Auditing and Assurance

This report evaluates the true and fair status of the financial statements of QBE Insurance Group Limited. It analyzes the independent auditors report, key audit matters, and auditing standards.

Running head: AUDITING AND ASSURANCE
Auditing and assurance
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AUDITING AND ASSURANCE
Table of Contents
Executive summary:.....................................................................................................3
Introduction:..................................................................................................................4
Australian accounting standards:..............................................................................4
Accounting theories:.................................................................................................5
Problem statement:.......................................................................................................6
Research objectives and aims:.....................................................................................6
Structure of study:.........................................................................................................7
Methodology:................................................................................................................7
Research approach:..................................................................................................8
Research design:......................................................................................................8
Process of data collection:........................................................................................9
Overview of the company:............................................................................................9
Findings:.....................................................................................................................10
Identification and assessment of material misstatement risk:................................12
Materiality in performing and planning the audit:....................................................14
Response of auditors towards the risk assessment:..................................................15
Accounting policies used in the financial statement of BGC limited:......................19
Forming an opinion and reporting on the financial report:......................................19
Auditor’s independence:.........................................................................................21
Going concern:...........................................................................................................22
Code of ethics for professional accountants:.............................................................23
Implication of findings:................................................................................................24
Conclusion and recommendations:............................................................................26

AUDITING AND ASSURANCE

AUDITING AND ASSURANCE
Executive summary:
The report is prepared to evaluate the true and fair status of one of the companies
listed on ASX (Australian stock exchange) by conducting a detailed investigation into
the financial statements presented ion the annual report. The report also presents
the critical evaluation of the independent auditors report with a particular emphasis
on the key audit matters as disclosed in the report. For the purpose of evaluation, the
company that has been chosen is one of the largest insurers of the world named
“QBE Insurance Group Limited”. The applicable auditing standards which has been
implemented by the group is analyzed using the risk based approach and in the
context of auditing theories, regulations, concepts and practices. Some of the facts
that have been investigated include ascertaining the risk of material misstatement,
going concern, corporate governance, materiality in performing and planning the
audit, code of ethics, forming an opinion on the financial report and auditors
response to risk assessment.

AUDITING AND ASSURANCE
Introduction:
The report is prepared to evaluate the status of true and fair representation of
the financial statement of the private company of Australia that is QBE Insurance
group limited. QBE Insurance group is the largest global insurer operating in
Australia and in major insurance market, the organization has numerous strongly
performing business along with having a diverse product mix and geography. The
opinion of the independent auditors is critically evaluated with special relevance on
the key audit matters (qbe.com.au, 2019) The facts of the case is analyzed using the
approach of risk based auditing, auditing standard and concepts of auditing. Auditing
standards are evaluated in the context of auditing theories. In addition to this, the
relationship of the auditing standard is discussed in the context of accounting
regulations, theories and identified standards. The impact of the auditing standard
and theories in evaluated with reference to the business risk, corporate governance,
and inherent risk, reporting obligations of shareholders, ethics and culture.
Australian accounting standards:
The Australian accounting standard provides application and establishes
requirements on the explanatory material on the auditor’s responsibilities when they
are engaged in conducting the audit of the financial statements of the reporting entity
along with any kind of historical financial information. They are the system of
principles and rules that prescribe the contents and format of the financial statement
of organization. The stakeholders of the organization are able to seamlessly assess
the financial health of the company if the reporting is consistent with the prescribed
accounting standard. Organizations complying to the international accounting
standard provides ease to the investors and other stakeholders to compare the
financial p[performance of the companies across regions as such standard offers a
standardized reporting system. The Australians securities and investment
commission is responsible for regulating the accounting standards with the system of
reporting being divided into two tiers. In the first tier, the methods of accounting are
prescribed that indicates that the methods should be in accordance with the IFRS
which has been issued by IASB. The manner in which the reporting should be done
by the company is provided by the outline of the accounting board and how the
accounting treatment of each of the transactions specific to the organizations should
be done. In the second tier, the presentation, recognition and measurement of the

