Key Audit Matters in the Mining Industry

AUDIT & ASSURANCE

Executive Summary
In the present world, owing to the presence of innumerable transaction, corporates are bound
to make adequate disclosures to thrive in the market. This is because stakeholders require
appropriate information to make decisions thereafter. Thus, the introduction of ASA 701 has
been a boon to the stakeholders as it assists in offering relevant information about the key
audit matters. With the help of this report, the mining industry has been taken into
consideration and four prime players of such industry have been studied for better
understanding. Overall, this report is primarily based upon the key audit matters that are
analyzed by auditors of the companies during their audit processes.
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Contents
Introduction.......................................................................................................................................3
ASA 701 and the situation of Lehman Brothers.................................................................................3
Importance of KAM...........................................................................................................................4
Mining Industry.................................................................................................................................4
BHP Billiton Ltd..................................................................................................................................5
Rio Tinto Limited................................................................................................................................6
Alumina Limited.................................................................................................................................7
CSR Limited........................................................................................................................................8
Conclusion.......................................................................................................................................10
References.......................................................................................................................................11
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Introduction
In the case of Lehman Brothers, there were numerous financial issues that resulted in its
disintegration. Furthermore, many other corporates also encountered major problems and as a
result, countries on a whole suffered when their markets fell. In addition to this, the overall
community of auditors also witnessed a huge deterioration based on goodwill and reputation
because their functioning in the minds of people was badly affected. In other words, the audit
processes performed by auditors became suspicious in nature in the eyes of people because
the management of Lehman Brothers failed to undertake due care in fulfilling their roles and
responsibilities (Lapsley, 2012). Hence, it is very crucial for the auditors to exercise due care
while auditing the financials of an organization. Moreover, if any negligence is found in their
activities, the financials of such organization will be considered to be biased and hideous of
material information, thereby resulting in the concealment of real facts. In the years 2001-
2008, various organizations were in the stage of earning higher profits because they were
inclined towards investment in the mortgage markets (Teen, 2012). However, all their desires
were failed to be attained because prior attention was failed to be exerted towards the market
that was already hampered. Additionally, Lehman made another blunder by offering real
estate, private financing, and lending of leverages that resulted in the compromise of all its
assets.
ASA 701 and the situation of Lehman Brothers
The introduction of ASA 701 resulted in the emergence of various facts that are bound to be
reflected by a corporate in its financials. Moreover, the implementation of such a standard
can play a key role in improving the financials of the corporate, thereby, in turn, enhancing
its goodwill and image in the eyes of the public (Kruger, 2015). However, if the
implementation of such standard has not been undertaken, the corporate can encounter major
defeat because major facts will not be properly revealed to the stakeholders, thereby resulting
in a lack of proper communication and transparency on its part (Ruhnke & Schmidt, 2014).
Nevertheless, these were the major issues that Lehman Brothers had to encounter and that
resulted in its disintegration (Geoffrey, Joleen, Kelli & David, 2016). While preparing the
financial statements, the major negligence on the part of Lehman was first that it endeavored
to attain the maximum amount of profits during the period 2001-2008. In relation to this, it
borrowed an immense amount of loans so that a stagnant capital structure can be established
and the profits can be increased altogether (Kaplan, 2011).
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