Auditing and Assurance Services | Research Paper

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

1AUDITING AND ASSURANCE SERVICES
Table of Contents
1. Executive Summary...............................................................................................3
2. Problem Statement...................................................................................................3
3. Methodology.............................................................................................................4
3.1 Introduction.........................................................................................................4
3.2 Outline of Research Method...............................................................................4
3.3 Research Onion..................................................................................................4
3.4 Research Philosophy..........................................................................................5
3.5 Research Approach............................................................................................6
3.6 Research Design................................................................................................6
3.7 Process of Data Collection..................................................................................6
3.8 Data Analysis Plan..............................................................................................7
4. Findings....................................................................................................................7
4.1 Identification and Assessment of Risk of Material Misstatement.......................7
4.2 Planning of Materiality and Performing the Audit...............................................8
4.3 Response of the Auditor to Risk Assessed........................................................8
4.4 Going Concern....................................................................................................9
4.5 Opinion Forming and Reporting on a Financial Report....................................10
4.6Modification of the Opinion in the Independent Auditor’s Report......................10
4.7 Emphasis on Matter Paragraph and Other Matter Paragraph..........................11
4.8 Code of Ethics for Professional Accountants...................................................12
4.9 Key Audit Matters..............................................................................................12
4.10 Auditor’s Responsibilities relating to Fraud....................................................13
5. Implications of Findings..........................................................................................14
5.1 Ethics and Culture.............................................................................................14
5.2 Inherent and Control Risks...............................................................................14
5.3 Internal Control.................................................................................................15

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5.4 Auditor’s reporting Obligations..........................................................................16
5.5 Auditor’s Independence, Duties and Continuity................................................16
5.6 Fraud and Misappropriates...............................................................................17
5.7 Whistle-blowing.................................................................................................18
5.8 Key Audit Matter...............................................................................................19
5.9 Business Risk....................................................................................................20
6. Conclusion and Recommendations........................................................................21
6.1 Conclusion........................................................................................................21
3.2 Recommendations............................................................................................22
7. References and Bibliography..............................................................................25

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1. Executive Summary
The research paper appropriately deals with the quality of reporting framework which
is used by the business of JB hi Fi ltd for the current period. The research paper
would be dealing with whether the business has included relevant key audit matters
in the financial report or not. The quality of the independent auditor’s report is matter
of question on which the research would be conducted. The analysis would be
showing the methodology which is utilized for the business for collecting appropriate
data and the same is analysed for identifying key findings from the research. The
research would be listing out key findings of the research on JB hi Fi ltd for the
period and ensure that appropriate reporting framework is used for representing key
financial information regarding the business.
2. Problem Statement
The main aim behind the preparation of this case study report is to address
the relationship as well as impact of different relevant auditing standards in related to
different aspects of auditing. The objective of this whole report is the assessment of
the true and fair standing of the financial reports of a high profile international
organization with the aim to criticize the auditor’s opinion provided in the
independent audit report through the consideration of the key audit matters
considered by the auditors of the organization. In order to proceed with this report,
JB Hi-Fi Limited is taken into consideration which is considered as one of the
leading retailers of electronic goods in Australia. The presence of the business
operations of JB Hi-Fi can be seen in the regions of Australian and New Zealand.
The major products of the company are consumer electronic goods, major
appliances and small appliances. The main problem statement of this study is to
discuss about the impact and relationship of the auditing standards in context of
different auditing theories, concepts, regulations, practices and others. Another
crucial aspect of this report is the risk of material misstatement and the determination
of the fact that the auditors of the selected company has been able in determining
such risk of material misstatements. It also taken into consideration the examination
of the going concern position of the company along with determining the fact that
whether the company has done any modification to the audit opinion that the
auditors have issued. This paper undertakes the analysis of the related auditing

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standards along with its impacts on the financial reports of the companies in order to
show true and fair value.
3. Methodology
3.1 Introduction
In order to collect appropriate information regarding the quality of audit
procedures which is applied on a reporting framework that the business
organizations use. The annual report for the business is the main source of
information which is considered. In addition to this, the financial information of JB hi
Fi for past years is also considered. The research would be relying more on
qualitative information considering the external sources for information as well as
internal sources would be analysed. The methodology of the research is an
important part of the study as different methods, approaches and philosophy which is
used for the research is discussed in this part. The information which is associated
with the key audit matters would be analysed from the auditor’s report which is also
involved in the annual report of the companies.
3.2 Outline of Research Method
The plan of the research methodology would be showing the approach which
is undertaken by the researcher for accumulating information which are essential for
drawing out conclusions from the research. The research method which is followed
for the research would be based on the nature of the topic and would also be
depending on the information which is available for the research. The research
would be applying concepts of epistemology and positivism approach for undertaking
the research process. The research paper would be following a descriptive
framework so that proper explanation is available in case of future reference. In
addition to this, the research paper would be following a deductive approach for
analysing information and testing out theories and different hypothesis.
3.3 Research Onion
The research onion is considered to be an integral part of the research
process and the same provides detailed explanation regarding the methods which
are conducted for research and also the different frameworks which is used for the
research(Mayer, 2015). The research onion would be explaining strategies and
procedures which are applied by the researcher for deriving appropriate conclusion