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transactions are done which is related to the first transaction. All the entity that is
listed on the stock exchange of Australia is required to adopt the accounting
standard while preparation of the financial statements in accordance with the
Corporation Act, 2001. Such standard depicts the format and rules that should be
applied when treating the different account and how it should be included in the
financial reporting system. It enables the companies to provide a true and fair
representation of their financial statements and helps the users of the financial report
to make the assessment that whether the presentation of the facts and figures are
true and fair.
Accounting theories:
Accounting theory can be described as the braid set of principles that helps in
the valuation of the accounting practice and guiding the development of the
procedures and new practices in a general frame of reference. The rules of
accounting are rationalized using the guidance of the accounting theories that helps
the accountants in classifying, gathering, reporting and interpreting the financial data.
It can also be referred to as the process of measuring, identifying and
communicating the economic information that permits the informed decision and
judgments by the users of the financial statement (Brasel et al., 2016). There are
different types of accounting theories that comprised of inductive theory, descriptive
theory, evaluative theory, deductive theory, normative theory, communicative theory
and generally accepted theory.
Problem statement:
The paper addresses the assessment of risk of material misstatement and
identifying whether such risks have been assessed by the auditors. In addition to
this, the report also tends to evaluate the key audit matters and the opinion framed
by the independent auditor and whether there has been any modification of the
opinion about the financial statement of company. The contributory negligence and
the negligence of order in framing the opinion in the financial statements of the
company have been addressed. The true and fair presentation of the financial
information is assessed in accordance with the Australian accounting standard.
Current study has been undertaken to deal with all the related and applicable

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standards of auditing and how the presentation of such information complies with the
required standard.
Research objectives and aims:
The objective of the paper is to conduct an investigation into the true and fair
status of the financial statements of QBE Insurance group limited. Such assessment
is done by particularly emphasizing on the key audit matters that are given by the
auditors of company and thereby forming a critical opinion on the independent
auditors report. The aims of the research paper are:
 To analyze the statement of financial position and to ascertain whether the
items have been presented in accordance with the accounting standards or
not.
 To assess the status of true and fair presentation of the financial information
 To critically evaluate the opinion of the auditors as presented in the
independent auditors report.
 To analyze the applicable accounting standards and verify whether such
standards have been applied in accordance with the requirement and the
applicable treatments.
Structure of study:
The concepts of the Australian accounting standard have been discussed in
the paper along with the assessment of the implementation in preparing the financial
reports. The true and fair presentation of the information is assessed and its
importance to the users of financial statement has been evaluated further. The
reporting entity for which the assessment of the true and fair representation has
been done is QBE Insurance group limited which is one of the largest insurer groups
of the world. The findings generated by the analysis of all audit matters are followed
by the appropriate recommendation and conclusion and forming the scope for future
study.
Methodology:
The case study has been analyzed by employing the method of extensive of
the financial report published by the reporting entity. A risk based auditing approach

AUDITING AND ASSURANCE
is used along with the accounting standards and auditing concepts for assessing the
information presented in the annual report of the company. There has been the
application of both quantitative and qualitative analysis with the particular focus on
the qualitative approach. In order to research the key audit matters and conduct an
evaluation, the data pertaining to such matters have been retrieved from the annual
report of the reporting entity. Philosophy of positivism is used in the paper along with
using the deductive approach as it would help in generalizing the findings to certain
extent and measuring the concepts quantitatively (Cho et al., 2019).
Research approach:
Research approach is the manner in which the data is collected and the tools
that are used for evaluating and analyzing the data retrieved from the financial report
of the reporting entity. Researcher basically uses two types of approach that is
inductive and deductive approach. In the current study, the analysis of the audit
opinion and the key audit matters are done by adopting the deductive approach to
research and carrying out investigation. The proposition of the existing auditing and
accounting theory is evaluated by collecting the data from the annual report
published by the company on their corporate website. Therefore, the verification of
the existing accounting and auditing theory is done by analyzing the data presented
in the financial statements of the company.
Research design:
The researcher is able to achieve the objective of conducting the research by
way of design the research that helps to answer the questions posed in the study. A
good design will help the assessor in ensuring that the obtained data will assist in
answering to the questions in an effective manner. In the present study, deductive
approach has been employed that is the pre planning the designs that is used to
conduct the analysis.
Process of data collection:
The data for the purpose of analysis has been retrieved from the annual
report of QBE Insurance group limited. Such data are the secondary data which has
already been published by the company.

