Audit and Assurance Program for BHP Billiton

The audit and assurance program is adopted by the auditors to identity whether the information and details shared by company is right or not. Every organization needs to keep the transparency in its business financial reporting frameworks if it wants to keep its business more sustainable in long run. This report has focused on the auditor’s roles, responsibilities and key audit and assurance program of the auditors which it has undertaken to audit the financial statement of company.

itonBHP BILL
Audit and assurance program
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EXECUTIVE SUMMARY
The audit and assurance program is adopted by the auditors to identity whether the
information and details shared by company is right or not. Every organization needs to keep
the transparency in its business financial reporting frameworks if it wants to keep its business
more sustainable in long run. This report has focused on the auditor’s roles, responsibilities
and key audit and assurance program of the auditors which it has undertaken to audit the
financial statement of company. As per the audit report of Auditors, BHP Billiton Company
has complied with the all applicable laws and regulations and maintains sustainable business
practice in long run. Directors have also given their declaration on the sustainable business
practice of company.
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Table of Contents
EXECUTIVE SUMMARY...................................................................................................................1
INTRODUCTION.................................................................................................................................2
AUDITOR’S INDEPENDENCE..........................................................................................................2
PROVISION OF NON-AUDIT SERVICES.........................................................................................3
ature of the non audit serviceN - .........................................................................................................3
AUDITER REMUNERATION.............................................................................................................3
KEY AUDIT MATTERS......................................................................................................................4
AUDIT COMMITTEE & AUDIT CHARTER.....................................................................................6
STRUCTURE....................................................................................................................................6
FUNCTIONS........................................................................................................................................6
RESPONSIBILITIES........................................................................................................................7
AUDIT OPINION.................................................................................................................................7
DIFFERENCE BETWEEN THE RESPONSIBILITIES OF MANAGEMENT AND AUDITOR.......8
MATERIAL SUBSEQUENT EVENTS................................................................................................9
CONCLUSION.....................................................................................................................................9
REFERENCES....................................................................................................................................11
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INTRODUCTION
This report emphasises upon the key audit matters, independence of the auditors and
their responsibilities while auditing the financial statement of company. Auditor who is
auditing the financial statement of company is indulged in auditing the books of account of
company. The KPMG is the audit firm which has undertaken the audit work program of the
BHP Billiton Company. This report reflects the audit functions, independences,
responsibilities and key audit matters which would be undertaken by the KPMG in its audit
reports and functions. The key audit matters are analysed to identify the disclaimer and issues
faced by the BHP Billiton Company in its audit report program. This report, has reflected
that audit remuneration paid to auditors for its audit services and other non-audit service
given by auditor to company. It helps in analysing the auditor’s responsibilities, roles and the
how director’s responsibilities differ from them. The audit assurance program and key audit
matters have also been discussed in this report.
AUDITOR’S INDEPENDENCE
It is analyzed that key auditor’s independences is based on the relation of the auditor
with the company. The KPMG is the independent auditor of the BHP Billiton. It has no
pecuniary relation with company and also worked in the best interest of the stakeholders of
the organization. Auditor’s independences are very much needed before hiring firm as auditor
in Company. At the time of appointing, KPMG as auditor, BHP Billiton Company took the
auditor’s independences letter from the firm. As per the listing rules and accounting
corporation laws, no auditor who has direct and indirect relation with the company could
audit the financial statement of company (Louwers, et al. 2015). Furthermore, no other
member of the audit firm should have any relation with the company. Otherwise that audit
firm will not be longer qualified to audit the financial statement of company. The auditors
are in the fiduciary position towards the stakeholders and it is their duty to check whether
company has complied with the applicable audit program. In order to determine the eligibility
of the auditor’s independences, auditors and company both needs to disclose their relation
with each other on timely basis otherwise the auditors will not be able to audit the financial
statement of company (BHP Billiton Company., 2017).
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PROVISION OF NON-AUDIT SERVICES
There are several times when KMPG had to give its non-audit services to BHP
Billiton Company. it has been indulged in providing the tax planning, insurance and other
accounting services which assists organisation to set up effective accounting recording
system in its financial statement. However, all the non-audit services given by KPMG have
been disclosed in the annual report of company. There is complete disclosure has also been
made in the notes to account of company that all the non-audit services taken by company
form the KPMG have been done at arm length price. This price has been determined on the
basis of other external factors (Louwers, et al. 2015). The main non-audit services provided
by the auditors are tax planning and accounting services. These services have assisted BHP
Billiton Company to strengthen its legal compliance program and set up strong harmonization
with its domestic and international reporting frameworks (BHP Billiton Company., 2017).
