Audit, Assurance and Compliance - Desklib

This report analyzes the audit procedures undertaken by the auditors of the firm CSR Limited based on different aspects like auditor’s independence, non-audit services, remuneration report, role of audit committee and reviewing all key audit matters.

Running head: AUDITING, ASSURANCE AND COMPLIANCE
Audit, Assurance and Compliance
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Executive Summary
Auditing helps to manage the financial aspects of the organization and also determine the risk
of investment which is one of the principal factors. When an investor in cause a huge risk that
person will demand a great amount of Return of Investment. Auditing helps to make sure that
each of the investment of the company is done in a proper and right place there is no financial
or non-financial loss. This thereby ensures where is proper financial security in an organization
investing in the same sure that their money is in the safe hands and there will be no laws for
them. The given report will highlight and analyze the audit procedures undertaken by the
auditors of the firm CSR Limited based on different aspects like auditor’s independence, non-
audit services, remuneration report, role of audit committee and reviewing all key audit
matters.

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Table of Contents
Introduction.....................................................................................................................................4
Whether the auditor complied with Independence requirements or not......................................4
Non-audit services...........................................................................................................................5
Auditor’s remuneration analysis.....................................................................................................6
Key Audit matters: Audit procedures performed............................................................................7
Audit committee and its members..................................................................................................9
Follow-up questions......................................................................................................................12
Conclusion......................................................................................................................................13
References.....................................................................................................................................14

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Introduction
Audit is defined as the way in which the company adopt a particular system to evaluate
and establish a financial security within the internal controls of the company. The auditing
system enables the company to know perspective the financial and the internal systems of the
company and also helps the company to enable the possibility of better functioning in future.
Auditing is mainly concerned with the financial aspects of an organization, however in the
Modern Times, the system of auditing has expanded and spread its wings into the development
and parents of the other systems of the organization as well (Cannon and Bedard 2016).
Modern business organizations have witnessed several changes in audit procedures while
evaluating the preparation of their financial statements. The organizations have recognized the
value and importance of auditing to identify any kind of error in the financial statements. There
are different kinds of errors that can be found in financial statements (Hayes, Gortemaker and
Wallage 2014). These are in the form of error of commission, error of omission and error of
principle. It is the responsibility of an auditor to identify all form of errors (Knechel and Salterio
2016). Due to this reason, many organizations have taken several positive steps in order to
enhance audit quality in their financial statements. In this report, the various aspects of annual
report of the firm CSR limited will be analyzed in terms of auditing.
Whether the auditor complied with Independence requirements or not
It is of utmost importance for an auditor to comply with all the independence
requirements effectively (Asien 2015). An auditor is required to comply with all the rules and

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regulations of Australian Auditing Standards effectively. Deloitte is the audit partner of the firm
CSR Limited. From the annual report, it has been observed that no auditor played a significant
role in the CSR group audit for the year ended 31 March 2017. However, the annual report for
the year ended 31 March 2018, the auditors of CSR limited have complied with the rules and
regulations made under section 342A of the Corporations Act 2001. Apart from this, the annual
report of the firm reflects the auditor’s independence declaration made under section 307C of
the Corporations Act 2001 (Csr.com.au 2018). Apart from this, it can be also inferred that the
directors of the firm are not involved in any kind of violation of Corporations Act 2001. In
addition to this, it has been also mentioned that there are no contraventions of code of audit
professional conduct.
Non-audit services
There are different kinds of services provided by the auditors to their clients on behalf of some
amount (Blay and Geiger 2013). In case of CSR Limited, the group auditor Deloitte Touche
Tohmatsu has provided different kind of non-audit services to the organization. The non-audit
services provided by Deloitte includes sustainability and carbon related assurance services and
other advisory and assurance services. In return to this, Deloitte receives remuneration on
behalf of companies.
Figure 1: Total Remuneration received by Auditors of CSR Limited