AUDITING AND ASSURANCE
Overview of the company:
QBE Insurance Group Limited is the largest insurance company based in
Australia that reinsurance the risks and underwrites general insurance worldwide. It
is involves in providing insurance services mainly in Europe, America, Australia and
region of Asia Pacific. The objective of the company is to deliver profitable growth in
the markets where there is competitive advantage by the simplification of the
business. The assessment of the quality of all the parts of business is assessed by
using the rigorous approach and the company delivering significant cost reductions
in recent years. QBE believe in respecting the rights of shareholder by providing
them with appropriate facilities and information so that the rights can be exercised
effectively. Effective communication with the investors is facilitated with the help of
comprehensive investor relations program developed by QBE. The annual general
meeting of the company is conducted every year where the shareholders are
encouraged to comment and poses direct questions to the chairman of the company
or the external auditors appointed by company to seek clarification regarding any of
the attempt and the methods imposed by organization. It is firmly believed by the
company that external auditors must be seen as independent and the independence
of the auditors are confirmed by way of separate enquiry conducted by the audit
committee. As per the meeting of the audit committee, the auditor meets with the
auditors in the absence of the management of organization. In the current financial
year of 2018, the auditor of the QBE Insurance group is PriceWaterhouseCoopers in
accordance with the section 327 B of the Corporations Act, 2001 (Edgley et al.,
2015). The auditor makes independence declaration at the end of each financial
year.
Findings:
In this section, the accounting and the auditing standard adopted by the QBE
Insurance group has been done and the evaluation of the facts and figures are done
by retrieving the data from the annual report of the company. Analysis of the
information obtained from the financial statements and the opinion of the auditors
regarding the key matters are evaluated in relation to the concepts of audit. In
addition to this, the risk based approach has been adopted for evaluating the risk
that has been identified from the analysis of the financial report of the reporting

AUDITING AND ASSURANCE
entity. PricewaterhouseCoopers performs the audit services in addition to the non
audit services
Being the auditor for conducting the audit of the QBE Insurance group, the
auditor has made the declaration regarding the financial report and the information
contained therein. It has been declared that there have not been any contraventions
of the requirements of the independent auditors of the Corporation Act in relation to
the audit. Furthermore, in relation to the audit, there have not been any
contraventions regarding the applicable professional code of conducts. All such
declarations are in relation to the entities controlled by QBE and QBE Insurance
group as a whole.
In addition to the statuary services, the auditor has also performed the non
audit services as well. It is mentioned in the directors report that the position of the
organization has been considered by the board and they are satisfied with the non
audit services provisions with such provisions being compatible with the general
independence standard for auditors that re imposed by the Corporations Act, 2001.
The provisions of non audit services which are given by the auditor are satisfied by
the directors as set out in the note 8.7 of the financial statements. The provisions laid
down by the auditors do not by any means compromise the requirement of the
independence of auditors in accordance with the Corporation Act, 2001 (Caplan &
Dutta, 2016). The annual report of the company presents a copy of the
independence declaration made by the auditors. The note to the financial statements
has disclosed the details of the total amount of fees paid or payable to the auditors of
company. For the non audit services, the company has engaged the external
auditors excluding the services that are subjected to the general principle. Such
principle states that the total amount iof fees payable to the auditor for non audit
services should not be more than 50% of all the fees paid in one financial year to the
external auditors. Given the external knowledge of the auditors of the group, it is
believed by the board that some of the non audit services are appropriate. Instead of
external auditor, the accounting firm is responsible for performing the external
taxation services. The excluded services of preparing the financial report or the
accounting records or acting in the capacity of management cannot be provided with
the external auditors as consistent with the prior period (Barr-Pulliam et al., 2017).
Therefore, from the analysis of the remuneration section of the auditors, it can be

AUDITING AND ASSURANCE
inferred that the company complies with the general principle of payment of fees
regarding the non audit services.
The annual report of QBE Insurance group has a separate section of the
report on the opinion regarding the audit of the financial statements. The auditors
have conducted the auditing of various financial statements of the company that
comprised of consolidated statement of comprehensive of income, consolidated
balance sheet, consolidated statement of cash flow and consolidated statement of
changes in equity for the year ending 31st December, 2018. In addition to this, the
auditor conducted auditing of the notes to the consolidated financial statements that
includes a summary of significant and relevant policies of accounting applicable for
the treatment of each transactions and activities performed by company along with
the declaration given by the directors of QBE Insurance group
(qbe2018.qreports.com.au, 2019).
The audit of the company is designed for providing reasonable assurance
about the fact that the financial statements contained in the financial report therein is
free from the material misstatement that arises due to occurrence of errors and
fraud. Information presented in the financial report are considered material if the
economic decisions of the users that is taken based on the financial report can be
reasonably influenced. The scope of the audit has been tailored by the auditor for
ensuring that enough audit work has been performed so that they are able to give
the opinion of the financial report as the whole. Such tailoring has been done by
taking into account the structure of the management and geography of the group,
control, process of accounting and the industry in which the organization carries out
its operation.
Identification and assessment of material misstatement risk:
The risk of material misstatement is assessed and identified by thoroughly
understanding the entity and the environment in which it operates in accordance with
the auditing standard 315. All the historical financial information presented in the
annual report of the company is audited with the application of this particular auditing
standard. Auditors in accordance with the standard has the objective of assessing
and identifying the risk of material misstatements at the assertion level due to errors
and fraud by understanding the internal control and environment of the reporting