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in respect for the research which is conducted. The research onion is quite helpful in
planning the research process and the same includes important steps such as data
collection and formulating appropriate design for the research work. The researcher
has the option of choosing qualitative, quantitative or mixed approach for the
research and the approach which is adopted needs to be incorporated in the
research onion.
3.4 Research Philosophy
The research philosophy takes into consideration the approaches which is
utilized by the researcher in order to collect, process and interpret the data so that
appropriate conclusion can be drawn from the research. The researcher has different
options available to him for conducting the overall research process. It is to be noted
that the research philosophy is useful for collecting information and the same also
sets the tone for the entire research. The research philosophy which is adopted by
the researcher also depends on the nature of the topic which is selected for the
research in the first place. The research methodology would be addressing key belief
and approaches which the researcher intends to follow for the purpose of
accumulating information and identify key findings (Saunders et al., 2015). This
research paper is based on quality of reporting framework which is utilized by JB hi
Fi ltd and the key audit matters which are recognised in the annual report of the
business. Further the research paper would be focusing on the quality of reporting
for the business and whether the information which is included in showing true and
fair. In addition to this, non-financial aspects which are also included in the reporting
framework would be considered such as code of ethics, key audit matters and risks
of the business would be considered for the purpose of the research and appropriate
qualitative data would be collected for the same as well. The approach which is
undertaken in the research paper would be selected in such a manner so that
maximum results can be obtained from the same. As per the nature of the topic and
wide range of arguments and theories which are available for analysis, positivism
approach would be most appropriate in this case(O’Gorman, Lochrie& Watson,
2014). Positivism theory approach allows a business to appropriately identify
theories and practices which can helping the researcher to get results. In addition to
this, the analysis would also be using statistical as well theoretical approach for
collecting appropriate information for the purpose of the research.

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3.5 Research Approach
The research approach is an important component for the entire research
process and the same helps in collection and interpretation of the data which is
collected for the research. The approach which is applied for the purpose of the
research will be focusing on data collection method and data analysis method which
is applied by the researcher. The approaches which can be applied by the
researcher should be aiming to get a clearer view of the research topic. The
researcher has decided to apply deductive approach for collecting important
information for the purpose of research(Teherani et al., 2015). The research also has
the option of using inductive approach for collecting information but it is estimated by
the researcher that the business would be able to collect more information with the
help of deductive approach in the research. It is to be noted that deductive approach
is based on application of theories and hypothesis. In addition to this, the approach
is also based on certain assumptions which are undertaken by the researcher.
3.6 Research Design
The design of the research would be determining the objectives and scope of
the research. The research design would be stating the methods and techniques
which is to be applied for the research. The options in regards to research design
which is available to the researcher are exploratory, explanatory and descriptive
approach. The research pattern which is to be applied for the business is descriptive
in nature. The nature of the study which is being conducted is descriptive in nature
as the study would be applying various theories and hypothesis and therefore, it can
be ascertained that the descriptive approach is most suitable for the research.
3.7 Process of Data Collection
The process to collect data is considered to be one of the most significant
process on the basis of which information is collected for estimating the findings of
the research process. The two types of data which is available to the researcher are
primary and secondary data. Primary data for a research would be collected directly
from the source and involves procedures such as interviews, survey results for such
type of data collection. The secondary data for a research is collected from different
articles and sources which are not directly associated with the business. The
research paper is associated with the reporting framework which is used by JB hi Fi
ltd and the same can be analysed with the help of annual report of the business.

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Further relevant information can also be made available from the official website of
the business. In this research case, majority of the data would be collected from
secondary sources such as financial reports of the business and other secondary
sources. The accounting standards which is used for reporting financial information
is also considered to be important and would be a valuable source for collecting data
for the business.
3.8 Data Analysis Plan
The data for the research will be collected from secondary sources mainly
from the annual reports which is formulated by the business and in addition to this
past year records would also be adhered. The annual report for JB hi Fi ltd for the
year 2019 is considered to be the secondary source from which data is collected by
the business. The key audit matters that the auditors have identified is clearly stated
in the annual report of the entity and the same appropriately shows whether the
reporting framework of the business is following true and fair view for the financial
information which is included. The data analysis plan would be ascertaining the
financial information and it is on the basis of the same findings and conclusion would
be drawn by the researcher.
4. Findings
4.1 Identification and Assessment of Risk of Material Misstatement
In Australia, it is required for the auditors to adhere to the rules of ASA 315
Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and Its Environment. According to Paragraph 3 of ASA
315, it is the objective of the auditors to recognize as well as measure the risks of
material misstatements due to of error or fraud, by gaining understanding of the
business organizations along with its business environment (auasb.gov.au, 2019).
Certain steps are required to be considered for assessing the risk; they are
understanding the entity, identification of risks, assessment of risks and responding
to the identified risks. It is needed to the auditors to have a minimum understanding
of the industry as well as economic situation of the company with the aim to
recognize and analyse the risks of material misstatements due to frauds or errors
(Sanderson, 2014). According to the 2019 Independent Auditor’s Report of JB Hi-Fi,
the audit partner that is Deloitte has taken into consideration the assessment and

