Auditing and Ethic Report 2022

Running head: AUDITING AND ETHIC
Auditing and Ethic
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ETHIC
Table of Contents
Introduction................................................................................................................................2
Section 1.....................................................................................................................................2
Materiality Level Determination............................................................................................2
Reviewing Draft Notes...........................................................................................................4
Section 2.....................................................................................................................................5
Section 3.....................................................................................................................................7
Cash Flow Statement Review................................................................................................7
Audit Report Review..............................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
Auditing profession involves in the systematic as well as independent review of the
financial statements of the clients in order to make sure they are free from material
misstatements and appropriate audit standards have been used in order to prepare and present
them (William Jr, Glover & Prawitt, 2016). The auditors are responsible for taking into
account different factors in the auditing process. Determination of materiality level is a major
factors that is needed for the determination of material misstatements. Moreover, it is the
responsibility of the auditors to ensure the application of relevant analytical procedures in
order to test different component of financial statements so that the areas of higher audit risk
can be identified. The outcome of the whole audit program helps the auditors in expressing
the appropriate audit opinion. The main aim of this report is the analysis of different audit
related aspects of Qantas Airways Limited like the determination of materiality, audit risks
from financial ratios and others.
Section 1
Materiality Level Determination
Materiality is an important aspect in auditing which is considered as a fundamental
concept of auditing. The auditors apply the concept of materiality in the audit planning stage
and when they undertake the evaluation of the impact of assessed material mistsement on the
financial statements of the client. The same is applicable for the audit of Qantas Airways
Limited (Qantas). It needs to be mentioned that there are three steps that need to be followed
by the auditors while determining the level of materiality of Qantas for the financial year of
2018. These three steps are as follows:
1. Selection of the suitable and relevant benchmark;

3AUDITING AND ETHIC
2. Determination of a certain level which is the percentage of the above selected
benchmark; and,
3. Give necessary justification or rationale of the choice.
The following discussion shows the determination of the materiality level of Qantas for
2018 based on the above three steps.
1. In this step, the auditor of Qantas is needed to take into account certain factors for the
selection of benchmark; and these are the nature of the entity and the nature of the
industry in which the entity operates. The mostly used benchmarks are total income,
total expenses, profit before tax, net assets and gross profit. In case of Qantas, profit
before tax is choses as the benchmark because most of the companies in the airline
industry use this benchmark for materiality determination and this is helpful in
comparing the material level of Qantas with its competitors (Eilifsen & Messier Jr,
2014).
2. This step involves in the determination of percentage and this is majorly dependent on
the judgments of the auditors of the companies. In this stage, it is needed for the
auditors to consider the materiality guidelines of AASB 1031. As per AASB 1031, the
auditor of Qantas have two options. First, he/she can select an amount that is equal to
or greater than 10% of the above-mentioned base that is presumed to be material.
Second, the auditor can chose an amount that is equal to or less than 5% of the above-
mentioned base that is considered as material (aasb.gov.au, 2019). From the above, it
depends on the judgment of the auditor to select among 5% to 10%. In case of Qantas,
the auditor needs to consider 5% of the benchmark (Mio, 2013).
Therefore, based on the above discussion, the materiality of Qantas can be determined in
the following manner: