Audit and Assurance Program of Flight Centre Travel Group Limited

This report emphasises upon the audit and assurance program of the auditors which assists in increasing the overall effectiveness of the financial statement of company. The auditors, independences, assurance, responsibilities and auditors opinion have been given on the financial statement of Flight Centre Travel Group Limited.

HI6026 Audit,
Assurance and
Compliance
Trimester 2 2018
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EXECUTIVE SUMMARY
This report emphasises upon the audit and assurance program of the auditors which
assists in increasing the overall effectiveness of the financial statement of company. The
auditors, independences, assurance, responsibilities and auditors opinion have been given on
the financial statement of Flight Centre Travel Group Limited. Ernst & Young has given non-
qualified audit report on the financial statement of company and shown that company has
complied with the applicable international financial accounting standards. The Ernst &
Young has also declared that company will be sustainable in long run. The auditor of Flight
Centre Travel Group Limited has also provided non-audit services to company apart from the
audit services and all the transactions of the non-audit services have been placed at arm
length price. The compliance program of company is effective and auditor’s opinion has
shown the positive implication on the financial and legal sustainability of company in long
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Table of Contents
EXECUTIVE SUMMARY...................................................................................................................2
INTRODUCTION.................................................................................................................................3
Independence of the auditors.................................................................................................................4
PROVISION OF NON-AUDIT SERVICES.........................................................................................4
AUDITER REMUNERATION.............................................................................................................5
KEY AUDIT MATTERS......................................................................................................................6
AUDIT COMMITTEE & AUDIT CHARTER.....................................................................................7
STRUCTURE........................................................................................................................................7
Auditor’s functions and responsibilities................................................................................................8
AUDIT OPINION.................................................................................................................................9
Difference of Responsibility.................................................................................................................10
Responsibility of director.................................................................................................................10
RESPONSIBILITY of auditor..............................................................................................................10
MATERIAL SUBSEQUENT EVENTS........................................................................................................10
CONCLUSION...................................................................................................................................11
REFERENCES....................................................................................................................................13
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INTRODUCTION
In recent times, it has become important for a company to assure that it operates its
activities transparently. Transparently into the business activities can lead to trust and
confidence on the part of stakeholders. All the information regarding the company is revealed
to its stakeholders through the Annual report. The one important information includes the
details of audit functions which will be undertaken by Ernst Young for setting up strong audit
and assurance program for the financial statement of company. The annual report has the
information of auditors, their remuneration system, and any non-audit services if provided by
auditor to the company. The report also has the information regarding the formation of audit
committee with the audit charter and the perception that each auditor. The opinion of the
auditor suggests improving or enhancing the profitability of the organisation. This report
brings out the discussion of independence of auditors, their responsibility, non-audit services,
and other auditor functions to know the material details of key audit matters of Flight Centre
Travel Group Limited. This report has also shown the key understanding on the auditor’s
independence and their responsibilities for setting up strong audit and assurance program
(Flight Centre Travel Group Limited, 2018).
Independence of the auditors
The auditor of Company is Ernst & Young who has been offering audit and assurance
services. The auditors have announced their independent declaration to acknowledge the
report of audit to the management of Flight Travel Limited. The auditors have stated that they
never tried to intervene and disturb the regulation imposed on them by the Corporation Act,
2001. Moreover, the auditors neither contravene the code of professional conduct nor their
independence as per stated in the Act. The key function of auditors is to reflect the
compliance program that is stated in the audit report of the company. Flight Centre Travel
Group limited appointed the audit committee to analyse the fair value of assets and liabilities
regardless of undervaluation recorded in the financial statement of the company (Flight
Centre Travel Group Limited, 2015).
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PROVISION OF NON-AUDIT SERVICES
The principles has stated in the APES 110 Code of ethics for the Professional Accountants
relates the non-audit services with the auditor`s independence. A set list of non-audit service
includes tax compliance and other services. It goes without saying it is difficult to hire the
human resource as the requirement, especially professional auditors. The non-audit services
offered by auditors are also accordance with the corporation act 2001. In order to derive and
extract maximum benefit from the auditor`s potential, Flight Centre Travel Group tries to
exploit the potential that the auditor have. The benefit from the auditor is only possible if
company starts getting professional assistance even in non-audit matters. To get the
assistance from the auditors even in the non-audit matters, the Company take care and respect
his independence. The company should not impose provisions that can hinder auditor`s
independence that is able to satisfy the audit and risk committee. Managing the current tax
compliance, several adjustment, and audit functions are the ways through which it can be
analysed whether the auditor is performing well to explicit the fair valuation of recorded
details (Flight Centre Travel Group Limited, 2017).