AUDITING AND ASSURANCE
entity (Kahyaoglu et al., 2019). In order to assess the material misstatement risk, the
auditors should perform the risk assessment procedure which comprise of analytical
procedure, inspection and observation along with enquiries of management. In
addition to this, an understanding of the process of managing and identifying the risk
by entity should be gained. As described in the paragraph 25 of the auditing
standard forming a part of the assessment of risk, it should be determined by the
auditors that whether in their judgments, there is the existence of significant risk. If
there is the existence of significant risk, then it is required by the auditor to
understand the internal control activities that are relevant to the risks. Furthermore,
the auditor should document all the key elements of different aspects of the entity
along with the identified risk. Every large organization has their internal audit function
for which the enquiry should be done by the auditors. Any information regarded
suspected and alleged fraud should be provided by the internal audit function to the
auditor in accordance with the ASA 240.
From the analysis of the financial report of QBE Insurance group Limited, it
has been ascertained that the main focus of conducting the audit and the audit work
was on the subjective judgments made by the group. Such judgment has involved
assumptions accounting estimates and any future events that are inherently
uncertain. It was also ensured that the team of audit at both operational and group
levels possessed the competencies and appropriate skills that were required for
conducting the audit of the complex global insurer such as QBE limited. This
comprised of information technology specialist, expertise insurance, and valuation
and tax professionals. The audit of QBE limited has been conducted for most of the
divisions that are financially significant such as operations in Europe, North America,
Australia, New Zealand and divisions of Equator Re. In addition to this, for certain
account balances for other controlled entities within the group; the auditor has
performed the particular audit procedures that are focused on the risk. The level of
involvement of the works which the auditors perform in PWC Australia or any firms
operating under the instruction is determined by the auditors. Such involvement is
made for assessing the fact that the audit work conducted is satisfied and for the
purpose of forming the opinion, required audit evidences have been obtained.
Throughout the year, the auditor is in regular contact with the audit team either by
way of written instructions and discussion or by video conference whichever seems

AUDITING AND ASSURANCE
appropriate. The audit procedures are performed at group level over the
consolidation of the reporting segments and remaining balances of the group.
Materiality in performing and planning the audit:
Under this standard, auditor is required to apply the concept of materiality in
performing and planning the audit of the financial report of entity. The application of
materiality in evaluating the impact of material misstatement that have been
identified on the audit is explained by ASA 450. Determination of material
misstatement by the auditor is a matter of professional judgments and the perception
of auditor regarding the needs of the financial report of the user affects the
materiality determination. In addition to this, the judgments are made about the size
of the misstatements. The performance materiality should be determined by the
auditors for assessing the material misstatement risk so that the timing, nature and
extent of the procedures are determined (Mock et al., 2018). Furthermore, for the
determination of materiality of the financial report as a whole, a benchmark is used
by the auditors in which the professional judgments should be exercised. For
choosing a benchmark, a percentage is applied as a point of initiating the process of
determining materiality.
The financial report of QBE Insurance group discloses all the relevant
information relating to the performance of the auditing procedures of auditors in
planning the audit and determining the materiality. It has been found that the auditor
has determined performance materiality and has chosen a benchmark for the same.
The information regarding the materiality is also presented by the auditor in
their report published in the annual reporting document. Auditor of QBE Insurance
group Limited has made use of overall materiality of the group of $ 58.9 million for
the purpose of conducting audit and the amount represents approximately 0.9% of
the net earned premium of the group. Based on the professional judgments, a
threshold of 0.5% is utilized by the auditors noting that such threshold is within the
range that is commonly acceptable. The reason for choosing net earned premium is
that such premium is viewed as the key financial metric and it is not as volatile as
other measures of profit and loss and helps in assessment of the group’s
performance. The threshold is applied along with the qualitative considerations for
determining the timing, nature and extent of the audit procedures and the scope of