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analysis of the external environment of business of JB Hi-Fi in order to undertake the
analysis of the material mistsement related risks. For example, the auditor has
gained knowledge of the internal control of JB Hi-Fi for designing audit procedures
while they have also evaluated the correctness of the accounting applied accounting
policies along with the assessment of the rationality of the accounting estimates as
well as related disclosures that the directors have made (investors.jbhifi.com.au,
2019).
4.2 Planning of Materiality and Performing the Audit
ASA 320 Materiality in Planning and Performing an Audit provides the
auditors with the needed standards and regulations for planning materiality as well
as performing audit. As per Paragraph 10 of ASA 320, it is the on the external
auditors to determine the overall materiality of the financial report at the time to
develop the overall audit strategy. In addition, it is mentioned in Paragraph 11 of
ASA 320 that the external auditors have the obligation for the ascertainment of
performance materiality for the analysis of the risks of material misstatements along
with the determination of the nature, timing as well as level of additional audit
procedures (auasb.gov.au, 2019). Apart from this, as per ASA 320, Paragraph 14, it
is required for the auditors to ensure the appropriate documentation of certain
aspects; such as financial report’s materiality, level of materiality for specific classes
of transactions and any revision of the above. However, it can be seen from the 2019
Report of Independent Auditor’ of JB Hi-Fi that the auditors have not disclosed any
information related to materiality planning (Sanderson, 2014). More specifically, they
have not disclosed information on the amount of overall materiality as well as any
performance materiality. In the auditor’s report, the auditors have mentioned that
they have communicated all the related information associated with the
determination of materiality with the directors, but the process of materiality
determination and the amount of overall materiality threshold is not provided in the
auditor’s report (investors.jbhifi.com.au, 2019). This can be considered as a
drawback of the auditor’s report of JB Hi-Fi as many audit firms are showing the
same in the auditor’s report.
4.3 Response of the Auditor to Risk Assessed
The responsibility of the auditors is to follow the rules and regulations of ASA
330, The Auditor’s Reponses to Assessed Risks for responding to the audit risks

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they have already assessed (auasb.gov.au, 2019). As per Paragraph 5 of AASB
331, it is the objective of the auditors for ensuring the design and implementation of
the overall responses with the aim to address the audit risks of material
misstatements assessed at the financial statements level. It can be seen from 2019
Independent Auditor’s Report of JB Hi-Fi that the auditors have responded well to
the assessed risks for the audit of the company’s financial statements. The auditors
have undertaken certain audit tests for addressing to the risks identified. For the first
risk, the responses of the auditors include the assessment of the design as well as
implementation of major controls, valuation of the value-in-use methodology of the
management, challenging the major accounting assumptions, assessment of the
appropriateness of the disclosure of the management and others (Abdallah, 2018).
The responses of the auditors related to the second risk are examination of the
completeness assertion, assessment of the accuracy assertion, evaluation of used
judgments as well as estimates, recalculation of certain liabilities and assets and
assessment of the appropriateness of the disclosures (investors.jbhifi.com.au, 2019).
All these matters are the proofs that the auditors of JB Hi-Fi have given effective
responses to the assessed risks of material misstatements while they have disclosed
them in the report of the auditors.
4.4 Going Concern
In order to audit the going concern situation of the companies, it is required for
the auditors to obey the rules and requirements of ASA 570 Going Concern. As per
ASA 57, Paragraph 9, it is the objectives of the auditors to gain adequate information
and conclude the correctness of the management’s utilization of accounting in the
financial reports that is in line with going concern; to ascertain based on the audit
evidence whether material uncertainty that can contribute major uncertainties on the
aptitude of the company to remain as a going concern is there or not and to report as
per the Auditing Standards (auasb.gov.au, 2019). It can be seen from 2019
Independent Auditor’s Report of JB Hi-Fi that the auditors have mentioned that it is
their responsibility to conclude the correctness of the directors’ utilization of going
concern basis of accounting from assessing the obtained audit evidence on the fact
that whether there is any uncertainty on the company’s capability to remain as a
going concern. It is also mentioned by them that they would report in the
independent reports of the auditors in case there is any uncertainty (Carson, Zhang