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(Source: Csr.com.au 2018)
From the above figure 1, it can be inferred that Deloitte has received an amount of 58000 in the
year 2017 and 77108 in the financial year 2016. In addition to this, it can be also deduced that
the auditors of CSR Ltd have followed all the rules and regulations of Corporations Act 2001.
Apart from this, it is also stated that Deloitte has not comprise the requirements of auditor’s
independence with respect of materiality of figures in financial statements as per Corporations
Act 2001.
Auditor’s remuneration analysis
The remuneration of the auditors along with the change in percentage can be reflected with
the help of the following table:-
Figure 2: Percentage change in Remuneration of Auditors in CSR Limited
(Source: Csr.com.au 2018)
From the above figure, it can be inferred that overall remuneration of the auditor has declined
by 6.64 percent in comparison with the previous year. In addition to this, it is also reflected that
remuneration of non-audit services like assurance services of sustainability and carbon has
Particulars 2018 (in
dollars) 2017 (in dollars) Percentage Change
Deloitte Touché Tohmatsu in Australia
Audit for the review of the financial Statements 742,000 788,400 -5.89%
Assurance services for sustainability and carbon 77,108 58,000 32.94%
Services related to other assurance and advisory 9,000 40,600 -77.83%
Total Payment 828,108 887,000 -6.64%

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increased by 32.94 percent. The total amount in audit for review of financial statements have
declined by 5.89 percent in the financial year ending in 31st March, 2018. In addition to this,
remuneration related to advisory services have declined drastically by 77.83 percent. Therefore,
the above analysis reflects that Deloitte have received less amount of remuneration in 2018 in
comparison to the year 2017 (Csr.com.au 2018).
Key Audit matters: Audit procedures performed
It is of utmost importance for the auditors to disclose key audit matters that have been
performed in the financial reports. From key audit matters, it can be seen whether the auditors
have performed audit procedures by providing assurance in a successful manner.
1st Key audit matter: Product liability provision
Product liability provision can be considered as a key audit matter in the financial report. From
the annual report, it has been seen that CSR limited recognized $289.0 million as product
liability provision. The provision is done with respect to foreseeable claims of future. Apart from
this, the given amount of complexity and size of the provision has been considered in the key
audit matter report (Csr.com.au 2018).
Audit procedures performed for 1st Key audit matter
Deloitte has hired external experts in order to assess the competence of management of
CSR limited. The assumptions of provisions made by the management are also assessed in an
effective manner. The auditors have also done random enquiries for external experts appointed
by the management of the firm. They have also assessed the appropriateness of the given
relevant disclosures incorporated by the firm in their financial report. In addition to this, all the

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reports prepared by external experts are evaluated properly and effectively (Köhler, Ratzinger-
Sakel and Theis 2016).
. These are the analytical procedures performed by the auditor for the first audit matter which
is Product liability provision.
Second key audit matter: Valuation of assets
The second key audit matter is related to valuation of assets of the firm CSR Limited. The
balance sheet of the firm reflects goodwill amounting to $98.1 million, plant and equipment
amounting to $834.0 million, other intangible assets amounting to $45.8 million and property
which are included in CGU’s of the organization. The management of the firm has incorporated
an impairment trigger analysis to recognize and identify the given CGU’s that needs to be
considered for calculation of impairment. The organization has considered this a key audit
matter due to its overall importance in analyzing and forecasting the future cash flows of the
firm (Csr.com.au 2018).
Audit procedures performed for 2nd Key audit matter
There are several audit procedures that have been performed by the auditor in terms of
valuation of assets. The auditor has successfully evaluated the process undertaken by the
management of CSR limited used in determination of the given CGU’s. The auditors Deloitte
have successfully evaluated and analyzed the effectiveness of impairment model used by the
firm CSR limited while incorporating their financial statements. Apart from this, the auditors
have done proper assessment of discounting rate, terminal growth rate, forecast of cash flows
and any kind of major changes in the business cycle in the near future. Therefore, due to this

