Audit, Assurance and Compliance - Independent Appraisal of KPMG's Audit on Inghams Group Limited

This document provides an independent appraisal of the audit work of Inghams Group Limited by KPMG. It evaluates various aspects of auditing, including declaration of independence, independent auditor's report, key audit matters, non-audit services, auditor's remuneration, audit committee, and audit opinion.

Running head: AUDIT, ASSURANCE AND COMPLIANCE
Audit, Assurance and Compliance
Name of the Student:
Name of the University:
Authors Note:

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AUDIT, ASSURANCE AND COMPLIANCE
Executive Summary:
Audit of financial statements is very essential for the investors and other stakeholders of
an organization as it provides independent appraisal of the financial statements of an
organization. A detailed discussion has been made in the document to evaluate the audit
conducted by KPMG on Inghams Group Limited. Auditing in Australia is to be conducted in
accordance with Australian Auditing and Assurance Standards. In this document it has been
explained how the audit of Inghams have been conducted. Independent appraisal of audit
performed by KPMG on the financial statements of Inghams Group Limited is to provide
objective description of the independent audit performed by the auditing firm for the financial
year ending in June 2017.

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Contents
Executive Summary:........................................................................................................................1
Introduction:....................................................................................................................................3
Review and analysis of key areas from annual report of the company:..........................................3
Declaration of independence by the auditor:...................................................................................3
Independent Auditor’s report:..........................................................................................................4
Key audit matters:............................................................................................................................5
Non-Audit services performed by the auditors:...............................................................................6
Auditor’s remuneration:...................................................................................................................7
Comparison of auditor’s remuneration between current and previous financial years:..................8
Audit committee:.............................................................................................................................9
Audit opinion:..................................................................................................................................9
Responsibilities of directors and management:.............................................................................10
Subsequent events:.........................................................................................................................10
Effectiveness of material information reported by auditor:...........................................................11
Follow up question for the auditor:...............................................................................................11
Conclusion:....................................................................................................................................11
References:....................................................................................................................................14

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Introduction:
International Auditing and Assurance Standards Board (IAASB) since its inception has
looked for better ways and means to improve the quality of auditing and assurance standards
provided by the auditors in all across the globe. In recent past the IAASB has explained the
importance of communicating material information in plain English to the stakeholders in audit
reports. In this document an independent appraisal of the audit work of Inghams Group Limited
has been made with the objective of understanding various aspects of auditing.
Review and analysis of key areas from annual report of the company:
In this section of the document the key areas in audit and assurance engagement of
Ingham Group Limited, here in after to be referred to as the company in this document, shall be
reviewed and analysed from the annual report of the company. The financial statements of the
company for 2017 has been audited by the KPMG. Let us now proceed to evaluate the auditing
and assurance services provided by KPMG to the company (Griffin and Wright 2015).
Declaration of independence by the auditor:
As per section 307C of the Corporations Act, 2001, here in after referred to as the act
only in this document for the sake of brevity, the lead auditor must make a declaration in the
annual report of the company that the auditor has conducted the audit of the financial statements
of the company as an independent entity and the auditor has no interests associated with the
entity and its operations except as an independent auditor.
The lead audit partner on behalf of KPMG has declared that all provisions of independence in
relation to the independent verification and review of the financial statements have been upheld

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and followed during the course of audit of the company. No violation of professional code of
conduct by the auditors in conducting the audit of the company. As per the act the auditor must
be independent, i.e. the auditor either works for a public accounting firm or is self-employed and
must not have any financial interests associated with the enterprise of which he is an auditor
(Libby 2017). From the annual report and in-depth analysis of the financial statements it is clear
that neither the partner of KPMG nor the Auditing firm has any interests associated with the
company and its operations.
Thus, from the above it is safe to say that the auditors have adhered to the provisions of the
section 307C of the act. KPMG has duly followed the provision of section 307C of the act and
has made the declaration of independence to the directors of Ingham Group Limited (Lobo and
Zhao 2013).
Independent Auditor’s report:
As per the revised International Standard on Auditing 700, the auditor must issue an
independent audit report on the general purpose financial statements of the company. As per the
standard the auditors must express whether the company has fulfilled the requirements of
financial reporting in accordance with the accounting standards applicable to the country.
KPMG has audited the accounts of the company for the financial year ending on June 30, 2017
and accordingly, has reported on these statements as per the auditing standards (Broberg et. al.
2013). As per international standard on auditing (ISA) 200, audits of entities must be conducted
as per the general principles and guidelines governing an audit. Expression of appropriate
opinion on the financial reports by an auditor would be entirely based on the ability of the

