Audit, Assurance and Compliance - Desklib

Analysis and evaluation of the diversified roles and responsibilities of the auditors is the central objective of this study. This report takes into account the independence of the auditors. After that, this report also considers the analysis of the material events in the financial statements of the company. After that, this report takes into account the key audit matters of the company along with the disclosure of the substantive audit procedures.

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

1AUDIT, ASSURANCE AND COMPLIANCE
Executive Summary
Analysis and evaluation of the diversified roles and responsibilities of the auditors is the central
objective of this study. This report takes into account the independence of the auditors. After
that, this report also considers the analysis of the material events in the financial statements of
the company. After that, this report takes into account the key audit matters of the company
along with the disclosure of the substantive audit procedures.

2AUDIT, ASSURANCE AND COMPLIANCE
Table of Contents
Introduction.....................................................................................................................................3
Compliance with Auditors’ Independence Requirement................................................................3
Non-Audit Services..........................................................................................................................4
Auditor’s Remuneration..................................................................................................................5
Key Audit Matters............................................................................................................................6
Audit Committee..............................................................................................................................8
Audit Opinion...................................................................................................................................9
Difference between Responsibilities...............................................................................................9
Material Subsequent Events..........................................................................................................10
Assessment of Material Information by the Auditors...................................................................10
Material Information Missing........................................................................................................11
Follow-up Questions......................................................................................................................11
Conclusion......................................................................................................................................12
References.....................................................................................................................................13

3AUDIT, ASSURANCE AND COMPLIANCE
Introduction
Financial success of the business entities largely depends on the report of the auditors
as the investors and other users see this report as a tool to judge the fairness and truthfulness
of the presented financial statements of the business entities (Chambers 2014). At the same
time, it is also the responsibility of the auditors to find out the main reasons for the occurrence
if material missstements in the financial statements of the companies. Thus, at the time to
conduct the audit procedure, the requirement of the auditors is to take into consideration all
the relevant financial aspects of the client organization (Christensen, Glover and Wolfe 2014).
The consideration of all these aspects helps in enhancing the quality of audit operations in the
companies. After the identification of material misstatements and their reasons for occurrence,
it is needed for the auditor to make the effective communication of those crucial aspects in the
annual reports so that all the stakeholders of the company can become aware of these facts. As
auditing is considered as one of the major aspects for the financial success of the companies,
the authorities have taken different kinds of initiatives with the aim to enhance the quality of
audit operations (Ojala 2014). The objective of this report is to inspect and analyze different
aspect of auditing in CSR Limited, an Australian Securities Exchange (ASX) listed company.
Compliance with Auditors’ Independence Requirement
In order to avoid the violation of any aspects of auditor’s independence, it is the
requirement for the auditors to make compliance with the required standards and regulations
of auditor’s independence (Tepalagul and Lin 2015). This aspect is also applicable in the case of
CSR Limited. It needs to be mentioned that the audit partner of CSR Limited for the year 2018 is

4AUDIT, ASSURANCE AND COMPLIANCE
Deloitte. It can be found in the annual report of CSR limited, especially in the section of report
of the director that there is a major standard that has been adhered to for the elimination for
the risk related to the violation of auditor’s independence and the standard is from 307C of the
Corporations Act 2001 (Csr.com.au 2018). In addition, the compliance with this major
principles has prevented the risk of the violation of requirements of auditor’s independence
(Csr.com.au 2018). Apart from this, the directors of the company have also mentioned that the
auditors have complied with all the requirements of Code of Professional Conduct while
providing the professional services in auditing.
Non-Audit Services
It needs to be mentioned that the auditors use to provide their audit clients with some
major non-audit services. The annual report of the company provides the evidence of providing
non-audit services by the auditors to the company; and they are Assurance Services related to
Sustainability and Carbon; and Other Assurance and Advisory Services. CSR Limited paid
$77,108 and $58,000 in 2018 and 2018 respectively for the sustainability and carbon related
non-audit services. At the same time, CSR Limited paid $9000 and $40,600 in 2018 and 2017 for
the services of assurance and advisory to the auditors (Csr.com.au 2018).
This fact is also evident from the latest annual report of CSR Limited that the auditors of
Deloitte have followed the guiding principles and standards of Corporations Act 2001 for
providing the non-audit services. For this reason, Deloitte has made the aspect clear that they
have not compromised the standards of Corporations Act 2001 for materiality determination in