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reason, they have also incorporated and used analytical tools to analyze the accuracy of cash
flows as given in the financial statements. The auditors Deloitte have also assessed the accuracy
of CGU’s of the firm on historical basis. In addition to this, the different forms of disclosures
have also been assessed whether they are appropriate or not. In addition to this, the auditor
have also evaluated the forecasted amounts and process followed the management of the firm
in terms of testing controls (Gimbar Hansen and Ozlanski 2015).
Audit committee and its members
There are several members in audit committee in case of the organization CSR Limited. There
are non-executive directors as well in the audit committee of the firm (Csr.com.au 2018). The
members in audit committee are as follows:-
 John Gillam
 Penny Winn
 Matthew Quinn
 Mike Ihlein
However, it can be also inferred there is no audit committee charter that have been disclosed in
the financial reports of the firm. In addition to this, it can be also deduced that the main role
and function of the audit committee is to manage and monitor internal policies and procedures
of financial reporting of the firm. In addition to this, they can also provide a written advice to
the firm in case of any non-audit services provided by the auditors.
Type of Audit Opinion:

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The latest annual report of the CSR Limited is pretty clear in defining the opinion of the auditors
of the company, Deloitte where they claimed that the organization has prepared and published
all their financial statements in accordance to the rules and regulations of Corporations Act
2001. The auditors were accurate in justifying that the users will be able to get the correct and
impartial interpretation of the financial performances of the company CSR Limited from the
financial statements presented. The auditors of Deloitte also mentioned that the concerned
organization CSR Limited has the agreement for the financial reporting with the standards of
Corporations Act 2001 and Australian Accounting Standards in their presentation of the
financial report (Csr.com.au 2018).
Contrast in the Responsibilities of auditors and managers
The main objective or the responsibility of the directors of CSR Limited in the production
of the financial report is to formulate and present the financial statistics or the statements after
the essential agreement with the regulatory principles of Australian Accounting Standards and
Corporations Act 2001 (Christensen Glover and Wolfe 2014.) Along with that, the list of the
responsibility of the directors also includes the evaluation of the capability of the organization
in remaining operation and increasing the growth rate of the profit. The material misstatement
is one of the prime concern for the organizations conducting an audit of the assets and
liabilities of the organization and in this case the auditors need to take the responsibility of
achieving the much needed assurance of the fact that there is no presence of any material
misstatements in the financial statement of the concerned organization. Along with this the
auditors are responsible in producing the fair and exact opinion from the evaluation of the
material misstatements. Apart from this the auditors are liable for the correct evaluation of the

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factors like valuation of the accounting policies, internal control mechanism along with the
analytical presentation of the going concern status and others. In addition to this, the auditor
needs to evaluate the foreseeable events of the organization and assess the historical process
of evaluation followed the firm while preparing their respective financial statements (Köhler,
Ratzinger-Sakel and Theis 2016).
Material Successive Events:
The organization CSR Limited are subjected to experience two successive events in the
year 2018 which are the payment of the dividend after the 31st of March 2018 and the sale of
the additional land at Horsley Park. In case of dividend amount, the management of CSR
Limited decided to pay 13.5 cents per share to the shareholders of the firm which will 75
percent franked. However, the total amount of final dividend has not been recognized in the
financial report as of 31st March, 2018 (Csr.com.au 2018).
For the mentioned events of Horsley Park, the organization CSR Limited are in expectation of a
profit of 30 million US dollars before the tax in the financial statement on 31st March 2019. The
assessment of the mentioned events by the auditors is instrumental in describing that these
events do not contain any sort of material impact on the financial statements of the concerned
organization.
Auditor’s Evaluation of the Material Information with respect to stakeholders
The analytical description of the auditor’s report and the financial statements make it
significantly clear that the auditors have evaluated the financial events of the CSR Limited in the
most suitable manner. The conduction of the operations for the audit is observed to follow all