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& Fargher, 2014). It is observable from the same auditor’s report of JB Hi-Fi that the
auditors have not mentioned anything further about the risk related to going concern
and this specifies that there is not any material risk in the capability of the company
to remain its business operations as a going concern (investors.jbhifi.com.au, 2019).
Apart from this, the auditors have also mentioned about the accountability of the
directors of the company to measure the ability of the company to remain as a going
concern.
4.5 Opinion Forming and Reporting on a Financial Report
It is required for the auditors of Australia to adhere to the rules of ASA 700
Forming an Opinion and Reporting on a Financial Reportin order to develop the
appropriate audit opinion on the financial statements (auasb.gov.au, 2019). It is
written in ASA 700, Paragraph 6 that there are two objectives of the auditors; first is
the development of audit opinion on financial reports by taking into consideration the
assessment of the audit evidence acquired and second is to ensure expressing the
opinion clearly through a written report. It can be seen from 2019 Independent
Auditor’s Report of JB Hi-Fi that the auditors have clearly demonstrated their audit
opinion on the final financial audit of the business entity. The auditors have
mentioned that they have audited all the financial statements of JB Hi-Fi and its
subsidiary companies along with the notes to the financial reports (Stannard, 2017).
According to the opinion expressed by the auditors, all the financial statements of the
corporation have given true and fair opinion of the financial situation as well as
financial performance of the selected business entity and all these financial
statements have complied with the required Australian Accounting Standards and
the Corporations Regulations 2001. At the same time, the auditors of JB Hi-Fi has
also disclosed the basis on which they have developed the audit opinion. This
indicates towards the compliance of the auditors of JB Hi-Fi with the necessary
standards for expressing the appropriate audit opinion (investors.jbhifi.com.au,
2019).
4.6Modification of the Opinion in the Independent Auditor’s Report
The auditors of Australia have the responsibility of adhering to the principles
as well as rules of ASA 705 Modifications to the Opinion in the Independent
Auditor's Report in case they want to provide a modified audit opinion
(auasb.gov.au, 2019). According to ASA 705, Paragraph 4, it is required for the

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auditions to follow two objectives for giving the modified audit opinion. It is required
for an auditors to express modified audit opinion in case it has been concluded by
the auditor on the basis of the assessment of acquired audit evidence that no
financial statements and information of the company is materially misstated and
he/she is unable in acquiring adequate audit evidence for concluding the fact that the
financial reports are not materially misstated (Nayır,Rehg& Asa, 2018). Expressing
modified audit opinion is considered as crucial for the overall financial position and
performance of the companies. However, it can be seen from 2019 Independent
Auditor’s Report of JB Hi-Fi that the auditors have not mentioned anything related to
the modification of issued audit report. The auditors have only mentioned about the
opinion along with the basis of opinion. This specifies towards the crucial aspect that
the entire financial accounts and reports of JB Hi Fi are not materially misstated; and
the auditors have obtained adequate audit evidence on the fact that there is not any
material misstatement in the financial reports of the company
(investors.jbhifi.com.au, 2019).
4.7 Emphasis on Matter Paragraph and Other Matter Paragraph
The responsibility of the auditors in Australia is to obey the principles of ASA
706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the
Independent Auditor's Report in order to express their concerns on certain
additional matters for the users of the audit reports (auasb.gov.au, 2019). As per
Paragraph 6 of ASA 706, it is the objective of the auditors to draw the attention of the
users on the matters where the judgment of the auditors is required. These are the
matters revealed in the financial reports that are crucial for increasing the
understanding of the users on the company’s financial statements; these can also be
the matters that are important for increasing understanding on the responsibility of
the auditors (Azim, 2013). It can be seen from 2019 Indepdent Auditor’s Report of JB
Hi-Fi that the auditors of the companyhas put major importance on the paragraph
named ‘Key Audit Matters’ where they have mentioned about two aspects that are
crucial for the final audit of the company. At the same time, the auditors have
provided certain emphasis on other paragraphs named ‘Other Information’, ‘Auditor’s
Responsibilities’ and ‘Report in the Remuneration Report’. It is required to mention
the fact that these matters are crucial to the users to comprehend the financial
reports of JB Hi-Fi while these matters provide increase the understanding of the

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users on the audit report along with the accountabilities of the auditors related to
financial statements (investors.jbhifi.com.au, 2019).
4.8 Code of Ethics for Professional Accountants
The respksbility of the Australian auditors is to conform with all the Codes of
Ethics for Professional Accountants at the time of providing professionals services.
In Australia, the accounting professionals must comply with the Code of Ethics
issued by the Accounting Professional and Ethical Standards Board (APESB); and
these are known as APES 110 Code of Ethics for Professional Accountants
(auasb.gov.au, 2019). As per APES 110, there are five Code of Ethics for
Professional Accountants; they are Integrity, Objectivity, Professional Competence
and Due Care, Confidentiality and Professional Behaviour. It is required for all the
auditors to maintain their compliance with all these codes of ethics while providing
auditing services (George, Jones & Harvey, 2014). It can be seen from 2019
Independent Auditor’s Report of JB Hi-Fi that the company has complied with the
required ethical principles at the time of the audit engagement of the company.
Under the section of basis for opinion, it has been mentioned by the auditors of JB
Hi-Fi that they have maintained their full compliance with the ethical necessities of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants that have major relevance with the audit of the
financial reports in Australia. At the same time, the auditors of JB Hi-Fi have also
complied with all other ethical requirements as per codes of APES 110
(investors.jbhifi.com.au, 2019). All these aspects indicate towards the important
aspect that code of ethics have been complied by the auditors of JB Hi-Fi while
undertaking the audit engagement of the company.
4.9 Key Audit Matters
In the recent years, key audit matters have become crucial matters expressed
by the auditors. In Australia, the commitment on the external auditors is to conform
to the rules and regulations of ASA 701 Communicating Key Audit Matters in the
Independent Auditor’s Report while handling the key audit matters of the business
entities (auasb.gov.au, 2019). According to Paragraph 6 of ASA 701, it is the
objective of the auditors to ensure the recognition of the key audit matters for forming
the audit opinion and communicating the same trough providing description of them.
As per ASA 71, there are four requirements that the auditors need to follow in the

