Auditing and Data Analysis Assignment

Auditing and Data
Analysis

EXECUTIVE SUMMARY
This document describes specific information about the AMP’s business. This will likely
to be only project having an effective prospective auditor’s analysis and hence proper clarity are
of the utmost significant aspect that is being done accordingly under this report. It is prepared to
guide company on the creation of the critical decision regarding, whether auditing is essential for
the AMP’s business. The questions which are answered in this evaluation report is based on in
depth research of this company. Various analyses and evaluation related to financial and
managerial position of this company is conducted in order to convey better decision to the
superiors of audit firm.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
1. Overview of AMP's operations...............................................................................................2
2. Laws affecting AMP's operations...........................................................................................3
3. Business risks impacting audit of AMP..................................................................................5
4. Key assertion at risk................................................................................................................6
5. Royal commission affecting the tendering decision...............................................................8
6. Audit decision.........................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10
2

INTRODUCTION
Audit is a systematic and independent inspection of financial statements of organisations
by using vouchers, statutory records, documents and vouchers. The process of auditing can be
performed efficiently using data analysis method as it helps in procure and interpret all the
numerical related data which is related to company's financial position. In this project report,
decision has to be taken by audit firm whether they should conduct audit for AMP Limited or
not. AMP is a financial services company in Australia and New Zealand which is listed on ASX.
They provide financial services such as insurance, financial advice, banking products and many
more. The main aim of this report is to identify various laws and regulations affecting
operations of AMP is mentioned along with its business risks. Case of Royal Commission is also
highlighted in this project to understand client's business risks and audit risks (Bazeley and
Jackson, 2013).
TASK
1. Overview of AMP's operations
AMP is a public limited company listed on ASX and has headquarters in Sydney,
Australia. This organisation is engaged in providing finance related services to their client. Their
service mix includes financial advice, customer solutions and may more. Some of the main
operations of this company are listed below:
 Banking – AMP is one of the Australia's largest retail and corporate banking services
provider. They offers few selected banking products and services to their clients which
are distributed using a network of self employed financial planners. These banking
services also includes advice to their clients by which client get benefited as they have
clear view of what to do and what not to do. AMP provides advices to their clients about
investment, financing and stocks. These operations are spread in whole of Australia and
New Zealand (Charnes, 2013).
 Insurance – AMP provides personal risk insurance products and self managed super
fund administration, support and design. These products are distributed through a
network of self employed financial planners. Along with insurance, superannuation
products are also distributed by super fund administration.
3

 Customer solutions – AMP provides services of financial advice and customer solutions
in order to meet their client's needs. These services are related to solutions regarding
security market and capital market in which client can obtain help about their investment
decisions.
 AMP capital – This is the division of AMP which concerns with capital market. This
organisation is considered as one of the Asia Pacific's largest investment management
company. AMP Capital has appointed a team of professionals and industrious experts
across the globe, they invests in equities, fixed interest, infrastructure, property and
diversified funds.
AMP is a company which is highly concerned with financial services and has diversified
activities. Due to ample of areas to be audited, audit process can result in number of complexities
but despite of numerous challenges, this firm can be audited effectively if the auditors are well
trained and experienced. The above operations are diversified but easy to be audited as all
financial services are recorded in systematic documents which can help in the process of auditing
(Jacobs, 2011).
2. Laws affecting AMP's operations
AMP organisation operates in financial industry but their activities includes numerous
functions such as human resources management, satisfying customer service and many more.
Along with financial laws such as Corporation Act, Australian taxation Act, General insurance
Act and Superannuation Act; there are several other laws which affects functioning and
operations of AMP and they are discussed below:
Competition and Consumer Act, 2010:
CCA, 2010 is concerned with unfair market practices, price monitoring, mergers and
industry codes. This is an act of the Parliament of Australia, the main aim of this act is to
promote fair trade practices and competition along with protecting interest of consumers. This
law is administrated and controlled by Australian Competition and Consumer Commission
(ACCC). Both the schedules of this act are applicable on AMP Limited. First schedule of this act
states that AMP company will not be a part of any unfair trade practices in order to attain
competitive advantage. The second schedule of this act states that any misleading or deceptive
conduct against consumers will be highly punishable and penalised (Lin, Yao and Zadeh, 2013).
4