AUDITER REMUNERATION
The remuneration is paid to the head of audit committee. The committee comprises a
number of auditors as its member. The payment made to the lead auditor for all the services
such as audit services, non-audit services, the advice related to tax, and compliance is paid in
the consolidated form to the Audit committee. The remuneration is return payment that is
generally fixed in the annual general meetings (Murphy, & Hogan, 2016). The boards of
directors appoint the first auditor and further the first auditor has the team of auditors. The
expense of remuneration will include service expenses incurred in connection to those audit
services that are provided by the auditors (Flight Centre Travel Group Limited, 2016).
AMOUNTS RECEIVED OR
DUE AND RECEIVABLE BY
ERNST & YOUNG FOR:
JUNE 2017
($)
JUNE 2016
($) % change
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1. the audit and assurance services
offered by Ernst Young to
company
189.45
million
187.25
million 12.12%
2. The tax services extended by
Auditors 205.42 245.74 10.11%
Other non-audit services given by
Ernst Young 71.1millon 77.5 million 5%
KEY AUDIT MATTERS
The aim of engaging the audit matters in an organisation is not to modify the financial
statements of the company. The key audit matters focus on the auditors as the professionals
and inform the stakeholders as auditors keep the check on the operational of the organisation.
From the annual report of the company, various key audit matters can be identified that helps
in evaluating the performance of the auditors and fairness of books of accounts that are
shared by the company (Flight Centre Travel Group Limited, 2018).
The key audit matters shown in the auditor’s report has reflected that auditors needs to
implement the audit risk model to control the inherent, control and detention risk while
auditing the financial statement of company (Murphy, & Hogan, 2016). The Key audit matter
will be associated with the several details such as analysing the key discussion, compliance
program of company and committee engaged in analysing the financial matters of company
(Flight Centre Travel Group Limited, 2015).
KEY AUDIT MATTER AUDIT PROCEDURE CLASSIFICATION OF
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PERFORMED AUDIT PROCEDURE
1. Control the audit and
detention risk in the financial
statement
The internal audit program
will be set up and hold in
each and every general
meeting of company. The
audit risk model will be set to
identify the risk associated
with the financial statement.
Assertion test would be used
2. Recovery from the receivable
and bad debts
The credit rating of the
debtors and recoverable test
would be implemented to
identify the risk associated
with the process (Flight
Centre Travel Group
Limited, 2018).
Observation and external
control test would be used.
3. Valuation of the assets Use of the impairment test as
per the IAS 136 would be
used (Murphy, & Hogan,
2016).
Substantive test with the
analytical procedure.
AUDIT COMMITTEE & AUDIT CHARTER
Flight Travel Limited has formed its own audit and risk committee. All the members
of this audit and risk committee are no longer the executive members of the management.
Flight Centre Travel Group Limited has formed the audit charter committee that shows that
all the efficient audit charters help in evaluating the risk involved in items of financial
statements. The audit committee keeps a check on the audit members to evaluate whether the
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company has made default in complying with the accounting standards and laws. It will help
in mitigating the chance of trading that occur inside the company to maintain the long-term
sustainability of the business (Flight Centre Travel Group Limited, 2018).
STRUCTURE
Every organisation has its own pattern of executing and achieving its objectives. The internal
audit committee of the company has a secretary and audit officers. The number of audit
officer depends on the size of operation of the business and the need of the company. The
structure of Audit department is determined on the basis of non-executive and executive
auditors in the organisations. Non- executive chairman includes John Eales, Robert Baker,
and Colette Garnsey who are not the part of executive directors of Flight Centre Travel
Group Limited. Auditors of the company are responsible for analysing the annual report of
the company and maintaining the proper harmonisation between the national and
international accounting standards (Flight Centre Travel Group Limited, 2018).
Auditor’s functions and responsibilities
 Auditors are responsible for reviewing and providing recommendation to accept the corporate
reporting as per the required applicable framework.
