Assignment | Auditing and Assurance

Running head: AUDITING AND ASSURANCE
Auditing and assurance
Name of the Student
Name of the University
Author Note

AUDITING AND ASSURANCE
Executive summary:
The report is prepared to develop a client evaluation report for determining the tendering of
the audit of AMP Limited. For this purpose, an analysis of the annual report of AMP limited
along with the extensive research on the information presented in the report has been
conducted. The business risk faced by the company has been analyzed in terms of its impact
on the audit. In addition to this, the accounts at the risk of material misstatement based on the
analysis of business risk is also presented. The later section of the report demonstrate the
evaluation of the compliance of the organization with the principle of corporate governance.

AUDITING AND ASSURANCE
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................4
Identifying the areas of operations of AMP:..............................................................................4
Primary competitors of the firm:................................................................................................4
Identifying the laws or regulations affecting the operations of AMP:.......................................4
Identifying the risks impacting the audit of AMP:.....................................................................5
Identifying the accounts to be at the risks of material misstatement:........................................6
Evaluating the compliance of ASX with the ASX corporate governance council:...................7
Conclusion:................................................................................................................................8

AUDITING AND ASSURANCE
Introduction:
The paper is developed to perform an extensive research of the financial report of
AMP limited for assessing the business that would form the basis of undertaking audit risk.
The preliminary information in the financial report of the company is analyzed to decide
whether the tendering of the audit of AMP should be undertaken or not. AMP limited is a
company offering financial services and provides assistance to the customers in managing
their finances and achieving their financial goals. The company operates in New Zealand and
Australia offering retail superannuation, financial advice, self-managed superannuation
funds, corporate superannuation, and banking, insurance and investment management. In
addition to this, company is involved in managing investments in fixed income, equities,
multi asset and diversified funds (Corporate.amp.com.au 2020).
Discussion:
Identifying the areas of operations of AMP:
AMP is the company involved in managing wealth that operates in the areas and
offers solution such as wealth management, banking, superannuation, self-managed
superannuation funds, investing and retirement income. Wealth management is done by
helping customers in saving and living well in retirement. When it comes to banking,
customers are provided with services such as deposit, home loans, investment and residential
property and transaction accounts. AMP capital helps in managing the fixed income, equities,
infrastructure and real estate assets. Life insurance helps in serving customers by supporting
their family with solutions such as disability insurance and income protection. They also
operate in areas of managing superannuation and closed insurance products through mature
business (Cohen et al. 2017).

AUDITING AND ASSURANCE
Primary competitors of the firm:
The four primary competitors of AMP limited comprised of Westpac, Commonwealth
bank, Suncorp and Bank of Queensland.
Identifying the laws or regulations affecting the operations of AMP:
Operations is carried by AMP across the globe across various jurisdiction that has its
own regulatory and legislative requirements (Corporate.amp.com.au 2020). Then four
legislations and laws impacting the operations of AMP are as follows:
 The operations of supply chain of AMP limited is impacted by the regulations and
laws of WH&S (Workplace, health and safety). It is expected from the suppliers to
comply with all the relevant rules and regulations for maintaining good labor practices
and updating the knowledge of significant work and health safety for supporting the
ongoing training and management.
 The whistleblower program of AMP limited complies with the Whistleblower
protection legislation that helps in the promotion of the programs to all employees,
consultants, contractors and suppliers.
 Risk management strategy and the strategic plan of the company complies with the
applicable regulations and laws. Compliance with the laws helps in aligning with the
pursuits of strategic objectives (Knechel and Salterio 2016).
 The regulations on the information security requires AMP to ensure the protection of
information assets using appropriate information security controls. In addition to this,
compliance of the organization with this legislation requires the suppliers to

AUDITING AND ASSURANCE
immediately notify any incident of control failure and incident on information
security (Corporate.amp.com.au 2020).
Identifying the risks impacting the audit of AMP:
The operations of business of AMP may be disrupted by the significant changes in the
customer and competitor’s environment. The customer satisfaction, sales revenue and sales
volume is impacted by the changes in the preferences of customers. Audit of AMP limited
might be impacted by some business risks faced by the company such as sales volume and
sales revenue (Niemi et al. 2018). It is required by the auditors to verify the figures of sales
volume and revenue appropriately. This is so because in the event of lower sales volume and
revenue generated due to the disruption in the operations introduced by changes in the
environment of competitors and customers, company would attempt to inflate their figures.
Failure of auditors to detect such inflation would cause them to make qualified audit opinion
(Leitch 2016). The audit of AMP limited is impacted by the business risk which are listed
below:
 Intensification of competition in the insurance industries and wealth management
 Sales revenue and volume impacted by change in the preferences of customers
 Cost and magnitude of cybercrime
 Sustaining regulatory pressure
Identifying the accounts to be at the risks of material misstatement:
The four accounts that are assessed to be at the risk of material misstatements are
intangible assets and goodwill, valuation of policies of life insurance, customer remediation
provisions and sale of mature portfolios and life wealth protection (Corporate.amp.com.au
2020).