AUDITING AND ASSURANCE
audit and further to conduct an evaluation of the impact of the material misstatement
of any items in the financial report.
Response of auditors towards the risk assessment:
The ASA 330 requires the auditor to address the material misstatement risk
by determining the overall risk. The assessed risk concerning material misstatement
at the assertion level should be responded by performing the further audit
procedures. Such further audit procedures involve testing the operating effectiveness
of the control. In addition to this, the auditors are required to evaluate the
appropriateness of the risk assessment procedures and to make the conclusion that
they have obtained sufficient audit evidences. The risk of material misstatement at
the financial reporting should be addressed by determining the overall responses. In
event of auditors planning only substantive procedures, then the substantive
procedures should be designed for relevant assertions that would bring the risk of
material misstatement to an acceptably low level. In some cases, the assessment of
the risk of material misstatement can be done by the auditors by only performing the
test of control (Legislation.gov.au, 2019). Such testing of control is performed when
the sufficient audit evidence has not been obtained by using the substantive
procedures.
In relation to several key audit matters that have been observed by the
auditors, the same is addressed by designing the effective test of control. Key audit
matters are those matters which have the most significance in the professional
judgments in conducting the audit of the financial statement of company. In the
context of audit of the financial report and forming an opinion on the same, the key
audit matters have been addressed and no separate opinion is made on the same
(Moroney & Trotman, 2016). Moreover, the extent of testing in the substantive
procedure is done in terms of the size of sample which the material misstatement
risk impacts.
The key audit matter of valuation of net outstanding claim is assessed by
developing the procedure in which the operating effectiveness of certain control is
tested and designed. The net outstanding claim is considered key audit matter on
part of auditor because of the significant judgments and complexities involved in the
process of estimating the balance. The actual estimates of historical claim are tested

AUDITING AND ASSURANCE
by selecting a sample of claims case of settlement and estimates. Moreover, the
estimates of the claim reserve presenting a higher risk are assessed for which a
greater level of judgments is involved. The consistency of the actual methodology of
the group with the industry is evaluated in the prior year as well. Application of
testing the discount is done for the business where the length of time is greater
between settlement and initial claim event. The payment for claim that is incurred in
the reporting year is also faced with the judgment as there is inadequate information
available in relation to such claims (Werner & Gehrke, 2018).
Reinsurance and other receivables valuation required considerable level of
judgments because of its inherent dependence underlying estimates on the gross
outstanding claims. The reinsurance recoveries on the outstanding claims of the
insurance is estimated by performing the same audit procedures as in the case of
gross claim estimates and thereby obtaining the audit evidence. In addition to this, a
sample of claims is evaluated by comparing the recovery calculations of the group
and considering the work of actuarial experts. A sample of relevant contracts were
inspected for determining the fact that the key terms have been reflect in accordance
with the Australia accounting standard in the financial statement. The assessment of
recoverability of such assets is done by performing procedures including the
assessment of credit ratings and considering the ageing of the receivable amounts.
The key audit matter of risk margin and probability adequacy, it is required by
the auditors to make judgments about each class of business variability and the
correlation between different geographical region and divisions. The approach of the
board to set margin in accordance with the AASB requirements is assessed by
emphasizing on the assessed level of uncertainty. In addition to this, the actual
calculation of the probability of adequacy is tested for consistency and
reasonableness. It also involved comparing the result with the benchmark of
industry.
The goodwill valuation in operations in North America is regarded as the key
audit matter by auditor because of the previous impairment charges and the financial
significance associated with the carrying value. Moreover, the changes are
impairment of goodwill is sensitive to any changes in the assumptions. The
procedures adopted by the auditors are to assess the methodology which the group

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adopted for impairment assessment is consistent with the Australian accounting
standard. An understanding of the process by which the cash flow is forecasted is
developed along with comparing the cash flow in three year of business plan.
Assessment of the key assumptions in relation to the future flow of cash is also done
and the calculations of sensitivity analysis of the group are reperformed.
The valuation of investment is considered as key audit matter because of the
significant level of judgments involved in determination of the fair value. The
valuation of investment is evaluated by auditors by testing the operating
effectiveness and assessing the design of selected control over the function of
investment. Independents confirmation is obtained from the fund managers over the
existence of investment. The computation of fair value of sample of investment is
compared to the own independent calculations.
The recoverability of the deferred tax assets is considered as key audit matter
because the assessment of requires considerable level of judgments. The
procedures adopted by the auditor to assess the materiality of the deferred tax
assets recoverability involved comparing the future taxable profits for assessing the
recoverability, considering the restructure impact, analyzing the applicable tax rate
and evaluating the availability of the tax losses for forecast recoupment period.
For recording and processing of significant volume of transactions, the group
is dependent upon the complex information technology system. This is regarded as
the key audit matter because of the considerable number of the key financial sought
by the organization on relying or forming their opinion is dependent upon the
automated control and is related to the IT systems. The analytical procedures
adopted by the auditor in evaluating this particular key audit matter are to develop an
understanding of the business process, relevant control and IT systems along with
testing the operating effectiveness and assessing the design of key control over the
relevant IT systems. In addition to this, independent tests are also carried out for
establishing the accuracy of selected controls. In addition to this, the technology
dependant manual control and automated control are selected for assessing the
correct opinion of the same. The issues associated with operating effectiveness and
designs are identified with the access and control of change management along with