AMP Limited has to comply all the rules and regulations stated in this act in order to
continue their business operations.
Minimum wages law:
This law prohibits employers or organisations to employ human resources for less than
given minimum wage in this legislation. The Australian National Minimum Wage is the
minimum base rate of pay to any employee working in any business entity. This law came into
force in 1902 in Australia. This law is controlled and authorised by Australian Fair Pay
Commission. AMP is one of the largest firm of providing financial services due to which they
have ample of employees which are needed to fairly remunerated due to this law. This law has
strict penalties which affects operations of AMP and they have to comply all the minimum bases
of wages and salaries mentioned in this law (Liu, 2013).
Work Health and safety Act, 2011:
WHS is a universal law and in order to bring safe environment in Australia, the
controlling commission of this law developed a single set of WHS laws under Safe Work
Australia. These laws are known as “model laws” and Safe Work Australia is responsible for
implementing these laws. The main aim of this law is to balance consistent framework to secure
the heath and safety of workers and workplaces. AMP has to fulfil various rules and regulations
including protecting workers from harm, encouraging unions to take a constructive role in
promoting improvements in WHS practices and to ensure appropriate scrutiny.
Australian Consumer Law:
ACL is a uniform legislation for consumer protection applying as a law of the
Commonwealth of Australia. This law was developed by the agreement of Council of Australian
Governments. AMP has to comply all rules and regulations as according to this law, consumer is
an individual who acquires goods or services that are priced at less than 40000 dollars and this
company has products and services worth this amount. The main aim of this act is to protect the
interest of consumers (Ngai, 2011).
Unfair dismissal Act, 1977:
This act is controlled under labour law. Unfair dismissal is when an employee is
dismissed from their job in a harsh, unjust or unreasonable manner. The primary objective of this
act is to protect the interest of employees working in any organisation. AMP has employed
numerous employees and none of them can be dismissed without providing valid reason.
5

AMP is a public limited company which has to follow various laws and legislations.
Audit of this organisation should be done as there is a wide scope of examination and
investigation. AMP is considered to be well managed company in which all laws and legislations
are appropriately followed.
3. Business risks impacting audit of AMP
Business risks are the possibilities of inadequate profits and even losses. These risks
threatens an organisation's ability to generate profit at its target levels. In this case scenario,
business risk are those which affects the process of auditing of AMP Limited.
The process of auditing includes numerous steps including gathering information,
evidences, providing reliable results and many more. These stages can get affected if the
business risks has higher involvement. AMP is a financial services provider and due to unstable
economies, they have to face several business risks. Some of those risks are calculative and can
be controlled but some of them can not be controlled by the firm and has high chances to affect
audit process. In order to ascertain, whether audit of this organisation is appropriate to conduct or
not, some of the business risks affecting auditing process are described below:
Liquidity risk:
This risk is mainly concerned with financial institutions like AMP which are unable to
maintain their minimum liquidity ratio and are not able to meet short term financial demands. As
an auditor it is important to ascertain liquidity position of a company.
Nature of business operation:
AMP is a financial institution which deals in providing finance related services to their
clients. Nature of business operations of this organisation is quite complex due to number of
services provided by them and their diversity. Nature of this organisation is a risk to this
company as financial institutions are most influenced organisations from internal and external
environment.
Regulatory changes:
These changes are the variations which occur due to changes in policies and rules of the
regulatory authorities such as government and other regularities such as banker's bank. These
regulatory changes includes changes in interest rates minimum liquidity ratio and may more.
Current internal and external business environment:
6