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auditor to accumulate audit evidence necessary to come to a relevant conclusion to make any
certain assertion about the nature of the financial reports.
As per the ISA 200 an auditor must verify the financial statements with the books of accounts of
the company to evaluate whether the financial statements of the company has been prepared
correctly and in accordance with the accounting standards applicable to the company. The books
of accounts shall be verified with the vouchers and other documents of the company to assess
whether the books of accounts have been correctly prepared on the basis of which the financial
statements have been prepared (Petraşcu and Tieanu 2014). The auditors must corroborate all
necessary evidence and collect information to conduct audit effectively and express valid opinion
on the financial statements of the company as to whether these statements reflect the true and fair
picture of the company as on particular date, in this case as on 30th June, 2017.
Auditors’ independence is essential to conduct an audit effectively. In case an auditor has any
interest associated with an organization then it would not be possible for the auditor to conduct a
free and fair audit on such organization. KPMG has no interest in the organization and it is clear
from the declaration of independence made by the auditor provided in the annual report of the
company (Bratten et. al. 2013).
Key audit matters:
Matters that according to the professional judgment of the auditors were of huge
significance for audit of the financial statements of the company for the financial year ending on
June 30, 2017 are the key audit matters. In case of audit of the company the following are the
key audit matters as per the auditor of the company.

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Revenue has been recognized at the fair value after adjusting the returns, trade discounts and
allowances, rebates and other such deductions. The significance of trade allowances is huge in
the financial report thus, it has been considered as a key audit matter (Tepalagul and Lin 2015).
The consolidated financial statements of the group shows that it has earned a revenue of
$2,426,900,000 with additional other income of $10,400,000. These amounts represent fair value
of the revenue received and receivable after deducting necessary trade discounts, rebates, returns
and allowances. The auditors have evaluated the accounting principles and policies of the
company to record revenue in the books of accounts and have not found any contravention with
the applicable accounting standards and principles (Nicoll 2016).
The notes to accounts reveal that the company has followed the standard accounting practice of
recognizing revenue from sales once the ownership associated with the goods have been
transferred to the sellers and there is no uncertainty regarding the final receipts of revenue from
sales.
Non-Audit services performed by the auditors:
Often auditors provide professional services to the clients that are not part of the regular
audit services. Auditors are expected to maintain highest ethical standards while discharging
their duties as auditors. Providing non-audit services to the clients by a qualified accountant who
is also auditor of the company is against the highest ethical standards set by the Auditing
profession. Thus, auditors are encouraged not to provide any non-audit services to the clients
(Carey et. al. 2013).
Inghams Group Limited’s auditor KPMG is involved with the company in other capacity apart
from conducting statutory audit of the company. The audit firm has provided non-audit services

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such as tax compliance, advisory, other services and IPO due diligence services to the company
to ensure that there is proper compliance with tax laws and other provisions of Income Tax
Assessment Act, 1997 and Corporations Act, 2001. The annual report of the company contains
the amount of remuneration paid to the auditors for the financial year ending on June 30, 2017
and corresponding period for the previous year. The remuneration paid to the auditor shows that
the auditor has provided non-audit services of tax compliances, advisory services, IPO due
diligence services and other services (Sarens et. al. 2013).
Auditor’s remuneration:
Auditors’ remuneration is the amount to be paid to the auditors for the audit services
performed by the auditors. Auditors’ remuneration is allowed to be deducted as expenditures to
calculate the assessable amount of net profit of the company. The annual report of Inghams
shows that the amount of remuneration paid to the auditors for the financial year ended on June
30th, 2017 is $2,027,000 and in the previous financial year the company paid $1,285,000 as
auditors’ remuneration. The auditors’ remuneration included the following payments:
In 2016-17 the company paid $769,000 for audit and review of financial statements of the
company with additional $137,000 and $1,121,000 for tax compliance and IPO due diligence
services respectively. It is important to note that there has been significant increase in the amount
of auditors’ remuneration in the current financial year. In the financial year ending on 30th June,
2016 the company paid merely $410,000 for IPO due diligence services whereas in this year the
remuneration for the same services has been $1,121,000. This is mainly due to the issue of IPO
that the company undertaken in the current financial year. Hence, it is clear from the above that
the auditors have provided significant amount of non-audit services to the Inghams Group

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Limited as remuneration for the non-audit services have far exceeded than the remuneration for
audit and review of financial statements (Abdullatif 2013).
Comparison of auditor’s remuneration between current and previous financial years:
The table below contains the details of remuneration paid and payable to the auditors of
the company in the 2016-17 and 2015-16.
$
Auditor's remuneration 2017 2016 Changes Change in %
from 2016
Payment for audit and review of
financial statements
769,000
.00
700,000.
00
69,000.0
0
9.86
Payment for tax compliance and other
advisory services
137,000
.00
175,000.
00
38,000
.00
21.71
Payment for due diligence services for
IPO
1,121,000.
00
410,000.
00
711,000.0
0
173.41
The fees in relation of audit and review of financial statements of the company have increased by
$69,000 in the financial year 2016-17 compared to the fees paid in 2015-16. This is an increase
of 9.86% from the previous year. Payment for tax compliance and other audit services made in
the year 2016-17 is $137,000 which has reduced from $175,000 for the corresponding period of
previous year. This is a decrease of 21.71% in the current financial year. However, the change in