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detailed testing and a combination of compensating control that helps in providing
sufficient evidence for the audit that has been conducted (Contessotto et al., 2018).
Forming an opinion and reporting on the financial report:
As per ASA 700, it is the responsibility of the auditors to form an opinion about
the financial report of the reporting entity. That is they are required to form an opinion
that the financial report is prepared according to the applicable financial reporting
framework in all the material aspects. Any indentified key audit matters should be
communicated in the auditor report. There should be appropriate balance between
the need of comparability and consistency in the auditor report. The auditor is
required to make conclusion about the obtaining of sufficient and appropriate audit
evidences according to ASA 330. The evaluation of the material aspects of the entity
should be done in accordance with the applicable reporting framework requirements.
Furthermore, an unmodified opinion should be expressed by the auditors when an
opinion is framed on the preparation of the financial report in accordance with the
reporting framework. The auditor should modify the opinion on the report in
accordance with the ASA 705 when they make conclusion that the financial
statement is nit free from the material misstatement and no sufficient audit evidences
are obtained to make conclusion that the financial statements is free from material
misstatement.
The opinion framed by the auditors on the financial report of QBE Insurance
group limited does not take into account other information and accordingly, no
assurance conclusion on the same is expressed thereon. The responsibility of the
auditor in connection with the financial report audit is to consider whether the other
information is materially inconsistent with the financial report and to read the other
information or otherwise, it would be stated that such information’s are materially
misstated. IT is concluded by the auditor based on the work performed on other
information before the date of auditor report that there is a material misstatement of
other information. Auditors have mentioned that they are required to report about the
material, misstatement of the other information. However, it is mentioned that there
is nothing to report in regard to the material misstatement of other information in the
current period. The annual report of QBE Insurance group mentions that obtaining
the reasonable assurance about the financial report being free from the material
misstatement is the responsibility of the auditors. Reasonable assurance is

AUDITING AND ASSURANCE
considered assurance that is of high level, however, it does not provide guarantee
that the existence of material misstatement will always be detected when the audit is
conducted according to the Australian accounting standard. Misstatements are
considered material when they are able to influence the economic decision of the
users which they take on the basis of opinion framed on the financial report and
usually such misstatement occurs due to the fraud and errors. The auditors have
formed the opinion on the accounting treatments and the financial statement
according to the Australian accounting standards. The responsibilities of the auditor
in relation to the accounting standard are described further in the section of
responsibilities of the auditor for the audit of the financial report”. It is believed by the
auditor that they have obtained sufficient audit evidences which are appropriate for
forming the opinion. In the opinion of the auditor, the financial report of the controlled
entities along with the QBE Insurance group limited which are prepared according to
the Corporations Act, 2001 provides a true and fair view of the financial position and
the financial performance of the group. Furthermore, the financial statements and the
treatment of the accounts complies with the Corporations regulations Act, 2001 and
is in accordance with the Australian accounting standard.
The annual report also commented on the independence of auditor and it is
viewed that the auditor is independent in accordance with the requirement of ethical
standard board of APES 110 Code of ethics for professional accountants, ethical
requirement of the accounting professional along with the Corporation Act, 2001
requirements which are relevant to the audit of the financial report of QBE Insurance
group. It is also mentioned by the auditor that all the other ethical requirements have
also been fulfilled according to the code of ethics. Furthermore, the auditors have
also formed an opinion on the remuneration report which they viewed that the report
has been prepared in accordance with the section 300 A of the Corporations Act,
2001.
Auditor’s independence:
The auditor of QBE Insurance Group Limited is independent of the group in
accordance with the requirement of the auditor’s independence of the Corporation
Act, 2001 and ethical requirement of the ethical standard board and professional
requirements. The external auditor which is Pwc has confirmed its independence
and the independence external auditor are separately enquired by the audit