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key audit matters; they are ascertainment of the key audit matters, communication of
the key audit matters, communicating the key audit matters with the staffs charged
with governance and documentation of key audit matters (Vik & Walter, 2017). It can
be seen from 2019 Report of Independent auditors of JB Hi-Fi that the auditors have
disclosed all the information associated with the key audit matters. As per the
auditor’s report of JB Hi-Fi, there are two key audit matters in the company; they are
The Good Guys cash generating unit related carrying value and presentation as well
as disclosure of AASB 16 Leases. At the same time, the auditors of the company
have disclosed the audit steps that undertook for responding to these two key audit
matters. All these matters are the indicators that the auditors of JB Hi-Fi have
revealed all the necessary information on key audit matters (investors.jbhifi.com.au,
2019). This is crucial for the users of the audit report of the company.
4.10 Auditor’s Responsibilities relating to Fraud
There are certain duties of the auditors related to fraud in the financial reports
of the audit clients. It is required for the auditors to comply with the rules and
regulations of ASA 240 The Auditor's Responsibilities Relating to Fraud in an
Audit of a Financial Report for discharging the responsibilities towards fraud in the
financial statements (auasb.gov.au, 2019). As per Paragraph 11 of ASA 240, there
are three objectives of the auditors connected to the fraud in the financial
statements; they are the identification as well as analysis of the risk of material
misstatements in the financial accounts because of fraud, acquire adequate suitable
audit evidence related to the evaluated risks of material misstatements because of
fraud by taking suitable responses and respond correctly to fraud at the time of audit
engagement (Chen et al., 2018). According to the 2019 Independent Auditor’s
Report of JB Hi-Fi, the auditors of the company have disclosed about their
responsibilities regarding fraud; they are identification of material misstatements,
designing as well as performing audit processes and gaining appropriate audit
evidence. As per the auditors, fraud may involve forgery, collusion, deliberate
omissions, misinterpretation and internal control override. In addition, the auditors of
JB Hi-Fi have also mentioned the fact that all the audit evidences obtained are
efficient for providing the basis of audit opinion. It implies that the auditors of JB Hi-Fi
have conformed with the principles of ASA 240 for discharging the responsibilities
related to fraud (investors.jbhifi.com.au, 2019).

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5. Implications of Findings
5.1 Ethics and Culture
Each company has to follow APES 110 while carrying their business activities.
APES 110 states all the norms and regulation which are to be followed by the entity
in their different operations (Martinov-Bennie & Mladenovic2015). These help the
company to carry all the business activities with professional behaviour and assist
them in providing proper amount of report to its shareholders. The management of
the company should follow all the five principles in their operations as this will help
them to prepare a proper financial report to its shareholders (Athanasiou2014). The
duties of the auditor are to ascertain that the company has to follow all the principle
in their business and to ascertain that audit carry many different audit procedures
upon the entity financial report. Auditor has to follow all the code of conduct rules at
the time to engage in the audit process in the business. According to the company
JB-HIFI Annual Report it can see that the auditor of the company is Deloitte and in
their independent auditor’s report they have mentioned about the application of
APES 110 Code of Conduct in entity report. The details of the same can be found on
page no 54 of company 2019 annual report (Investors.jbhifi.com.au. 2019). As the
auditor has shown in the report that they have followed all the principles which are
mentioned in APES 110 Code of Conduct that signify that the company does not
have any materiality in their financial report. The amount shown in the financial
statement is true and fair, and the company has done no misstatement. Moreover,
the overall compliance of the auditors with the requirements and principles of APES
is a crucial indicator that the auditors have fully adhered to the ethical as well as
cultural requirements of the audit profession.
5.2 Inherent and Control Risks
Inherent Risk are those type of risks which arise due to omission and error of
financial transaction in the annual report (Carroll &Buchholtz2014). These risks are
considered to be high if the company has complex business structure, and also the
entity business is solely based on assumption and judgement. As if the company is
having such kind of risk than they will not able to show a true and fair value in the
financial statement.
Control risk are the risks associated with the material misstatement in the
entity business operation because of internal control failure of the entity (Balsam,

15AUDITING AND ASSURANCE SERVICES
Jiang & Lu2014). Appropriate Internal control benefits the entity to detect and
minimise the risk that is associated in company business. The entity does not have
good amount of internal control system due to which the degree of risk increases in
the financial report of the entity.
One major responsibility of the auditors can be seen in ascertaining the risk
which is accompanying in company business and which can be done with the help of
ASA 315 Identification of risk related in the business and ASA 330 Response to
Assessed Risk, these both standards helps the entity to know the risk connected in
company (De Simone, Ege&Stomberg2014). As per Deloitte gave the auditor report
it can see that they have followed the auditing standard which carrying the audit
procedure and with the help of the standard can ascertain the risk associated in
company business (Investors.jbhifi.com.au. 2019). The auditing standard helps the
entity to analysis the financial statement easily and assists the auditor to frame an
independent opinion upon the entity report and able to evaluate whether the
company demonstrates true and fair view or not.
5.3 Internal Control
The internal control system are set of principles, rules and procedure which
the entity makes to increase the efficiency and strength their business operations
(Feng et al., 2014). These policies help the entity in achieving their goals and
objective in the business. These system assists the entity to detect and reduce the
business risk that arises while the company carries its operations. The company
needs to sustain a proper amount of internal control system as if there is some lack
in the system than the degree of risk will be increased in entity business. Auditor is
needed to ascertain that the company has proper amount of internal control system
(Newton et al., 2015). Auditing standard helps the auditor to assess the competence
of internal control system and to ascertain whether the company has proper internal
control system or not. According to the report of the auditors, the auditors have
mentioned about the communication which has taken place between the directors
and auditor in regards to the deficiencies which are there in entity internal control
system. As this communication will provide major assistance to the auditor in
planning the audit process in regards of internal control system as well as assist it to
have a detail inspection of the system which the company follows to minimise the
risk associated in their business (Investors.jbhifi.com.au. 2019). The company has

