Auditing and Assurance Services

Running head: AUDITING AND ASSURANCE SERVICES
Auditing and Assurance Services
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1AUDITING AND ASSURANCE SERVICES
Table of Contents
Introduction................................................................................................................................2
ASA 701: Rationales..................................................................................................................2
ASA 701: Explanation...............................................................................................................3
KAMs of the Australian Mining Industry..................................................................................4
BHP Group Limited...............................................................................................................4
Downer Edi Limited...............................................................................................................4
Evolution Mining Limited......................................................................................................5
Newcrest Mining Limited......................................................................................................5
Rio Tinto Limited...................................................................................................................5
Whitehaven coal.....................................................................................................................6
Conclusion and Recommendations............................................................................................6
References..................................................................................................................................8

2AUDITING AND ASSURANCE SERVICES
Introduction
Audit can be considered as a systematic as well as independent assessment of the
accounting books and information of an organization in order to ascertain that to what extent
the financial statements of that organization express the appropriate view of their financial
Standings and health (William Jr, Glover and Prawitt, 2016). In the recent years, the auditing
profession has to face major criticism for its connection in some of the large corporate
collapses all over the world. As the outcome of these concerns and criticism, the profession
has witnessed the development of some new accounting standards in the forms of ASA 701
Communicating Key Audit Matters in the Independent Auditor’s Report (ASA 701), revision
in some of the existing auditing regulations such as ASA 570 Going Concern and others
(Knechel and Salterio, 2016). This report taken an honest attempt to discuss about the
rationales behind the introduction of the new auditing standard ASA 701 along with
discussing the components this particular auditing standard. This report also taken an attempt
to ascertain the auditors’ efficiency in Key Audit Matter (KAM) reporting in the report of the
auditors in the mining companies listed under ASX top 100.
ASA 701: Rationales
The business failure of Lehman Brothers is considered as a corporate failure where
the failure of the auditors can be seen. In Lehman Brothers, the management of the firm was
involved in mischievous use of Repo instrument to artificially strengthen their balance sheet
for $50 billion (Jones and Presley, 2013). Through the auditors of the firm had the knowledge
about this issue, they did not consider this as a significant audit matter and provided the
company with unqualified audit report. This is considered as the main cause that contributed
towards the failure of the firm and provided the fuel to the 2008 financial crisis (Ball 2016).
These two aspects were the major reasons for the introduction of ASA 701. The
standard of ASA 701 was introduced with the view that it would put the obligation on the
auditors consider crucial audit matters like events and transactions which was lacking in the
business operations of Lehman Brothers. Reduction of the auditing gaps developed from the
collapse of Lehman Brothers was another major aim behind this new standard of auditing
(Tarr and Mack, 2013). It is the requirement of the new auditing standard ASA 701 that
auditors must disclose the audit matters that are of highest risk in the report of the auditors so
that the users of the financial reports can know about them. For the business failure of
Lehman Brothers, the auditors failed in assessing and analysing the accounting judgments,