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committee. As a part of the meeting of committee, the external auditor meets with
the audit committee in the absence of management. The annual general meeting is
attended by the external auditors and any questions put forward by the shareholders
in relation to the audit is answered by the representative of the auditors. An internal
guideline is issues by the audit committee on the independence of external auditor
under which the auditors are not allowed to exclude services in relation to valuation
of liabilities and assets, financial report and preparation of the accounting records. In
addition to this, external auditor cannot act in the capacity of management as a
share registry or the custodian of assets (Samsonova & Siddiqui, 2016). However, it
is believed by the board that given the knowledge of the external auditors toward the
group, the external auditors can provide non audit services. It has been found that
the auditors have also performed non audit services that are consistent with the
general independence standard which is imposed by the Corporation Act, 2001.
Moreover, the non audit services provision did not compromise the requirement of
the independent of auditors of the Corporation Act, 2001.
Going concern:
Under the ASA 570, it is the responsibility of the auditors to audit the financial
report relating to the going concern and its implication on the audit report. It is
required by the auditor to obtain sufficient and appropriate audit evidence on the
appropriate use of the going concern basis of accounting by the management in
preparing financial report. In addition to this, they are also requiring to make a
conclusion on the existence of material uncertainty about the ability of the entity to
continue as a going concern. Even if there is not an explicit requirement by the
management to make specific assessment of the going concern aspect, the auditors
are entrusted with this particular responsibility. In the event of performing the risk
assessment procedures in accordance with ASA 315, the auditor should conduct an
investigation into the existence of any conditions or events that would cast a doubt
on the ability of entity to continue as going concern (Auasb.gov.au, 2019). The
management shall be enquired as to the knowledge of conditions or event beyond
the period of assessment of management.
The annual report of the company mentions that it is the responsibility of the
directors to assess the ability of the group to continue as a going concern in

AUDITING AND ASSURANCE
preparing the financial report. The directors should ensure that the company has
employed the going concern basis of accounting unless it is the intention of the
directors to cease the operations and liquidate the group. In addition to this, the
annual report has not mentioned anything about the identification of the events and
conditions that would pose question to the going concern basis.
Code of ethics for professional accountants:
The distinguishing of the accounting profession is to accept the responsibility
to act in the public interest. The code of ethics contained three parts which involves
identification of threat to comply with the fundamental principles, evaluating the
identified significance of threats and application of safeguard to reduce the threat to
acceptable level to completely eliminate them (Hu et al., 2016).
QBE Insurance group limited has released an updated code of conduct and
ethics in February, 2018. Updating and reviewing of the code of conduct by the
company is done by taking into account the changing environment of business,
strategy, approach and emerging compliance and regulatory issues. The code of
conduct is applicable to the directors and employees, contractors and agents.
Furthermore, the conduct of conduct of director is covered by the conduct and code
of ethics. It has been found that the operations of QBE in Australia comply with the
General Insurance code of practice. A strong culture of risk is supported by QBE as
they are considered instrumental in determining the effectiveness of internal control
mechanism and the framework of ERM along with recognizing the importance of
awareness of risk. The current focus of the organization is to achieve alignment
between the wider culture of organization and culture of risk. In addition to this, the
risk behavior is included in the DNA of QBE which is used in the process and people
across the group. The culture of risk is also embedded in the code of ethics and
culture that is applicable to employees, representatives and directors (Fang et al.,
2018).
Implication of findings:
In this section, the analysis and evaluation of all the relevant information that
is retrieved from the financial report of QBE limited is demonstrated. It represents
how the organization has complied with the Australian Accounting Standard and how

AUDITING AND ASSURANCE
the auditor has conducted audit using the auditing standards and risk based
approach.
From the analysis of all the key audit matters that has been identified by the
auditors, it is inferred that the auditors pointed out such accounts on the basis of
sufficient appropriate evidences based on their analytical procedures. The key audit
matters is related to several accounts such as valuation of investment, goodwill,
probability of adequacy, risk margin, reinsurance and other recoveries, recoverability
of deferred tax assets and operations of control and IT system. The matters requiring
significant audit attention has been identified as it pose challenges in forming opinion
about the appropriateness and sufficiency of the judgments. While evaluation of the
key audit matters, the auditor of QBE has taken into account the areas of higher
assessed risk of material misstatement. The impact of significant audit event and any
kind of transactions occurred during the time of conducting have been taken into
account by the auditor. Furthermore, the most significance audit matter is
determined by the auditor and has outlined indicating that such matter would have
considerable impact on the accounting, economic, regulatory, financial statement
and any other development that impacts the judgment and assumptions of
management.
The auditor report of QBE Insurance group limited has presented a detailed
discussion and description of each of key audit matters that has been identified. This
was also supported with the reasons why the matter is considered to be significant in
conducting the audit and the manner in which such identified key audit matters was
addressed are also presented in the section of auditor report. Auditors have
communicated all the identified key audit matters in the financial report in the context
that they have formed opinion on the financial statements as a whole and there was
not any separate opinion on each of the identified matters in the financial report. All
the matters of going concern are reported by QBE in accordance with the ASA 570.
Moreover, the auditors have formed their opinion on the financial statements and
information by identifying the existence of any conditions and events that would pose
the threat to the ability of entity as going concern (Görener, 2017). In this regard, no
such challenge he and threat was observed by the auditors and they have formed
opinion that there is appropriate use of going concern accounting in preparing the
financial report.