16AUDITING AND ASSURANCE SERVICES
proper audit risk committee which helps them to establish a sound and efficient
internal control system in the business structure.
5.4 Auditor’s reporting Obligations
Auditor has to ascertain that the business organization is following the
required laws and regulation at the time to prepare the financial report ( Lin et al.,
2014). The auditor should carry many audit procedures with the assistance of
auditing standard to know the materiality in the entity financial report. It has to follow
ASA 200 which state the objective of the audit process as the auditor provide
reasonable assurance about the materiality involves in entity business. It has to
provide proper amount of audit evidence that the entity has prepared its financial
statement following Australian Accounting Standard (DeFond& Lennox2017). The
auditor has to provide all the details which it has obtained while carrying out the audit
procedure in the entity business and also to state the matters which are found very
suspicious concerning financial statement. As per the annual report of the entity, the
auditor has followed all the obligation in their auditor report. The auditor’s report state
that the business has adhered to all the accounting standard at the time to develop
the financial statement. It has followed ASA 700 in the auditing process and based
on which can form an opinion about the materiality involve in entity report as well as
help it to maintain an independence of the auditor.
It is the duty of the auditor to develop the opinion upon the financial statement
following ASA 700 as in regards of ASA 700 it has to provide a proper opinion as
whether it has followed all the norms to prepare the annual report (Coetzee &
Lubbe2014). The entity has to prepare the annual report with the help of GAAP, and
the Auditor has to have proper amount of knowledge of the entity business as it will
assist them to have proper ascertain the risk associated in the business. The auditor
can able to give to many types of opinion as per the risk associated in entity
(Investors.jbhifi.com.au. 2019). The report which was given by Deloitte to JB-HIFI is
Unqualified Report which signifies that the entity can follow all the required norms
and the financial report is not having any materiality in their business.
5.5 Auditor’s Independence, Duties and Continuity
The auditor is accountable for providing a proper and independent opinion
upon the entity business as this will helps the user to develop the appropriate audit

17AUDITING AND ASSURANCE SERVICES
opinion upon the financial health of the entity (Ruhnke& Schmidt2014). The relevant
and reliable financial report helps the entity to raise the capital as well as help them
to carry its business operation smoothly. The frauds and big scams in the company
happen due to materiality involve in the statement which denotes that the auditor has
to ascertain the materiality involve in the statement as well as helps the company to
provide proper information to its financial investors. With the aim to ensure this, it is
required for the auditors to ensure that they adhere to the principles of independence
through maintaining independence from the audit clients. At the same time, the
auditors also have the obligation to comply with all the required Australian Standard
of Auditing while performing professional services. These aspects are crucial for
maintain the continuity of the auditing profession.
The auditor should be independent while carrying its audit procedure and it
has to keep a distance from the management as the company management can
easily manipulate the independence of the auditor (BOTEZ2015). There are several
amounts of threat which can disturb the auditor opinion and to minimise the threat
the auditor has to follow the safeguards which are being mentioned in APES 110
Codes of Conduct. The safeguards are that it should maintain professional behaviour
with the management and able to keep a proper distance from the director of the
company.
In accordance with the annual report of the company organization, that the
auditor has followed all their responsibility while carrying the audit procedure upon
the company financial accounts. It has given all the information which can gather by
carrying the different audit procedure, and also giving the opinion in regards to ASA
700 (Investors.jbhifi.com.au. 2019). It also covers the ASA 701 by providing the key
audit matter in the auditor report and able to provide sufficient information to the
financial user of the company.
5.6 Fraud and Misappropriates
Fraud is the material misstatement which the entity intentionally does to
gather more amount of capital from the public (Hines et al., 2015). The company
overvalued their financial information which helps them to show the good image of
the company to the investors as well as assists them for acquiring more amount of
capital in the business. Auditor responsibility is to check whether the entity is having

