Audit and Risk Management in NAB

This assignment explores the audit process in National Australia Bank (NAB), focusing on the role of audit in ensuring the accuracy and reliability of financial records. It discusses various types of business risks, including strategy risk, operational risk, reputation risk, and compliance risk, which can affect the audit process. The assignment also touches upon the importance of fair and right entry and record-keeping for systematic and proper auditing.

Auditing and
assurance

Executive summary
This study was covered that national Australian bank does many operational work like
provide retail, wholesale and insurance services to customers. It was covered that business
risks like operational risk, strategy risk and reputation risk that impact on audit of
organization. This report was also covered many types of accounts of NAB and risk also
contain with all accounts of organization.

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Areas of operations..................................................................................................................1
2. Business risk that impact on audit...........................................................................................1
3. Three accounts of national Australian bank and evaluate significant risk...............................2
4. Royal commission....................................................................................................................3
5. Would you undertake audit or not...........................................................................................4
Conclusion.......................................................................................................................................4
References........................................................................................................................................5

INTRODUCTION
Audit is a systematic and effective evaluation and analyze of books, annual records and
documents of organization that prove fair and accurate records. Audit is conduct internally and
externally in organization (Knechel and Salterio, 2016). Audit is an assurance service that
provide confidence related to internal and external financial statements. National Australian bank
is a public organization that provide banking and financial services. It was founded in 1982 and
it headquarters situated in Bourke street Docklands, Melbourne. 35063 employees engaged in
this organization and it provides their service in Australia and new Zealand. This report will be
cover key areas of operations, risk related to audit.
1. Areas of operations.
NAB conduct operation in different areas for provide well services to consumer as well
as increase profitability of organization. So it does operations in areas like:-
Retail operations :- NAB does operation work in retail banking so through this it
provides services to public like mortgages, loans, deposit and checking accounts. It means that
accept deposit from public and give interest for increase investment. It also lends loans to public
through amount of deposit and charge high interest rates that it increase profit and revenue of
banks.
Wholesales operations :- NAB also operate wholesale banking that means it deals with
large customers and companies so through this it provides loans to huge companies and clients. It
helps in increase investment. It focuses on increase large numbers of investment for earn more
profit (Ahmed Haji and Anifowose, 2016).
Insurance :- NAB also provide insurance services to customers like individual,
organization. It is a contract for financial loss but it not reduces risk. It recovers loss may occur
in future and insurer provide this policy to policy holder. Insurance like life insurance, general
insurance.
2. Business risk that impact on audit.
Business risk reduce profit of organization that affect to audit of NAB. Many types of
risk are present that decrease possibility of earn profit and create threats in achieve target of
organization.
Inherent risk :- this risk is related to financial statement that create through material
misstatement. It majorly raises due tom errors. It is very huge error because it includes many
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things and transaction also made very complex so it creates huge problem in audit because
auditor can not evaluate right things and through little error all transaction make wrong. Audit
affected through this because real and fair revenue and expenses evaluation become more
difficult.
Control risk :- it is a risk of material misstatement and it includes fraud and error occur
in financial statement. It is created and raise due to lack of control in organization and time to
time internal audit not conduct ion organization that affects on audit. Financial managers also not
control on books and statements that create risk. Audit affected through this because it has to
audit all of things and evaluate all data and books very deeply so that consume more time.
Detection risk :- this risk is created when auditor fails in detect errors and frauds through
audit that means if it fails in prevent material misstatement so it creates risk. Auditor is
responsible for detect errors from financial statement and books and accounts of organization
and if it fails in this work due to fraud and error so it creates problem in audit and effect it.
(Graetz and Franks, 2016).
Compliance risk :- this risk is created problem and impact on audit. It means that if
NAB not follow all rules, accounting standards, regulation and legislation so it can't exist with
long term and quit it because through this organization get helps in meet their objective and
employees and members of bank do not work proper. Audit effected through this risk because
auditor not get real and accurate books of accounts. So through ignorance of standard and rules
risk increase and fraud and errors can not reduce.
Strategic risk :- it is a common risk of organization that direct effect on audit because it
creates through mismanagement and top management not make right strategy so it may fall profit
and revenue of NAB. Many types of product launch in this organization and existing customers
not accept new product so it causes of strategy risk that is created due to lack of management. If
organization do not achieve their target and not pay tax and do not make strategy for effective
audit that put impact on audit (Begenau, 2018).
Operational risk :- it is also major risk for NAB because it is created through internal
performance that means if resources of organization not work in proper way so it creates risk.
But it easily prevents through replace resources. In this organization if resources like computer
and employees are not work properly and do not record all transaction properly so it creates
mistake so it impacts on audit.
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3. Three accounts of national Australian bank and evaluate significant risk.
Many types of annual and financial reports prepare by national Australian banks. Reports
are prepared for maintain all transactions and keep annual records of organization. Three types of
accounts prepare in organization like balance sheet, cash flow and income statement.
Balance sheet :- it is a type of report that prepare by organization in end of financial year and it
shown whole financial position of organization. This statement include assets and liability of
organization and shown that at end of financial year national Australian bank has quantity of
assets and liability and assets are sufficient or not for payment of all liability.
In NAB investment increase in 2018 compare to last five year and bank also lend more
loans to customers it is increase in 2018 that include mortgage loans and business loans. Liability
also increase because organization increase investment from people for earn more revenue but in
2018 time deposit and demand deposit both decrease compare to 2017 that decrease liability, tax
liability increase every year that impact on overall liability and increase continue (Del Negro
and Sims, 2015).
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Through balance sheet of NAB 2018 shows that credit risk present in organization
because it provides loan of higher amount and to organizations and if they can not repay the
amount of loan so it increases risk. Failure reason of pay that loss in business, decrease income
that create debt risk and it reduces profit and revenue of organization. Through this good credit
decrease and bad credit increase.
Cash flow statements :- it is a statement that make by national Australian bank. Its include all
transaction of inflow and outflow of cash of organization. It means cash inflow in organization
through sales of assets and profit and cash outflow means cash goes from organization through
pay of liabilities. It includes three types of fund like funds from operations, fund from investment
and fund from financing.
NAB cash flow statement of 2018 shows that operations through income decrease
compare to last years. Through investing activities cash flow also decrease because last year cash
flow more than 2018 and financing activities increase in organization that means cash flow
through this activity increase like cash dividend growth.
Market risk shows through this statement because investment decrease in NAB that
include interest rate risk and equity risk. So investment reduce through interest rate of
organization fluctuate and it creates risk. NAB increase their stock price as well so it decreases
their investment and operation and cash flow statement show these things.
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Income statement :- it is a financial statement and it shows profits and loss account through this
NAB prepare statement and use all transaction like income and expenses in particular period. So
income statement of 2018 shows that income from interest increase compare to past years and
expenses related to interest also increase. So in this statement audit risk show because auditor
may issue in evaluate and conduct audit because they provide fraud and error report that create
risk in organization (Tian and Zhang, 2016).
4. Royal commission.
Many types of deficiency occur in books of NAB and royal commission highlight all
errors and frauds during auditing. So it will take a tender so errors and deficiencies impact on
their decision. Deficiencies like omission is shows through audit. Omission includes forget entry
of expenses and enter transaction of sale of goods that it create major issue. NAB will take tender
so it decisions effected because if they enter wrong entry so it can't analyze income and
expenses.
Reversal is also proved in audit that NAB operation members enter wrong entry and enter
debit transaction in credit side. So decision taking process very difficult by organization related
to tender because it can not evaluate right income and profit. Different types of errors show in
audit report and it creates problem in making decision. NAB when evaluate their profit and
income so it can't do that (Aobdia, Lin and Petacchi, 2015).
5. Would you undertake audit or not.
Above all things and process like audit, risk and other thing I evaluate and take decision
that I would like to take audit. Because it is very large bank and very popular. It goodwill in
market also very well established. Through this report of audit show many deficiencies and I
evaluate that lack of management and carelessness it occurs. I audit of NAB and prevent and
detect all errors and fraud. I also provide all tips and tricks for reduce errors that helps in
maintain all books and records. I also advice to top management for make strategy very
effectively and also provide helps in increase profit and revenue.
Conclusion
From above study it has been summarized that audit is a systematic and proper
evaluation and analyse records and books of accounts. That is use for assure all things of
organization. It also covered that many types of business risk present in organization like
strategy risk, operational, reputation and compliance risk that affect to audit process of
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organization. So it concludes that fair and right entry and record is very important for
organization that helps in systematic and proper audit.
References
Books and journals
Knechel, W.R. and Salterio, S.E. 2016. Auditing: Assurance and risk. Routledge.
Ahmed Haji, A. and Anifowose, M. 2016. Audit committee and integrated reporting practice:
does internal assurance matter?. Managerial Auditing Journal. 31(8/9). pp.915-948.
Graetz, G. and Franks, D.M. 2016. Conceptualising social risk and business risk associated with
private sector development projects. Journal of Risk Research. 19(5). pp.581-601.
Begenau, J. 2018. Capital requirements, risk choice, and liquidity provision in a business cycle
model. Risk Choice, and Liquidity Provision in a Business Cycle Model (March 6,
2018).
Del Negro, M. and Sims, C.A. 2015. When does a central bank׳ s balance sheet require fiscal
support?. Journal of Monetary Economics. 73. pp.1-19.
Tian, J.Y. and Zhang, Z.Y. 2016, August. Improvement and enhancement of the income
statement. In 3d International Conference on Applied Social Science Research (ICASSR
2015). Atlantis Press.
Aobdia, D., Lin, C.J. and Petacchi, R. 2015. Capital market consequences of audit partner
quality. The Accounting Review. 90(6). pp.2143-2176.
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