 To check whether the key managerial person is representing the fair financial statements and
the books of accounts (Murphy, & Hogan, 2016).
 Auditors delegate audit services, non-audit services, and law & compliance advices to the
company. Audit and charter committee recommend and appoint independent auditors to work
and audit programs.
 To analyse how far the book value of assets and the liabilities is fair.
 To undertake the review of financial statements of the organisation whether the requirement
of law and compliance has been accomplished or not with their true understanding.
 Reviewing the appropriateness of estimations and policies, accounting judgements used by
the organisation to prepare the final accounts.
 Auditor has to consider which accounting principles and standards the company do follow.
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To advice, appoint, and recommend a most suitable external auditor. Existing auditors of the
company also assist the company to make remuneration policies and advice to remove any
independent auditors (Flight Centre Travel Group Limited, 2018).
 The charter and risk committee manages the internal audit functions of the company. It also
appoints the head of internal audit team as per the calibre to handle the team.
 Auditors helps the organisation to get the knowledge of relevant updates related to financial
reporting and undertake the important changes in relation to compliance field.
 To keep a check whether the external auditors are delegating their appropriate services to the
organisation`s books of accounts. To check how auditors are complying the requirement of
independent auditors which are expected out of their duty and service (Murphy, & Hogan,
2016).
 Auditors are responsible to keep a check and act as a fiduciary person especially to the
stakeholders in order to receive a transparent detail of the business operation and financial
statement of the company.
 Auditors provide non-audit services such as advices to expand the company`s operation,
insurance coverage details, analysing the financial reporting, assisting the accountants to
comply with national and international financial standards (Eilifsen, Hamilton, and Messier
Jr, W. F. (2017).
AUDIT OPINION
The auditors of the company announce unbiased and clear opinion of financial
situation of Flight Centre Travel Group Limited. As per the knowledge and experience of the
auditors, the financial statements of the company are made as per the law and compliance
requirement. According to the audit procedures, books of accounts and the financial
statements are maintained as per the provisions of Corporations Act, 2001. The auditors
accept in their report that regulations stated by Australian Accounting Standards and the
Corporations Regulations 2001 are followed properly. There are no misstatements as of now
that came into the knowledge of the auditor from the regulations performed. Moreover, the
auditors have appreciated and embraced the required independence delegated by the
directors. Auditors expect this independence throughout the audit. Despite auditor`s
independence, the audit report mentioned that the company meets all the ethical requirements
as per the APES 110 code of ethics for Professional Accountants. The perception of the
auditor’s report reflects that it is able to comply with applicable accounting rules and
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standards. The financial report discloses each applicable rule and standard. Further and at
last, a qualified annual and audit report generated by the auditors assist the stakeholders to
look into the performance and derive several information of different situation of the
organisation (Hammer, 2015). This information reflects the fair and true value of assets and
liabilities. This audit report becomes a source through which stakeholders can assess the
operations and make decision regarding financial investments. It is understood once the
company reports are checked by such experts and efficient auditors, the company becomes
confidence regarding its financial statements. Moreover, Auditor`s supervision boost the
confidence of stakeholders and lead their investment decisions (Mala, & Chand, 2015).
Difference of Responsibility
Responsibility of director
The directors of the company are the first owners of the company although; the aim of
directors is to make a business plan to expand the business operations. Nevertheless, it is the
duty of the director to intervene the preparation of financial statements. The directors have to
check whether the law requirements of the Corporation Act, 2001 and accounting standards
has been fulfilled or not. Moreover, the director has the responsibility to assess the capability
of consolidated group of auditor`s committee. The director`s responsibilities defines the
extent to which a director is liable to losses if the company fails due to its inability to comply
with laws and accounting standards (Murphy, & Hogan, 2016).
RESPONSIBILITY of auditor
The responsibility of auditor is to do appraisal of the financial statements prepared by the
organisation. Subsequently, the internal control in the organisation can provide reasonable
assurance. Nevertheless, if in case they still find discrepancies and issues of the financial
statements, they will hold liable for the losses. It assists in affirming that whether right value
of assets and liabilities is being revealed or not (Sirois, Bédard, & Bera, 2018).