5AUDIT, ASSURANCE AND COMPLIANCE
the process of providing the non-audit services. They have considered the monitoring of
auditor’s independence while providing the non-audit services (Makarenko 2016).
Auditor’s Remuneration
It is the right of the auditors to receive the justified amount of remuneration from the
business organizations in return for providing the auditing and non-auditing services. The
remuneration details of the auditors of CSR Limited are given below:
Particulars 2018 ($) 2017 ($) % Change
Deloitte Touché Tohmatsu in Australia
Audit related to financial statement review 742,000 788,400 -5.89%
Payment for the services of carbon and sustainability 77,108 58,000 32.94%
Payment for other assurance and advisory 9,000 40,600 -77.83%
Total Payment 828,108 887,000 -6.64%
Table 1: Remuneration of the Auditors for 2018 and 2017
(Source: csr.com.au 2018)
As per the above table, CSR Limited paid the auditors $742,000 and $788,400 in 2018
and 2017 respectively due to the audit services for the review of financial statements and
reports. One can observed from the above provided table that 5.89 is the decrease percentage
in the payment to the auditors in the year 2018 than 2017 for the review of the financial
statements and reports (Csr.com.au 2018).

6AUDIT, ASSURANCE AND COMPLIANCE
The above table also includes the payment to Deloitte for non-audit services. It is
evident from the above table that CSR Limited has paid the auditors with $77,108 and $58,000
in 2018 and 2017 respectively for the non-audit services in the areas of carbon and
sustainability. Hence, as compared to the year 2017, Deloitte has received 32.94% more
remuneration in 2018 for providing this specific kind of non-audit services (Csr.com.au 2018).
It can also be observed from the above table that Deloitte has received $9000 in 2018
and $40,600 in 2017 from CSR Limited for providing the company with the non-audit services
related to advisory and other assurance services. Thus, as compared to the year 2017, there is a
77.83% decrease in this payment in the year 2018. On can also observed the fact from the
above table that CSR Limited has paid the auditors with $828,108 and $887,000 in 2018 and
2017 respectively due to get the auditing and non-auditing services (Kusnadi et al. 2016). Thus,
from the above, it can be observed that Deloitte has received 6.64% less audit fees on total
basis in the year 2018 as compared to the year 2017 for providing both audit and non-audit
services.
Key Audit Matters
The recent reformation in the auditing regulations puts the obligation on the companies
and the auditor to disclose the Key Audit Matters along with the applied substantive audit
procedures to minimize them. The following part of the report sheds light on the key audit
matters of identified by the auditors from the review of the financial statements of CSR Limited.
Key Audit Matter 1

7AUDIT, ASSURANCE AND COMPLIANCE
Description: The auditors have considered the position of CSR Limited in product liability for
$289 million as at 31 March 2018 and this situation is connected to the future claims of the
predictable and known asbestos (Sirois, Bédard and Bera 2018). CSR Limited has hired the
outside experts from United States and Australia for the determination of the required
provision for these types of claims. In the presence of the dimension and complication of the
assumptions in order to determine the provision, the auditors have treated this situation as a
key audit matter (Csr.com.au 2018).
Audit Procedures: The auditors of Deloitte have undertaken the assessment of the
independence and competency of the hired outside experts. They have also assessed
methodologies that the experts used for the determination of provision. Most important, the
appointment mechanism of the external experts has been assessed for this purpose. Apart from
these, the auditors have also undertaken the assessment of the determination basis for
prudential margin and the appropriateness of the financial statements of CSR Limited. With the
aim to conduct the testing of the basis to include and exclude the asbestos claims, the process
of the testing of the relevant sample has been considered from the auditor’s side. In the
presence of all these reasons, these performed substantial audit procedures can be classified as
analytical procedures and tests of controls (Kuenkaikaew and Vasarhelyi 2013).
Key Audit Matter 2
Description: This key audit matters is related to the valuation of asset of CSR Limited; and
intangible assets like goodwill along with property, plant and equipments are the related assets
for this key audit matter. It needs to be mentioned that there has been use of major financial

8AUDIT, ASSURANCE AND COMPLIANCE
judgments and assumptions relate to growth rate, discount rate, inflation rate, change in
forecast and others as these all are related to valuation of assets (Velte 2018). For the
identification of the cost generating units, the management of CSR Limited has used
impairment trigger analysis. The involvement of some crucial verdict for the ascertainment of
future cash flows can be seen in this situation that has forced the auditors to consider this
situation as a key audit matter (Csr.com.au 2018).
Audit Procedures: With the aim to address this matter, Deloitte has undertaken the evaluation
process for the determination of the cash generating units. In order to achieve this, Deloitte has
also undertaken the assessment and analysis of certain aspects like terminal rate of growth,
discount rate, rate of inflation, forecaster cash flow and others. Sample testing has been taken
into consideration for the assessment of the mathematical accuracy of the cash flows. At the
same time, Deloitte has also assessed the accuracy of the disclosure of the financial statements
of the company. All these procedures can be considered as analytical procedures and subtitle
test of details (Goh, Krishnan and Li 2013).
Audit Committee
The Board of Directors of CSR Limited has a Risk and Audit Committee can with the
objective for monitoring all the dimensions and issues of the internal control policies and
procedures so that effective safeguard for the financial reporting integrity can be developed
and implemented (Guo et al. 2017). This Risk and Audit Committee includes Four non-executive
directors; they are Mike Ihlein, Mathew Quinn, Penny Winn and John Gillam. The analysis of the