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any materiality in their financial statement or not as the level of materiality also
increase the risk of fraud in the entity operations (Hess & Cottrell Jr 2016). The
auditor should carry different audit process to determine the risk which is related with
the entity, and these will be done with the help of different auditing standard.
Identification of fraud as well as misappropriates in the financial statements is crucial
for assessing the actual financial health and financial standings of the business
entities.
Auditing standard aids the auditor to maintain a framework in the audit
process as with the help of it able to ascertain the risk related in the entity’s
business. The annual report states that the entity has followed all the rules and
regulation at the time to prepare the annual report (Investors.jbhifi.com.au. 2019).
The auditor has carried many audit processes in regards to the business, and with
the help of it, the auditor has formed the opinion that the statement is displaying true
and fair view. The company is not having any materiality in their report, so this
signifies that there is no amount of fraud taking place in their business activities. At
the same time, the key audit matters of the audit of the company have been taken
into consideration by the auditors and these assist the auditors to put special
emphasis on the matters that are crucial for the audit of the financial statements of
the firm. However, with the assistance of appropriate audit procedures, the auditors
have been able in gaining sufficient evidence and assurance that these key audit
matters have not contributed to any kind of material misstatements in the financial
reports.
5.7 Whistle-blowing
Whistleblowing is act of communicating the financial user and the
management about the fraud which is taking place in the business operations (Villa-
Real 2014). The whistleblower communicates all the unlawful activities that are
taking place in the organisation to the auditor and other authority in the company.
These aid the auditor in knowing the risk and other issues which the company is
facing and the auditor can continue the audit process as per the information which
can get from the whistleblower (Ruankaew 2016). The company should form a
proper whistleblowing policy and able frame a proper amount of framework for the
person who carries the whistler blowing in the business. The company should not

19AUDITING AND ASSURANCE SERVICES
disclose the name of the person as this may impact the health of the individual so
the management should provide a proper amount of protection to the individual.
The company financial report states that the entity has proper whistleblowing
policy which enables the individual to communicate all the misconduct that is
happening in the business structure (Investors.jbhifi.com.au. 2019). The company is
going to launch the policy in August 2019, and the policy will be governed by the
Board of Director and the Audit Committee. The management of the policy will
directly report any information to the risk committee as this will assists the company
to reduce the risk which is related in the business. It needs to be mentioned that the
whistle-blowing policy within the company will enable the employees or other staffs
of the same firm to report any kind of fraudulent or illegal business activities that can
manipulate the financial performance and financial position of the business.
5.8 Key Audit Matter
In accordance with ASA 701, auditor has to communicate all the essential
information in its auditor report and able to deliver the same to the shareholders of
the company (Wells 2017). The key audit matter paragraph helps the auditor to
provide a transparency report to the financial user based on which they will able to
form a proper decision in regards to the financial situation of the entity. The auditor
has to show all the crucial point in regards to an entity which are found unusual to
the auditor.
The auditor’s report state about the key audit matters which are being
communicated by the auditor to the financial user in the annual report (Cumming,
Hou & Lee 2016). The crucial first audit matter was Carrying value of The Good
Guys Cash Generating Unit as the auditor is not able find the evidence in regards to
value transfer by the entity in this account. Auditor has carried test of control to
whether the asset will be impairment or not (Tan et al., 2016). The crucial second
audit matter stated by the auditor is in regards to AASB 16 LEASE, as the entity can
change the accounting standard in the business activities. The auditor is not able to
satisfy the judgement and estimation taken by the management in regards of the
lease valuation and the auditor also able to find that the information given by the
entity is not proper or complete which increased the risk associated in company
financial statement (Investors.jbhifi.com.au. 2019). All these aspects indicate

20AUDITING AND ASSURANCE SERVICES
towards the effective discharge of the responsibility of the auditors to reveal and
discuss about the key audit matters along with their responses in the form of key
appropriate audit steps.
5.9 Business Risk
Business Risk are those types of risk which are being associated in entity.
Each company should adopt a proper risk assessment procedure in which can
detect and reduce the risk related to the operations. The more risk the company is
having, the more material misstatement the company financial statement will have
which signify that the entity should develop a proper amount of risk assessment
procedure in the business. As per the entity financial report, it can see that the
company has developed proper business risk which can touch the overall
performance of the company. The risk which is mentioned in the annual report is
related to competition as the market in which the entity is carrying business has
much amount of competition and due to which the business is not able to perform
well in the market. The other business risk is loss of goodwill and reputation in the
business, as the company has proper amount of goodwill in the market
(Investors.jbhifi.com.au. 2019). The third business risk is changing in the consumer
demand as if the consumer changes their demand or shift their demand than their
will be reduction in the overall profit of the entity. It is required to mention that all
these business risks are essential for the auditors of the firm to gain knowledge
about the industry as well as external business environment in which the firm
operates. This majorly assists the auditors in assessing the risks of material
misstatements in the financial accounts of the firm.
The company can many strategies which helps them to have more customers
in the business. The company can lose its reputation by the increase in the price as
well as the customer relationship factor, and the entity is trying to implement proper
amount of change in the business. Last business risk which is been mentioned by
the company is in regards of online competitions taking sales from group stores as
the company is able to perform proper amount of service being online rather than the
physical store so due to these the sales of physical store is decreasing day by day in
the market. The auditor can ascertain that the company has carefully manage all its
business operation properly and able to manage the risk associated in the business
operations.