Internal and external business environment of AMP limited is the major risk for this
organisation as it concerned with business environment factors. When considering internal
business environment, factors which affect this business are employees, suppliers and members
of the company. Whereas external environment of this company is political, economical,
technological and other factors.
Compliance risk:
These risks are related with legislations and bureaucracy which are associated with best
practices. AMP is a large scale organisation which has to comply rules of various laws including
minimum wages and Health and Safety. As an auditor, compliance risk is the most influential
factor in the process of auditing because if any rules and regulations are not complied then image
of company as well as the image of audit firm is at stake (Vasarhelyi, 2012).
The above discussed risks can impact audit of AMP as these factors are concerned with
business as well as with audit risks. The audit of AMP can be complex but these complexities
can be evaded and minimised by few measures.
4. Key assertion at risk
Business risk influences operation of business as well as the process of auditing. AMP
Limited is a organisation which has face various risks due to their nature of work. Material
misstatement is a difference between the amount of reported financial statement and the amount
which is required. These misstatements can arise due to some fraud or error. On the basis of
above risk analyses of AMP, accounts which are at risk of material misstatement are discussed
below:
Cash account:
A cash account is a real account which is includes all cash transactions of an
organisation. This account includes all cash receipts and cash journals which are first recorded
in journal. AMP Limited is a company which is affected by several operational risks due to their
cash account can be misinterpreted. For example, AMP deals in banking as well as in insurance
sector due to which they have to face mismanagement in activities and due to which their cash
account is sometimes gets affected and does not reconcile.
Assertion is a reason due to which account is said to be material misstatement. There are
two key assertions, they are inherent risk and control risk. Inherent risk is the misstatement due
to error or fraud and control risk is the misstatement due to lack of internal control. Key assertion
7

of cash account is control risk because material misstatement of this account is a cause of
improper management practices as AMP has diversified activities (Wahyuni, 2012).
Expenses account:
This account records all the expenses and their costs in order to ascertain all the costs
which are needed to be faced by an organisation. This account is the equity account with debit
balance. AMP Limited has to face strategic risk which are the result of improper strategic
management. Strategies are needed to prepared for smooth conduction of business operations.
Expenses account can be material misinterpreted as company is facing issues regarding strategic
management. For example: AMP Limited has adopted strategies of conservatism which allows
the accountant to record expenses which are anticipated due to which expenses account does not
reconcile.
Key assertion of this account is control risk. Misstatement of expenses account is the
result of unreliable strategies which are performed by the organisation. AMP is needed to bring
efficiency in their in their management and controlling techniques.
Revenue account:
In this account all revenues or gains are recorded in order to analyse profitability of an
organisation. AMP is facing various business risk due to which their revenue account is resultant
to be material misstatement. This account is an equity account with all credit balances which
means revenue directly increases the profitability of AMP. This company is needed to conduct a
audit so that they can identify what are the reasons of misstatement of this account. For example:
AMP is used to face business risks due to which they decided to not record predicted revenues
due to which revenue account does not match and result into material misstatement.
Assertion of this account is control risk, as revenue recognition is a complex task which
can result in misstatement of revenues due to unable management. In order to control this risk,
AMP needs to appoint a team of professional which can manage their risks.
Account receivables account:
Under this account all the amounts which were due to be received. This account records
all the amount of value which is received by AMP bank plc. Due to this account, AMP is facing
few problems such as transaction analyses and material misstatement. It is significant to record
all account receivables in order to ascertain true financial position of an organisation. Risk
involved in this account is related with ascertainment of future profits.
8

Key assertion of this account is inherit risk, as account receivables only records
transactions when the amount is actually received due to provisions can not be made and it result
in poor forecasting of profits (Xian, 2012).
After analysing accounts which are at risk of material misstatement and their key
assertions, it can be said that auditing of this company is a complex task but can be done by
analysing each and every aspect of their financial statements.
5. Royal commission affecting the tendering decision
The royal commission into banking misconduct has suggested AMP to deal with criminal
prosecution for misleading the corporate regulator. They are facing specific issues such as
breaching of criminal provision for misleading the Australian securities and investment
commission over their changing customer’s fees for no services. In a further indication of AMP
struggles, their troubles wealth management division indicate cash outflow of $873 million. The
banking royal commission has heard further evidences regarding inappropriate financial decision
with embattled wealth administration company AMP again under the direction of misguiding
customer interest.
In AMP’s case, it has been shown to have broken the law and regulation lied to the
regulators over all the issues of fees for not appropriate services. This is the position of customer
were literally paying their hard-earned income for nothing during the four banks and AMP raked
in hundreds of millions of dollars as fees. The internal control over financial reporting is the
major deficiencies which is being associated with the AMP. They are not being able to provide
specific information about the financial services to their customers. Internal control used to
provide reasonable assurance regarding the reliability of financial reporting and formulation of
financial statements for outcomes objectives. The royal commission has been provided a short
time period to investigate the sector which means it would not be able to cover plenty of aspects
within an organisation.
Justification: Because of all the above issues mentioned in the above can affect the
business performance and financial strength of the company. As, these are existing in most of
profitable organisation, so as auditor the decision for auditing of company’s financial data
necessary. It provides reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use and disposition of AMP assets that could have material effect on
9