9AUDIT, ASSURANCE AND COMPLIANCE
2018 Annual Report of CSR Limited indicates towards the absence of any Audit Committee
Charted within the organization (Csr.com.au 2018).
Audit Opinion
One can absorbed certain crucial aspect from the provided opinion by the auditors and
these aspects of the opinion help the investors in various ways. The audit opinion states that
there has been major adherence to the different standards of Corporations Act 2001 so that
efficiency can be maintained in the preparation of the financial statements (Salleh and Jasmani
2014). The opinion of the auditors also indicates towards the fact that the users can get the
true and fair view of the financial performance of CSR Limited from their financial statements.
The auditors have also stated the fact in the auditor’s report that CSR Limited has compliance
with the standards of Corporations Act 2001 and Australian Accounting Standards for financial
reporting (Csr.com.au 2018).
Difference between Responsibilities
To prepare and present the financial statements after making the necessary compliance
with the guiding principles of Australian Accounting Standards and Corporations Act 2001 is the
prime responsibility of the directors of CSR Limited in financial reporting (Frias‐Aceituno,
Rodriguez‐Ariza and Garcia‐Sanchez 2013). After that, assessment of the capability of the
company to continue as a going concern is another responsibility of the directors (Martínez‐
Ferrero, Garcia‐Sanchez and Cuadrado‐Ballesteros 2015).

10AUDIT, ASSURANCE AND COMPLIANCE
To obtain the require assurance on the fact that there is not any material misstatements
in the financial statements of the company is the prime responsibility of the auditors (Litt et al.
2014). The next major responsibility of the auditors can be seen in providing the correct audit
opinion based on the assessment of material misstatements. Some other responsibilities of the
auditors are the assessment of the internal control mechanism, valuation of the accounting
policies, analysis of the gong concern status and others (Peecher, Solomon and Trotman 2013).
Material Subsequent Events
There is mention about two specific subsequent event of the financial reporting of CSR
Limited for the year 2018. The process to pay the dividend after 31st March 2018 is one of them.
Sale of surplus land at Horsley Park is the second subsequent event. Due to the presence of this
event, CSR Limited is expecting a profit before tax worth $30 million in the statement of
financial performance on 31St March 2019. After the analysis of these two events, the auditors
of Deloitte has provide their opinion that these events do not have any material impact on the
financial statements of CSR Limited (Peecher, Solomon and Trotman 2013).
Assessment of Material Information by the Auditors
An individual third party stakeholder can observe certain facts from the annual report of
CSR Limited and one of them is the fact that the auditors of the company have been efficient at
the time to review the financial reports; and for this reason, they have been able in the
identification of the key audit matters in the business that are the major material issues in the
financial statements. In this process, APES 110, Corporations Act 2001 and Australian Auditing

11AUDIT, ASSURANCE AND COMPLIANCE
Standards are the major standards that have been adhered to. It can also be seen that the
auditors have communicated the key audit matters in the annual report of 2018 along with the
applied substantive audit procedures. All these aspects indicate towards the effective
treatment of the material events by the auditors of Deloitte (Edgley 2014).
Material Information Missing
The auditors of Deloitte have been able to identify the major material issue in the
financial statements that are the key audit matters while effectively maintaining the compliance
with all the required standards; and they have also properly addressed these issues with the
help of substantive audit procedures. It can also be seen that the auditors of Deloitte has
effectively communicated these key audit matters through their audit report with the required
stakeholders of CSR Limited. All these aspects indicate towards the fact that the auditors have
not missed the assessment of material information of the company (Johnstone, Gramling and
Rittenberg 2013).
Follow-up Questions
1. What are the major procedures in order to detect the material issues?
2. What they have found after the discussion with the internal auditors of CSR Limited?
3. Is there any back-up plan for the audit procedures of CSR Limited in case the existing
one fails? (Adams 2015)

12AUDIT, ASSURANCE AND COMPLIANCE
Conclusion
The above study involves in the analysis of the report of the auditors in the 2018 Annual
Report of CSR Limited. It can be seen from the above report that the auditors of Deloitte has
taken into consideration all the relevant regulations and standards in order to maintain the
aspect of auditor’s independence like Section 307C of the Corporations Act 2001. As per the
above study, Deloitte has provides CSR Limited with both the audit and non-audit services in
the year 2018. When there is decrease and increase in the remuneration of the auditing and
non-auditing services to Deloitte respectively, the above discussion indicates towards overall
decrease in the payment to the auditors in the year 2018 from 2017. Most important aspect is
that the auditors of Deloitte has taken into consideration two key audit matters in CSR Limited
related to product liability and valuation of assets. At the same time, they have communicated
about the procedure to address these issues. It can be seen that the management of CSR
Limited has established a Risk and Audit Committee in order to implement better internal
control mechanism within the organization. As per the above discussion, Deloitte has provide a
positive opinion by mentioning that the financial statements of CSR Limited has been
developed as per the required standards and thus they provide a true and fair picture of the
financial position of CSR Limited. In the section of the auditor’s report, Deloitte has mentioned
about the separate responsibilities of the directors and the auditors in financial reporting.