AUDITING AND ASSURANCE
The auditors have also made critical evaluating of the estimates and judgment
with regard to the account of probability of adequacy and determination of risk
margin. The board of the group has determined the risk margin so that the potential
for uncertainty is mitigated in estimating the net discounted central. Measurement of
class of business variability is done using the technique that helps in determining the
possible ranges outcome with such technique using standard statistical distributions.
Moreover, the group has determined the probability of adequacy by analyzing the
correlation between the classes of business and division and variability in each class
of business (Bowlin et al., 2015). Such estimates and judgment used by the
management is critically evaluated by the auditor using the analytical procedures
and development of substantial procedures by developing the effective test of
control.
There is a highest standard of governance which the QBE is committed to and
the seven cultural elements fundamental to the organization is interlinked with the
new DNA. The ongoing success of the business and long term profitability is
promoted by the culture that rewards integrity, transparency and performance. It can
be seen from the annual report of the company that majority of the directors are
independent which meet the requirement of the independence definition of the ASX
Corporate governance council. The relationship of independent director with QBE is
determined by the board with the help of application of the definition of
independence. The board receives advice from the directors on an ongoing basis of
interest as it is believed that they might have conflict with the interest of QBE. It has
been found that the factors contributing to the strong corporate governance is the
renewal and orderly succession of the board along with continual review and careful
planning (Alagic et al., 2018). Furthermore, an updated corporate governance is
adopted by the group because of the commitments of the group to maintain highest
corporate governance standard. The provider of the current system of whistle
blowing is changed and the new system is released named as “QBE ethics hotline”
which reflects the commitment of organization to ensure that the disclosure made by
employees are protected and taken seriously along with developing a speak up
culture. All the declarations made by the directors regarding the financial statements
of the company is in accordance with the Corporate governance council and

AUDITING AND ASSURANCE
recommendation of the ASX Corporate governance council and requirements of the
section 295A of the Corporations Act, 2001.
Conclusion and recommendations:
The above facts and analysis done provided a detailed discussion of the
evaluation of the true and fair status of the financial report of QBE Insurance group
limited. The opinion of auditors regarding the financial report and all the identified
key audit matters has been evaluated critically with reference to the difference
applicable Australian accounting and auditing standard. It can be inferred from the
analysis of the facts and the relevant information drawn from the financial report that
the auditors have exercised their duties and have fulfill their responsibility in
assessing the financial information and have formed their judgment on the basis of
appropriate and sufficient audit evidences (Bunjaku, 2019). There has been a
detailed presentation of the entire key audit matters foe which the auditor adopted
appropriate analytical procedures to conduct the assessment. Furthermore, the
material misstatement has also been observed by the auditors for which the
adequate judgment has been made. Therefore, the investors and stakeholders of the
organization can sufficiently rely on the audited financial statement and their
economic decision based on the assessment of the report would not get influenced
due to materiality. From the analysis of the financial report and the opinion of the
auditors presented on the same, it is inferred that the financial statement is free from
the material misstatement due to any error and fraud activities except to the key
audit matters which are addressed and assessed separately by designing effective
test of control and analytical procedures (Coetzee, 2016). It can also be concluded
that the QBE Insurance group limited strictly adheres to the code of ethics, principles
and practice. The updating of their corporate governance is the evident of the fact
that the organization is committed to maintain strong position in terms of fair
presentation of their financial information and governance.
QBE Insurance Group limited is one of the largest insurer companies in the
world and carries out its operation worldwide. It is required by the company to further
strengthen their financial report and present the information in a manner that
generates ease in comparability with other companies for the investors. The
management of the organization should have timely discussion and engagement

AUDITING AND ASSURANCE
with those charged with the governance which forms an important part in the process
of evaluating the significant matter and any existence of the risky factors deterring
the fair representation of the information. There should be existence of effective
communication between the component auditors and group engagement team which
is considered important in ensuring that the highlighted matters is communicated to
such group and they are addressed appropriately. There can b situation of close
calls where the evidence obtained from audit concluded that there does not exists
any material uncertainty but there are events and conditions casting considerable
doubt on the entity’s ability to continue as going concern. In such situation, the
auditors of QAE group should conduct an evaluation of the requirements concerning
the applicable framework of financial reporting along with providing adequate amount
of disclosures in relation to such conditions or events. This disclosure is considered
important because it is fundamental to the understanding the entity and might be
included in the key audit matters (Margret & Hoque, 2016). Furthermore, in event of
material uncertainty report for the going concern, the auditor should give the
reference to the basis of adverse opinion concerning the material uncertainty related
to going concern. Therefore, particular emphasis has been laid down on the
presentation of key audit matters and evaluation of the entity risk assessment
procedures and on effective communication.

AUDITING AND ASSURANCE
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