MATERIAL SUBSEQUENT EVENTS
Impairment and Testing of Goodwill and Other intangible assets
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The matter of testing goodwill is the key audit matter in judging the auditor`s activities. It is
because there is a huge balance of loss on amount of total assets.
Audit Procedure- Impairment of Assets is preferred as a requirement in the AASB 136. To
check and assess the level of accuracy of cash flow statement and valuation of assets, a
valuation specialist is appointed to determine the scope of accuracy. There are certain
methods to forecast and assume the price of the asset such as book value, realisable value,
and present value. Auditor has to undertake a deep analysis of each method of asset
valuation. The procedure that is carried to execute the audit process can be fetched into the
test of control.
Business Acquisitions
A large number of business acquisition and collaboration has made it necessary to undertake
an efficient key audit matter (Worth, 2009).
AUDIT Procedure- The audit procedure carries the assessment of the procedures that are
followed by the entity within the laid down rules, regulation, and compliance of applying
accounting standard. The adequacy and estimation of valuation of asset is checked.
The audit procedure assists stakeholders to estimate the worth of an entity in the corporate
world through efficient test of control (Tepalagul, & Lin, 2015).
The audit procedure is preferred to be undertaken to estimate the fair value of the assets and
liabilities recorded in the financial statements (Wu, Hsu, & Haslam, 2016).
The material subsequent events include the events such as dividend declaration and large
takeovers, acquisition made during the year. It is undertaken to check whether the overtaking
and collaboration has been conducted successfully by complying all the necessary policies
and procedures. It also helps in increasing the transparency in the operation of Flight Centre
Travel Group Limited. A company conduct these events confidently only because the
organisation is aware it is reflecting the true picture of its operations in front of its
stakeholders. Material subsequent events reflect how efficiently the organisation performs
with complying the necessary applicable accounting standards and rules (Yew Wong, (2015).
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CONCLUSION
From the above discussion, it can be concluded that while going through the annual
reports of the Flight Centre Travel Group Limited, Auditor`s performance seemed perfect. No
material information was unnecessarily manipulated or modified. All the necessary
information is well presented and can be easily interpreted to estimate the worth. There were
no questions, which were not answered properly by the auditors. The report is based on
auditors independence stand apart in maintain the transparency of the business operation of
the business. Moreover, auditor should undertake its analysis responsibility seriously to
undertake and increase the overall outcome and efficiency by adding an effective audit
program to it.
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REFERENCES
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Uncertainty: Examining the Effect of Audit Materiality and Sensitivity Analysis
Disclosures on Investors’ Judgments and Decisions.
Flight Centre Travel Group Limited, 2015 retrieved, from
http://www.fctgl.com/investors/annual-reports/.,
Flight Centre Travel Group Limited, 2016 retrieved, from
http://www.fctgl.com/investors/annual-reports/.,
Flight Centre Travel Group Limited, 2018 retrieved, http://www.fctgl.com/investors/annual-
reports/.,
Hammer, M., (2015). What is business process management?. In Handbook on business
process management, 3rd ed, Springer, Berlin: Heidelberg.
Mala, R., & Chand, P. (2015). Judgment and Decision‐Making Research in Auditing and
Accounting: Future Research Implications of Person, Task, and Environment
Perspective. Accounting Perspectives, 14(1), 1-50.
Murphy, L. & Hogan, R., (2016). Financial Reporting of Nonfinancial Information: The Role
of the Auditor. Journal of Corporate Accounting & Finance, 28(1), pp.42-49.
Sirois, L.P., Bédard, J. & Bera, P., (2018). The informational value of key audit matters in the
auditor's report: evidence from an Eye-tracking study. Journal of Accounting
Horizons. 14(2), 12-50.
Tepalagul, N. & Lin, L., (2015). Auditor independence and audit quality: A literature
review. Journal of Accounting, Auditing & Finance, 30(1), pp.101-121.
Worth, R. (2009). Communication skills (1st ed.). New York: Ferguson.
Wu, C.Y.H., Hsu, H.H. & Haslam, J., (2016). Audit committees, non-audit services, and
auditor reporting decisions prior to failure. The British Accounting Review, 48(2),
pp.240-256.
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Yew Wong, K. (2015). Critical success factors for implementing knowledge management in
small and medium enterprises. Industrial Management & Data Systems, 105(3), 261-
279.
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