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the rules and regulations of Corporations Act 2001, APES 110 and the Australian Auditing
Standards. The effective management of the events by the auditors is visible with the
communication of the crucial audit matters and the applied audit procedures in the annual
report of 2018 (Bédard, Gonthier-Besacier and Schatt 2017).
Scope of Material Information Missing:
From the evaluation of the annual report of the mentioned organization for the year
2018 that the company, it can be inferred that Deloitte have effectively assessed the important
audit matters and their assessment also provides sufficient focus on these issues with the help
of the different forms of audit procedures. It is also evident that proper communication took
place from the part of the auditors of Deloitte to the stakeholders of the CSR Limited through
the audit report informed about the crucial audit matters. The operational assessment of the
work of the auditors makes it pretty clear that they have not missed any opportunities of the
evaluation of the material information regarding the company. However, on the contrary, it can
be also inferred that an effective charter of the audit committee was missing in the report of
the firm.
Follow-up questions
There can be many follow up questions that can be evaluated for the auditors of CSR Limited
which are as follows:-
 Are there any other key audit matters that can be considered?

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 What are the analytical procedures followed in order to assess the material issues of the
firm CSR Limited?
 What are the contingency plan for any kind of changes in business cycle?
 What feedback have been taken from the internal auditors of the firm? (Gimbar Hansen
and Ozlanski 2015).
Conclusion
It can be concluded that one of the principle importance of auditing lies in the fact that helps to
make sure organization is in the least risk zone. From the above analysis, it can be inferred that
the auditors of CSR Limited have incorporated all the audit procedures in an effective manner.
Deloitte have identified two key audit matters and have evaluated both the audit matters by
following effective audit procedures. It has also been seen that Deloitte provides both auditing
and non-audit services to the firm CSR Limited. However, in return, they take remuneration as
well. From the audit remuneration report, it has been seen that there has been a fall of
percentage in case of total auditor’s remuneration. In addition to this, there is no proper
charter of audit and risk management committee, though their presence inevitable. However,
Deloitte has provided positive opinion regarding the financial report of CSR Limited. In addition
to this, it can be also inferred that there are two material subsequent events which are in the
form of dividend and additional land at Horsley Park. However, the stakeholders can be
satisfied with the material evaluation of financial reports of the firm and there are no
information missing apart from the audit committee charter. From this, it can also be concluded

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that the annual report of CSR Limited meets all the requirements and standards which have
helped the organization to present a fair view of their operations to all its stakeholders.
References
Asien, E.N., 2015. Firms' attributes determining auditors' remuneration: empirical evidence
from Nigeria. International Journal of Auditing Technology, 2(4), pp.297-315.
Bédard, J., Gonthier-Besacier, N. and Schatt, A., 2017. Analysis of the Consequences of the
Disclosure of Key Audit Matters in the Audit Report.
Blay, A.D. and Geiger, M.A., 2013. Auditor fees and auditor independence: Evidence from going
concern reporting decisions. Contemporary Accounting Research, 30(2), pp.579-606.
Cannon, N.H. and Bedard, J.C., 2016. Auditing challenging fair value measurements: Evidence
from the field. The Accounting Review, 92(4), pp.81-114.
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
on 20th Sep. 2018].
Gimbar, C., Hansen, B. and Ozlanski, M.E., 2015. Early evidence on the effects of critical audit
matters on auditor liability. Current Issues in Auditing, 10(1), pp.A24-A33.

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Hayes, R.S., Gortemaker, H. and Wallage, P., 2014. Principles of auditing: an introduction to
international standards on auditing. Prentice Hall, Financial Times.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.
Köhler, A., Ratzinger-Sakel, N.V. and Theis, J., 2016. The Effects of Key Audit Matters on the
Auditor's Report's Communicative Value: Experimental Evidence from Investment Professionals
and Non-Professional Investors.