21AUDITING AND ASSURANCE SERVICES
6. Conclusion and Recommendations
6.1 Conclusion
The analysis of the research is related to quality of reporting which is followed
by JB hi Fi ltd for the purpose of revealing the financial performance of the business
during the period. The research appropriately shows the method, outline and
approach which is undertaken for the purpose of collecting appropriate information
for the research so that relevant findings can be established from the same. The
research mainly relies on secondary sources for drawing out conclusions and
deductive approach is applied in terms of methodology for collecting data. It is also
ascertained that more emphasis is provided on qualitative information rather than
qualitative information for the purpose of this research.
The annual report of the corporation demonstrates that the management team
of the business has established a risk management company for ensuring that the
risks related with the business and its reporting framework can be identified in an
effective manner. The risk of the business is effectively identified in the annual
reports of the business and proper disclosures are provided in the notes to the
financial statements section of the financial reports. The auditor of the business is
Deloitte for the year and the auditor of the business has applied the provisions of
ASA 315 “Identifying and Assessing the Risks of Material Misstatement
through Understanding the Entity and Its Environment” for identification any
risks which can impact the activities of the business. The audit measures which are
undertaken by the auditor has assisted the auditor to acquire a proper understanding
of the risks which the business is likely to face. This provides information that the
auditor has adhered to relevant auditing standards to analyse the reporting
framework of the business. In an audit procedure, computation of planning
materiality is quite important for the purpose of developing appropriate strategy for
conducting the audit of the business. The auditing standard of ASA 320 “Materiality
in Planning and Performing an Audit” has been followed by the auditor for
determining the materiality of the business. However, the analysis reveals that the
auditor has not reported the thresholds which the auditor had considered which can
create doubts in the minds of the users.
The research paper also makes it clear that the auditor needs to adhere to
reporting requirement of going concern in a circumstance that this assumption has

22AUDITING AND ASSURANCE SERVICES
been affected as per ASA 570 “Going Concern”. It is the accountability of the
directors of the business to ensure that the going concern norm for the business
remains intact and, in any case, the same is affected, then the management is
required to report the same in the annual reports of the business. The auditor
requires to follow ASA 700 “Forming an Opinion and Reporting on a Financial
Report”, for formulating an opinion on the annual reports of the business in order to
establish whether the financial report is demonstrating the true and fair view or not.
The audit opinion for the business as reflected in the audit report of the business is
positive which shows that the business has followed an appropriate reporting
framework for revealing financial information for the business. Apart from this, the
auditor of the business also requires to report regarding the ethical norms which are
to be followed in a business which are covered in APES 110. One of the ethical
norms which is identified in the study is independence of the auditor and key
professionals of the business. The auditor’s independence statement appropriate
shows that the fundamental principle of independence is appropriately followed in
the business of JB hi Fi ltd. Further the reporting framework shows that the business
has not made any mistakes in reporting of financial information of the corporation.
The annual report for the JB hi Fi ltd shows that no modification has been made in
the auditor’s report as it can be clearly established that the financial statements are
displaying true and fair view of the financial position of the business. The key audit
matters for JB hi Fi ltd has been effectively highlighted in the financial statements as
per the necessities of ASA 701. This shows that the reporting framework has
identified certain risks associated with the business and the same have been
appropriately identified.
3.2 Recommendations
The recommendation which can be provided to the management of the JB hi
Fi ltd so that they can make improvements in the reporting framework of the
business are appropriately identified in the financial statements of the corporation.
The annual report shows that the management of the corporation has provided
appropriate revelations in the financial statements. The recommendation which can
be provided for making improvements are listed below:
 The financial disclosures which are provided in the annual report can be more
detailed so that the users have access to more information and the overall

23AUDITING AND ASSURANCE SERVICES
quality of report which is presented by the business is appropriate. This will
make the financial statements of the company more comprehensible to its
users.
 In order to make proper disclosures regarding the accounting treatments,
relevant accounting standards requires to be provided in the annual reports.
This is required for the users of the financial statements to verify the
accounting treatments, assumptions and accounting judgments made by the
senior management of the company.
 The annual report for JB hi Fi ltd appropriately shows some of the key audit
matters and one can identity these matters from the reporting framework.
However, there are several other matters which can be comprised in the key
audit matters of the corporation so that completeness is maintained in the
reporting framework of the business. Therefore, it is suggested to the auditors
to ensure the disclosure of all significant matters for the audit of the financial
reports of the company.
 The reporting framework and its quality are also affected by the internal
control policies of the business. The management of JB hi Fi ltd can make
amendment to the policies so that the reporting framework is not affected in
any matter. The research appropriately focuses on points which can make
improvements. It is also suggested to the auditors to ensure correct
examination of the internal control of the company with the aim to identify
flaws in them.
 It is suggested to the auditors to provide the disclosure regarding the
determination of the overall materiality level of the financial reports along with
the performance materiality threshold. This will make the independent
auditor’s report more transparent to its readers associated with the materiality
of the financial statements.
 It can be observed from the above discussion that the auditors have not
delivered any information on the fact that whether there is any hesitation
associated with the going concern position of the company. For this reason, it
is recommended to the auditor to ensure that there is an extra paragraph in
the independent auditor’s report informing that whether there is any material
uncertainty regarding the going concern status of the company. This will make
the independent auditor’s report more acceptable to its users.

24AUDITING AND ASSURANCE SERVICES
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