financial statements. Despite of comments of royal commission it is suggested that this company
should audit AMP Limited as these allegations are common course of business (Zhu, 2014).
6. Audit decision
AMP Limited is a financial services provider which operates in Australia and New
Zealand. This company is considered as the one of the largest banking service provider of
Australia due to which it can be said that there is a wide scope of auditing in this company. As an
auditor of an independent audit firm, audit of AMP should be conducted. The reason behind
considering the tender of audit of AMP is mentioned below:
Wide scope of audit – AMP is a large scale organisation which has various financial and
managerial statements and aspects to be investigated. In the due course of audit of AMP, auditor
can get a wide scope of audit as they will have numerous accounts and statements to be studied
along with which they will also get scope to investigate efficiency in the managerial functions of
this company (Yang, and Jia, 2013).
Diversity in operations – AMP deals in providing banking services, insurance services,
financial advice etc. and has few divisions as AMP capital and more due to which it can be said
that they have diversity in their operations. Due to this diversity, audit firm can audit and check
all those operations and their related operations.
Controllable audit risks – AMP deals in financial services due to which they have to
face various business risks and there are several audit risks related to them as well but these risks
can be adjusted using effective measures. Despite of deficiencies mentioned by Royal
Commission, this firm should be audited as these deficiencies are a part of their business
activities which regularly tried to be evaded.
CONCLUSION
From the above evaluation report of AMP, it has concluded that the tender of audit of this
report should be considered as there is wide scope of audit activities in this company. Various
analyses such as financial and managerial is conducted in order to achieve the audit decision.
Laws and regulations which affects this company's operations can be managed along with all
business risks. Deficiencies which are highlighted by Royal Commission are considered but even
after that the decision of auditing of AMP is positive as these issues are common part of a
financial firm which can be controlled. As an auditor of an independent audit firm, it has been
10

suggested to superiors that this audit should be conducted after considering all the above reasons.
Auditing of this firm will be effective using method of data analyses.
11

REFERENCES
Books and Journals
Bazeley, P. and Jackson, K. eds., 2013. Qualitative data analysis with NVivo. Sage Publications
Limited.
Charnes, A., and et. al., 2013. Data envelopment analysis: Theory, methodology, and
applications. Springer Science & Business Media.
Jacobs, J. P., and et. al., 2011. Variation in outcomes for benchmark operations: an analysis of
the Society of Thoracic Surgeons Congenital Heart Surgery Database. The Annals of
thoracic surgery. 92(6). pp.2184-2192.
Lin, T. Y., Yao, Y. Y. and Zadeh, L. A. eds., 2013. Data mining, rough sets and granular
computing (Vol. 95). Physica.
Liu, B., and et. al., 2013, October. Scalable sentiment classification for big data analysis using
naive bayes classifier. In Big Data. 2013 IEEE International Conference on (pp. 99-
104). IEEE.
Ngai, E. W., and et. al., 2011. The application of data mining techniques in financial fraud
detection: A classification framework and an academic review of literature. Decision
Support Systems. 50(3). pp.559-569.
Sall, J., and et. al., 2012. JMP start statistics: a guide to statistics and data analysis using JMP.
Sas Institute.
Vasarhelyi, M. A., and et. al., 2012. The acceptance and adoption of continuous auditing by
internal auditors: A micro analysis. International Journal of Accounting Information
Systems. 13(3). pp.267-281.
Wahyuni, D., 2012. The research design maze: Understanding paradigms, cases, methods and
methodologies.
Xian, Y., and et. al., 2012. Data quality in the American Heart Association Get With The
Guidelines-Stroke (GWTG-Stroke): results from a national data validation audit.
American heart journal. 163(3). pp.392-398.
Yang, K. and Jia, X., 2013. An Efficient and Secure Dynamic Auditing Protocol for Data
Storage in Cloud Computing. IEEE Trans. Parallel Distrib. Syst. 24(9). pp.1717-1726.
Zhu, J., 2014. Quantitative models for performance evaluation and benchmarking: data
envelopment analysis with spreadsheets (Vol. 213). Springer.
Online
Cyber security threats. 2018. [Online]. Available through:
<https://securitybrief.com.au/amp/story/microsoft-report-cyber-attacks-cost-australia-
29b/>
12