Nature of the non-audit service
All these non-audit services given by the auditors are of revenue nature and recorded in the
profit and loss account of company and auditors.
AUDITER REMUNERATION
Auditors are persons who audit the financial statement of company so that
stakeholders could trust that all the information shown in the books of accounts of company
is genuine. The audit remuneration is the amount of compensation given by the company for
the audit services rendered to it by the auditors. It is fixed with the mutual agreement while
the appointment of the auditor is made. KPMG has been receiving the remuneration from the
BHP Billiton Company for its tax compliance services, accounting service and other non-
audit services given to clients (BHP Billiton Company. 2017).
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KPMG has given auditing and non-auditing services to BHP Billiton Company and the same
have been paid as remuneration to it. The table has been shown for the same.
Audit remuneration to KPMG
for its audit and non-audit
services.
JUNE 2017
($) in
million
JUNE 2016
($)in
million
% change
Amount of consideration paid to
KPMG for the audit services (BHP
Billiton Company. 2017).
$ 1587 $ 1685 30%
Amount of consideration paid to
KPMG for the non- audit services .32 1.02 170%
After analysing the audit report, it is found that auditors has received good amount of
consideration for its audit services. However, as compared to last year data, compensation for
the non-audit services has increased by 170% as compared to last year data (BHP Billiton
Company. 2017).
KEY AUDIT MATTERS
The key audit matters are disclosed by the auditors in its audit report. Ideally, the
main key audit matters of the KPMG with the BHP Billiton is that assists in implementing the
impairment test, use of the assertion test and observation to identify the right value of the
assets (BHP Billiton Company. 2017).
This table has reflected the key audit matter, audit procedure and classification of the audit
procedure which have been used by KPMG in its audit program (BHP Billiton Company.
2016).
KEY AUDIT MATTER AUDIT PROCEDURE CLASSIFICATION OF
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PERFORMED AUDIT PROCEDURE
1. Audit control model to
evaluate and assess the
inherent, detention and key
audit risk in the business.
The auditors needs to set the
materiality test in its books of
accounts on the basis of the
nature of the business,
complexity of the reporting
statement and viability of the
financial statement which it
could have undertaken in its
books of accounts (Knechel,
& Salterio, 2016).
Use of assertion test, control
risk model and observation
would be used by the
auditors while setting up the
ranking of the discrepancies
in the books of accounts
2. Undertaking merger and
amalgamation with other
small organization
Auditor’s analysis whether
BHP Billiton company has
complied with the applicable
laws and regulations while
setting up the effective work
program and business
transactions (BHP Billiton
Company. 2017).
The substantive test,
observation and other audit
risk model would be used to
assess the consideration
given to other organization.
3. Impairment test as per the
AASB 136
The impairment test would
be followed to identify the
true and fair value of the
assets and liabilities. It will
assist organization to disclose
the right value in the books
of accounts of company.
The analytical procedure and
substantive test is the true
indicator for valuing the
books of account of company
(BHP Billiton Company.
2017).
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AUDIT COMMITTEE & AUDIT CHARTER
As per the listing rules and regulations, in Australia, every listing company needs to
appoint audit committee and audit charter who could manage the audit services and internal
control work in the best interest of the stakeholders (Louwers, et al, 2015). These committee
and charter check the key audit matters and issues in the financial statement of company.
The detail of the audit committee and charter could be seen in the auditors detail given in the
annual report of company. These are the key authority that checks the viability of the
prepared financial statements and assists auditor to form his audit report in effective manner
(BHP Billiton Company. 2017).
STRUCTURE
The structure of the company for its audit compliance program is as per the listing rules and
compliance laws. Company has one audit committee which is manage by the chairman of the
committee name Lindsay Maxsted and one member of the audit charter named Malcom
Broom. The Andrew Few and Marlay have also undertaken the audit program to evaluate the
books of account of BHP Billiton (BHP Billiton Company. 2017).
(BHP Billiton Company. 2016)
FUNCTIONS
There are several audit functions which have been undertaken by the KPMG while rendering
the audit services to BHP Billiton Company (BHP Billiton Company. 2017).
 Evaluating the going concern capacity of the organization
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 Identify whether company has given proper notes to accounts and other details for supporting
the data (Sirois, Bédardand, & Bera, 2018).
 To implement the internal audit control check.
 Ensuring whether there is any discrepancies in the recorded financial statements
 To look into the statutory requirement and legal compliance program which company needs
to comply?
RESPONSIBILITIES
There are several audit responsibilities of the KMPG which he should discharged while in the
position of the auditor of company (Štangová, 2017).
 He needs to implement the assertion test and observation while going for the internal audit
program.
 Assess whether the details shown in the books of account is reflecting the right value or not.
