerned client organization’s financial statements.
b. Provision for product liability
As per 31st March, 2018, the CSR Limited recognised a $289 million liability provision,
related to the disclosed as well as future claim which are foreseeable, linked to asbestos.
The advice of management appointed external advisors in the USA and Australia, has been
incorporated for ensuring the same. Thus, considerable judgement is required for the
purpose of ascertaining the future claim’s profitability in case of the provision and the
provision estimate is also influenced significantly by the assumptions related to the discount
rate as well as movements of the exchange rates over time. The variance in the complexities

9AUDIT AND ASSURANCE
of the assumptions, thus, make this aspect one of the key audit matters, taken into
consideration by Deloitte (Gimbar, Hansen & Ozlanski, 2015).
The independence and the level of expertise and knowledge of the company hired
external experts can be seen to be evaluated by the auditing company, Deloitte, which also
critically analyses the suitability and appropriateness of the methodology and the
assumptions taken into consideration by these external experts. For assessing the
consideration and exclusions of the asbestos related claims, the company can also be seen
to be using the sample testing method. The provisions, being designed and formulated on
the basis of the reports, this becomes extremely significant for the auditing aspects and
procedures. Deloitte has also conducted enquiry about both the external experts appointed
by the CSR Limited as well as the internal and the external legal counsel for the concerned
company. The auditor can also be seen to analyse the level of suitability of those of the
pertinent disclosures which are present in the financial statements of the concerned client
company.
Auditing Committee
The Directors of the concerned organization, as per the annual report (2018) of the
same, can be seen to have developed the “Risk and Audit Committee”, with the primary aim
of the same being that of reviewing the procedures and policy frameworks of the companies
in the aspects of imposition of internal controls for the asset and liability protection and
ensuring integrity in the aspects of financial reporting of the CSR Limited (Lary & Taylor,
2012). The four non-executive directors of the company, in their Risk and Audit Committee
are:
 John Gillam

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 Penny Winn
 Matthew Quinn
 Mike Ihlein
The primary roles of the concerned committee can be seen to be as follows:
 Analysing the assuring procedures of the integrity in the aspects of financial
reporting of the concerned company
 Analysing and evaluating the audit risk management framework present within the
concerned company (Brennan & Kirwan, 2015)
 Evaluation and assessment of the dynamics related to that of commercial income
realisation and any kind of influences working in this aspect in the concerned
company
The annual report of the CSR Limited, in 2018, however, does not show any evidence
regarding that of the charter of the concerned audit committee.
Audit Opinion
The report of the independent auditor highlights that the concerned organization
has abided by the “Section 300A of the Corporations Act 2001”, for the purpose of
formation of the remuneration report. The financial reports and statements of the
organization, as per the independent auditor, have also been formed, under the regulatory
framework of the “International Accounting Standards Board”, “Australian Accounting
Standards Board” and the “International Financial Reporting Standards” (Shah, 2012). The
financial conditions and dynamics of the CSR Limited has been accurately represented in its
financial reports, as per the assertions of the independent auditor as there is no presence of
wrong statements and claims. Thus, unqualified opinions can be seen to be provided by

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Deloitte, regarding that of the CSR Limited, after analysing their financial aspects and after
conducting fieldwork in their effectiveness testing (Mock et al., 2012).
Responsibilities of management, directors, auditors: Differences
There exist different variations in the roles and responsibilities of the directors,
management and the auditors, in the aspects of development of the financial reports for the
concerned organization, the CSR Limited, as is evident from the latest annual report of the
concerned company. One of the primary responsibilities of the directors of the concerned
company is that of analysing the organization’s capacity to continue as a growing concern
(Nobes, 2014). Moreover, the management and the directors of the company also need to
formulate the financial statements and reports of the CSR Limited, in compliance to the
regulations and the accounting standards which prevail in the country (Australia) where the
company ventures.
The auditors, however, have different responsibilities, in the sense that it is their role
to effectively assure whether the financial reports formed by the concerned company, are
devoid of erroneous statements or not. Apart from this main role, the auditors, in this case,
also have several other responsibilities like that of detection of risks which arise from
misstatements of the company, examining the appropriateness of the accounting policies,
analysing the internal control, evaluating the accounting basis used by the company’s
directors, collecting relevant audit evidences and also examining the representation of the
financial reports and statements as formed by the concerned client organization, the CSR
Limited.

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Material Subsequent Event
Two material subsequent events can be seen to be contained in the 2018 annual
report of the CSR Limited:

Sale of the Horsley Park surplus land- The company announced this on 3rd April,
2018. The selling terms indicate the need for recognition of $30 million income
before tax by the CSR Limited, in the income statement of the company for period
before 30th March, 2019 and the settlement is due in April, 2019.

Declaration of dividend- Franked dividend of 13.5 cents/share has been announced
by the CSR Limited, which contributes to $68.1 million dividend and 3rd July, 2018 has
been the date of payment of the dividend, which is yet to be given by the concerned
company.
Material information effectiveness: Assessment
The auditing company, Deloitte, has effectively and unbiasedly analysed the material
information of their client company, the CSR Limited, as per the assertions of the third-party
stakeholders of the company. The actions of the auditors can be seen to be adhered to the
regulatory requirements of the APES 110, the Corporations Act, 2001 as well as the auditing
standards present in Australia (Carson et al., 2012). The auditing company can also be seen
to disclose the key audit matters in the CSR Limited, along with the necessary steps for
dealing with the concerned issues, which in turn indicates towards high effectiveness and
efficiency of Deloitte in the aspects of auditing the financial activities, reports and
statements of the CSR Limited.

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Missing, under-reported or not fully reported aspects
As can be seen from the 2018 annual report of the CSR Limited and the operations of
Deloitte, all the material aspects and other relevant information of the company, especially
those which if unaddressed, could have led to misstatements, have been taken into
consideration by Deloitte and considerable explanation as well as disclosure of the required
information have also been given by the concerned auditing company, regarding the
financial aspects of the CSR Limited. This in turn indicates that there is no such missing
aspects or omission or partial reporting of any information on part of the concerned
company.
Questions related to follow-up
For Deloitte, the company auditing the financial aspects of the CSR Limited, the
follow-up questions which can be asked in the general meeting held annually, are as follows:
 What are the planned auditing scopes?
 Has any kind of discussion related to accounting or auditing aspects taken place
between you and the management of the company prior to your retention?
 Does the company have any external auditor you are aware of?
 How effective is your auditing scopes in the aspects of error identification, fraud
detection, analysis of internal control and illicit acts?
 What risk assessment techniques are used by you?
 Are there any concerning or alarming issues present with the management of the
concerned company regarding the control of its business processes?
 Is there any visible complexity in the aspects of auditing which you think should be
taken into consideration?

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Conclusion
From the above discussion, it is evident that Deloitte, the auditing company for the
CSR Limited, in 2018, has adhered to the regulatory frameworks and auditing standards
which are present in Australia, while carrying out their audit and non-audit related services
for the CSR Limited. The company has also complied to the highest level of ethical standards
while providing the non-audit services to the CSR Limited. The overall remuneration of the
auditing company can be seen to have declined by 6.64% from 2017 in 2018. The auditing
company of the CSR Limited can also be seem to have reported and disclosed the relevant
information fully as can be seen in accordance with the 2018 annual report of the company
and there is no such evidence of presence of missing or partially reported or disclosed
information, which makes the overall auditing and disclosing activities of Deloitte highly
standardised and considerably trustworthy.

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