Auditing and Assurance

Running head: AUDITING AND ASSURANCE
Auditing and Assurance
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ASSURANCE
Table of Contents
Introduction..........................................................................................................................2
Part A...............................................................................................................................2
1. Conducting Analytical review of the financial statement for identifying areas of
concern.........................................................................................................................................2
2. Formulating the audit procedures and responding to the areas of concern.................3
Part B...................................................................................................................................4
1. Explaining the team’s understanding of the concept of audit quality.........................4
2. Explaining and identifying 3 steps the accounting bodies have taken in Australia to
improve the quality of audit.........................................................................................................5
3. Importance of maintaining audit quality in carrying out an audit...............................6
Conclusion...........................................................................................................................7
References............................................................................................................................9
List of Appendix................................................................................................................11

2AUDITING AND ASSURANCE
Introduction
The reporting aspects of the study will focus on evaluating the annual report of AMP Ltd
for the year ended 31 December 2017. The study will include analytical review of the financial
statements put forward in the planning phase and included the concerns on how the relevant
assertions and accounts are impacted. The next step is seen with formulating the relevant audit
procedures for responding to the areas of concern in the planning phase. The second section of
the study has been able to focus on the concept of the audit quality as per the given case study. In
addition to this, it has also explained about identifying three steps for the initiatives taken by the
accounting bodies of Australia for improving the quality of audit. The final section of the study
has been further able to provide the relevant analysis on how the teams will be able to maintain
the adequate quality for carrying out the relevant audit procedure and provide the justification for
the same.
Part A
1. Conducting Analytical review of the financial statement for identifying areas of concern
As per the assessment of the annual report Risk is inherent in the business of AMP. The
company has faced key business challenge in terms of adverse impact of the delivery of the
strategies. A significant aspect of the business risk faced by the company are discerned with
competitor and customer environment. In addition to this, some of the other risk aspects of the
company are seen with the risk of liquidity concerns. The high amount of liquidity has created
major concerns for the company which are associated with improper utilization of available
short-term finances. This risk is seen with current ratio of 8.18 in 2017. Such a figure of the
current ratio is considered to pose a significant concern of liquidity. A similar finding is seen to

3AUDITING AND ASSURANCE
be evident in case of quick ratio. The financial risk of the company is further inferred with
reducing Fixed Asset Turnover Ratio (Tepalagul & Lin, 2015).
Additionally, some of the various types of the other areas of concern for the company can
be determined in form of strategic risk, credit risk, market risk, insurance risk, operational risk
and concentration risk. The strategic risk loss of AMP Ltd. can be directly considered with loss
of forgone value linked with competitive positioning and strategic decisions. Additionally, the
credit risk of AMP Ltd. is identified in terms of risk of forgone value pertaining to the non-
payment of contractually required payment by a counterparty. The market concerns can be
determined with forgone value pertaining to the negative fluctuations of the investment values
and market prices (Bryce, Ali & Mather, 2015). The various types of the insurance risk concerns
are taken into account pertaining to the adverse development in the mortality rate, changes in the
behaviour of the policyholder and including the longevity and expense. The concentration risk is
seen with a series of exposures for producing losses. Additionally, the operational risk is inferred
with risk of loss which is a resultant from the failure of the internal process pertaining to the
external events (Ball, Tyler & Wells, 2015).
2. Formulating the audit procedures and responding to the areas of concern
As per the information published in the annual report of AMP Ltd. it may be discerned
that risk is inherent in the business and AMP takes the measured risk for achieving the strategic
objectives. The company has been able to set a clear strategic plan for identification of the
enterprise risk and aiding the overall process of the business. This is important for the company
in understanding and identification of the preliminary risk. The “Enterprise Risk Management
(ERM)” framework maintained by the company has enabled the company in identifying,
reviewing and monitoring the emerging risk factors which may affect the business. AMP has
recognised that the effective risk management with “Enterprise Risk Management (ERM)”