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payment for due diligence is huge. In 2016-17 the company paid $1,121,000 for IPO due
diligence services whereas in previous year the company paid only $410,000 (Zhang 2017).
Audit committee:
The listed companies in Australia are encouraged to constitute audit committees to improve
the internal controls and the operations of companies. The audit committee of the company
consists of only non-executive directors and the majority of the members of the committee are
independent directors as is clear from the committee charter of the company (Abbott et. al.
2016). Also the committee must have at-least three members. The main points of audit
committee charter are summarized below:
I. A minimum of three members in the committee.
II. The chair of the committee must be independent with majority of total number of
directors in the committee must be independent.
III. The responsibility of the committee to manage the relationship with external auditors.
IV. The audit committee must cooperate with internal auditors and audit functions (Jones
2017).
Audit opinion:
Unqualified opinion has been given by the auditor of Inghams Group Limited after
conducting audit on the financial reports of the company in accordance with the Auditing and
Assurance standards. As per the auditor, the financial statements of the company reflect the true
and fair picture of its performance and position o as at the end of financial year 2016-17. The
provisions of Corporations Act 2001 and the relevant accounting standards issued by AAASB

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have followed by the company in maintaining its books of accounts and preparing the financial
statements (Tepalagul and Lin 2015).
Responsibilities of directors and management:
The responsibilities of the directors and management are completely different from that
of the auditors. Preparation of financial reports in accordance with AASBs and presentation of
these reports are the responsibilities of the directors whereas the auditors is appointed by the
company to conduct audit on these reports prepared by the directors to express an opinion on
these reports. The directors are responsible to take important decisions in relation to the daily
operations of the company (Tsipouridou and Spathis 2014). The management on the other hand
is responsible to conduct the day to day affairs of the company. Making optimum utilization of
available resources of the company in the business operations is also one of the many
responsibilities of the company.
Linda Bardo Nicholls, the non-executive director and Peter Bush the Chairman of the company
have signed the directors’ declaration statement stating the responsibilities of the directors in
preparation and presentation of financial statements of the company (Arens et. al. 2013).
Adhering to the AASBs and provisions of the act are to be verified by the auditors of an
organization and as per the audit report of Inghams KPMG has expressed that the company has
followed all the provisions and AASBs to portray the true and fair picture of the company’s
performance and position as at the end of 2016-17 (Svanström 2013).
Subsequent events:
After the end of the year the company has paid a dividend of 9.5 cents per share totalling
of $36.10 million. The dividend of $36.10 million was paid on October 4, 2017. The effects of

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such payment has been made in the consolidated financial statements. Apart from this payment
there has been no other significant events subsequent to the end of the financial year (Koh et. al.
2013).
Effectiveness of material information reported by auditor:
The auditor in the independent audit report apart from expressing unqualified opinion has
provided necessary details about the basis of forming the audit opinion on the financial
statements of the company. The key audit matters of revenue recognition and impact of rebates,
trade discounts, trade allowances, and returns on the amount of revenue has been outlined. The
auditor has also outlined the responsibilities of the directors in preparing and presentation of
financial statements of the company (Knechel and Salterio 2016).
There has been no information that has not been provided in audit report of the company as the
auditor has touched each and every aspect of financial statements and have made it clear that the
financial statements reflect the fair and true picture of the company as on the end of the financial
year (De Simone et. al. 2014)).
Follow up question for the auditor:
At the Annual General Meeting of the company the follow up question to be asked to the
auditor is provided below:
How about including a paragraph in the audit report to suggest the investors about the expected
future performance of the company?

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Conclusion:
Taking into consideration the guidelines laid down by the IAASB and the suggestions
made by the Board a detailed discussion has been made in the auditing and assurance services
provided by the Auditors of Ingham Group Limited. A complete evaluation of the auditing and
assurance services provided by the auditors shall be made by appraising the annual report of the
company to provide opinion as to the quality of services provided by the auditors to the
company.

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References:
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Arens, A.A., Best, P., Shailer, G. and Fiedler, B., (2013). Auditing, Assurance Services and
Ethics in Australia. Pearson Higher Education AU.
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fair values and other estimates: The effects of underlying environmental, task, and auditor-
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Broberg, P., Umans, T. and Gerlofstig, C., (2013). Balance between auditing and marketing: An
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De Simone, L., Ege, M.S. and Stomberg, B., (2014). Internal control quality: The role of auditor-
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Griffin, P.A. and Wright, A.M., (2015). Commentaries on Big Data's importance for accounting
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