13AUDIT, ASSURANCE AND COMPLIANCE
References
Adams, C.A., 2015. The international integrated reporting council: a call to action. Critical
Perspectives on Accounting, 27, pp.23-28.
Christensen, B.E., Glover, S.M. and Wolfe, C.J., 2014. Do critical audit matter paragraphs in the
audit report change nonprofessional investors' decision to invest?. Auditing: A Journal of
Practice & Theory, 33(4), pp.71-93.
CSR. 2018. Annual Meetings and Reports. [online] Available at:
https://www.csr.com.au/investor-relations-and-news/annual-meetings-and-reports [Accessed
17 Sep. 2018].
D. Chambers, A., 2014. New guidance on internal audit–an analysis and appraisal of recent
developments. Managerial Auditing Journal, 29(2), pp.196-218.
Edgley, C., 2014. A genealogy of accounting materiality. Critical Perspectives on
Accounting, 25(3), pp.255-271.
Frias‐Aceituno, J.V., Rodriguez‐Ariza, L. and Garcia‐Sanchez, I.M., 2013. The role of the board in
the dissemination of integrated corporate social reporting. Corporate social responsibility and
environmental management, 20(4), pp.219-233.
Goh, B.W., Krishnan, J. and Li, D., 2013. Auditor reporting under Section 404: The association
between the internal control and going concern audit opinions. Contemporary Accounting
Research, 30(3), pp.970-995.

14AUDIT, ASSURANCE AND COMPLIANCE
Guo, L., Wang, S., Gao, J. and Sun, W., 2017, June. The literature review of auditor changes.
In Service Systems and Service Management (ICSSSM), 2017 International Conference on (pp. 1-
6). IEEE.
I.О. Makarenko, 2016. Non-audit services in Ukraine: the need for regulatory
harmonization. Problemi Teorìï ta Metodologìï Buhgaltersʹkogo Oblìku, 2-3(35), pp.240–252.
Johnstone, K., Gramling, A. and Rittenberg, L.E., 2013. Auditing: a risk-based approach to
conducting a quality audit. Cengage learning.
Kuenkaikaew, S. and Vasarhelyi, M.A., 2013. The predictive audit framework.
Kusnadi, Y. et al., 2016. Audit Committees and Financial Reporting Quality in Singapore. Journal
of Business Ethics, 139(1), pp.197–214.
Litt, B., Sharma, D.S., Simpson, T. and Tanyi, P.N., 2014. Audit partner rotation and financial
reporting quality. Auditing: A Journal of Practice & Theory, 33(3), pp.59-86.
Martínez‐Ferrero, J., Garcia‐Sanchez, I.M. and Cuadrado‐Ballesteros, B., 2015. Effect of financial
reporting quality on sustainability information disclosure. Corporate Social Responsibility and
Environmental Management, 22(1), pp.45-64.
Ojala, H., Niskanen, M., Collis, J. and Pajunen, K., 2014. Audit quality and decision-making in
small companies. Managerial Auditing Journal, 29(9), pp.800-817.

15AUDIT, ASSURANCE AND COMPLIANCE
Peecher, M.E., Solomon, I. and Trotman, K.T., 2013. An accountability framework for financial
statement auditors and related research questions. Accounting, Organizations and
Society, 38(8), pp.596-620.
Salleh, K. and Jasmani, H., 2014. Audit rotation and audit report: empirical evidence from
Malaysian PLCs over the period of ten years. Procedia-Social and Behavioral Sciences, 145,
pp.40-50.
Sirois, L.P., Bédard, J. and Bera, P., 2018. The informational value of key audit matters in the
auditor's report: evidence from an Eye-tracking study. Accounting Horizons.
Tepalagul, N. and Lin, L., 2015. Auditor Independence and Audit Quality: A Literature
Review. Journal of Accounting, Auditing & Finance, 30(1), pp.101–121.
Velte, P., 2018. Does gender diversity in the audit committee influence key audit matters'
readability in the audit report? UK evidence. Corporate Social Responsibility and Environmental
Management, pp.Corporate Social Responsibility and Environmental Management,
03/23/2018.