AUDITING AND ASSURANCE
Valuation of policies of life insurance is considered to be significant because the
entity made subjective and complex judgments about the events that are internal and external
to the business when valuing the liabilities of life insurance policies. Valuation of the
liabilities cam be materially impacted due to any minor changes in the assumptions (Asbahr
and Ruhnke 2019).
Sale of mature portfolios and life wealth protection is considered significant item in
the audit process because of timing and transaction complexity in relation to key areas of
judgment. In addition to this, the liabilities and assets is classified as discontinuing or
continued operations.
Regarding the provision of customer remediation, provisions has been recorded
concerning customer remediation program and assessment of such remediation matters
requires significant judgment. In addition to this, significant judgment is also required in
provision measurement (El-Khaldi et al. 2018).
Valuation of intangible assets and goodwill is considered to be at the risk of material
misstatement because of the recognition of goodwill resulting from the historical allocation
by AMP. Such acquisition represented the excess of the fair value and the allocation made to
the cash generating unit at the acquired date. Acquisition of intangible assets are done for the
distribution network and in force contracts. It is indicated by the change in circumstances that
the carrying amount of such assets may not be recovered in the event of assessment of the
assets for impairment or amortization (Brasel et al. 2016).
For each of the account that is identified to be at the risk of material misstatement, the key
assertion at risk is also identified.

AUDITING AND ASSURANCE
 The key assertion for the intangible assets and goodwill is valuation and accuracy that
requires whether the events, transaction, balances and other financial matters have
been disclosed or not.
 The assertion at risk regarding the valuation of life insurance policies is valuation as it
has to assess whether the entity has appropriately valued it and whether they have
been disclosed appropriately in the account (Bédard et al. 2016).
 Assertion at risk concerning the sale of mature portfolios and life wealth protection is
occurrence. The risk of making the sale of certain products to be material because it
has to identify whether the transactions recognized have occurred and is related to the
entity.
 Regarding the provisions of customer remediation, the assertion at risk is exertion and
completeness. It is so because the auditor has to make judgment on the recording of
the provisions and whether they exist at the end of period (Mactavish et al. 2018).
Evaluating the compliance of ASX with the ASX corporate governance council:
The corporate governance aligns with the recommendations that is set out in the
corporate governance council of ASX. However, some of the recommendations were not
adopted by the company from April to June during the year 2018. It is laid down in the
principle four of the council of the corporate governance of ASX that the integrity of the
corporate reports of the entity should be verified using an appropriate process. As per the
principle, it is recommended that the listed entity should make a disclosure of the charter
committee along with the experience and qualification of committee members. There should
be an audit committee appointed by each listed entity and make a disclosure of the process
adopted to verify the integrity of report (Asx.com.au 2020).

AUDITING AND ASSURANCE
AMP limited has an audit committee that has eight members and one of which is the
chairman who is an independent non-executive director. The committee has at least three
members and all the members possess adequate understanding of the financial services and
helps in effectively discharging the responsibilities. In addition to this, a charter of
independence audit has been adopted by the audit committee that helps in assisting the
committee to maintain its independence (Farooq and de Villiers 2019).
Conclusion:
The engagement of the auditor with the company is considered essential as it helps in
verification of the various information’s presented by the company in their annual report. It
has been assessed from the operations of the AMP limited that the company is carrying out its
activities in accordance with the various prescribed legislation and laws. However, the audit
of company is impacted by some of the business risks faced which might deter the audit
opinion. However, adequate verification of the various accounts can be done in accordance
with various auditing standards. Therefore, the audit firms should undertake the audit of the
company. Moreover, any accounts or the items that is suspected to be at the risk of material
misstatement should be separately listed under the heading key audit matters according to the
new auditing standard on such matters.

AUDITING AND ASSURANCE
References list:
Asbahr, K. and Ruhnke, K., 2019. Real effects of reporting key audit matters on auditors'
judgment and choice of action. International Journal of Auditing.
Asx.com.au., 2020. [online] Available at: https://www.asx.com.au/documents/regulation/cgc-
principles-and-recommendations-fourth-edn.pdf [Accessed 6 Jan. 2020].
Bédard, J., Coram, P., Espahbodi, R. and Mock, T.J., 2016. Does recent academic research
support changes to audit reporting standards?. Accounting Horizons, 30(2), pp.255-275.
Brasel, K., Doxey, M.M., Grenier, J.H. and Reffett, A., 2016. Risk disclosure preceding
negative outcomes: The effects of reporting critical audit matters on judgments of auditor
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Cohen, J., Krishnamoorthy, G. and Wright, A., 2017. Enterprise Risk Management and the
Financial Reporting Process: The Experiences of Audit Committee Members, CFO s, and
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Corporate.amp.com.au., 2020. [online] Available at:
https://corporate.amp.com.au/content/dam/corporate/shareholdercentre/files/asx-
announcements/2019/AMP_2018_AR.pdf [Accessed 6 Jan. 2020].
El-Khaldi, N., Nashwan, I. and Kullab, A., 2018. Business Risk Assessment Using Client
Strategy Analysis Approach in order to Increase the Efficiency and Effectiveness of the Audit
Process. Journal of Economics and Administrative Sciences, 24(103), pp.43-43.
Farooq, M.B. and de Villiers, C., 2019. Sustainability assurance: Who are the assurance
providers and what do they do?. In Challenges in Managing Sustainable Business(pp. 137-
154). Palgrave Macmillan, Cham.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.

AUDITING AND ASSURANCE
Leitch, M., 2016. Intelligent internal control and risk management: designing high-
performance risk control systems. Routledge.
Mactavish, C., McCracken, S. and Schmidt, R.N., 2018. External Auditors' Judgment and
Decision Making: An Audit Process Task Analysis. Accounting Perspectives, 17(3), pp.387-
426.
Niemi, L., Knechel, W.R., Ojala, H. and Collis, J., 2018. Responsiveness of auditors to the
audit risk standards: Unique evidence from Big 4 audit firms. Accounting in Europe, 15(1),
pp.33-54.
Stojanović, T. and Andrić, M., 2016. Internal auditing and risk management in
corporations. Strategic Management, 21(3), pp.31-42.

AUDITING AND ASSURANCE