 Identify the fraud, error and issues in the financial reporting frameworks.
 Needs to identify that company has followed Australian listing rules and international
accounting standards while recording the details in books of accounts.
 Issue of the auditor report (Thompson, 2018).
AUDIT OPINION
The audit report is given by the auditor to reflect the audit point of view and where
company has failed to comply with the listing rules and corporation laws while accounting
the required details. This audit opinion is very much necessary for keeping the business more
sustainable and making the stakeholders vigilant with the any discrepancies and issues in the
financial statement ( Baldauf, Steller, & Steckel, 2015).
As per the audit report given by the KPMG, it is found that BHP Billiton company has
complied with the all the laws and regulations and also established harmonization in its
domestic and international reporting. However, due to the audit procedure and assertion test
implemented by the auditor, there may be chances that company might have hidden required
information. KPMG on the basis of the shared information and annual report has given non-
qualified audit report which reflects that company has no discrepancies and issues in its
reporting frameworks. ON the other hand, due to the sustainable business practice, it has also
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maintained sustainable business practice which has kept resulted to keeping the business
functioning in long run (Byrnes, et al. (2018).
There are chances that some internal frauds and misstatements are forged deep intentionally
that cannot be levelled up with the procedures that the auditor performed. Every kind of work
that the auditor is doing in his professional capacity is bound to follow the independence
requirements. The auditor has also maintained its independence while auditing the financial
statement company. As per the declaration of the auditors, company will sustain its business
in long run (BHP Billiton Company, 2017). .
DIFFERENCE BETWEEN THE RESPONSIBILITIES OF MANAGEMENT AND
AUDITOR
Auditors acts for the stakeholders and in order to make the financial statement reflecting the
true value, they analysis and audit the financial statements. They identify all the invoices,
supporting files and other details which they could use to identify whether the recorded assets
are recorded or accountant with the proper value or not. They also use the audit risk model to
determine the materiality level in the books of account of company. They identify whether
the management representation letter given by the management is reflecting all the required
details and invoices for the accounted details in the books of account of company. It is their
responsibilities to check the material misstatement which may be there or could be found in
the accounted details of company (Durrah, et al. (2016).
The main responsibilities of auditors are to showcase any discrepancies and issues made by
company in its financial statement. Passing audit report and reflecting the true and fair view
of the books of accounts of company is one of the audit responsibilities of the auditors. He
needs to identify whether the funds provided by the shareholder are not misused and
deployed in properly (Kajananthan,& Velnampy, 2014).
On the other hand, directors works for the Organizaiton and he has to take all the decisions
and strategic planning in the business interest and its long term sustainability. Furthermore,
the main responsibility of the director is to give management representation letter to its
auditor so that they could be satisfied that all the information shared with them is fair.
Directors also has responsibilities to direct accountant to comply with the all the legal laws
and accounting standards so that company could harmonize with its domestic accounting
laws and international reporting framework (Agha, 2014).
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MATERIAL SUBSEQUENT EVENTS
The material subsequent events which have been disclosed by the Company are based on the
profitability, liquidity and other events which have occurred in the last previous year. The
profitability of company has negatively impacted and decreased by 12% since last year it has
resulted to loss of AUD $ 7.5 million and the reason behind is based on the excess investment
in this research and development department. It has also invested AUD $ 334 in its research
and development department. This investment is made in order to discharge the CSR
liabilities but also negatively impacted the production cost of the business Furthermore, last
year events in Brazil have also negatively impacted the business sustainability and long term
brand image of company (AICPA., 2017).
Hidden and not disclosed information
There are no such material subsequent events which have been hidden and not disclosed by
the company in its annual report. However, due to the high complexity of the legal
compliance and listing rules, there might be inherent risk in its accounting and reporting
frameworks. This may be found by implementing the audit risk model (Appelbaum, Kogan,
& Vasarhelyi, 2018).
CONCLUSION
The audit report reflects how well company has complied with the accounting and
auditing laws while formulating its financial statement. Auditors act for the best possible
outcomes and works in the fiduciary duty to its stakeholders. After analyzing the facts, it is
inferred that auditors has given no disclaimer on the financial statements prepared by the
Organizaiton. It has given clear chit in its non-qualified audit report stating the fact that it has
complied with all the applicable laws and regulations and disclosed all the material
information in its books of accounts. There is no discrepancies and misstatement given by
company to its stakeholders which may negatively impact the decision made by them. The
key audit matters have also shown that KPMG has given several audit and non-audit services
to company. The management representation letter has been taken by auditors while auditing
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the company and disclosed that company is working in the best interest of the stakeholders
and would be more sustainable in long run.
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