Auditing and Ethics | Report

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

1AUDITING AND ETHICS
Table of Contents
Introduction................................................................................................................................2
Section 1.....................................................................................................................................2
Materiality..............................................................................................................................2
Review of Draft Notes and Disclosures.................................................................................4
Section 2.....................................................................................................................................5
Section 3.....................................................................................................................................7
Statement of Cash Flows Review..........................................................................................7
Audit Report Review..............................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

2AUDITING AND ETHICS
Introduction
It is the responsibility of the auditors to account for the required aspects at the time to
carry out the required audit procedures. Ascertaining the materiality level is one of these
aspects where the auditors are required to consider the required aspects associated with the
ascertainment of audit materiality. In addition, the auditors are responsible for reviewing
different drafts and disclosures of the company’s financial statements for identifying the areas
with major audit attention. They are required to undertake the necessary preliminary
analytical review of the financial statements for the identification of the risk areas. They are
also responsible for assessing the risk of going concern of the clients by taking into account
the required factors (Wigunani, 2016). There are three part of this report. The first part
discusses about audit materiality and review of drafts as well as notes of Amcor Plc. The
second part undertakes the preliminary analytical review of the financial reports of Amcor
Plc. The last part discusses about cash flow, going concern and audit report of the same
company.
Section 1
Materiality
According to ASA 320, Paragraph 2, in auditing, materiality can be considered as the
misstatements that include individual or aggregate omission that can reasonably influence the
decision of the users of the financial information on the basis of the financial statements. The
auditors are required to make the materiality related judgments by considering the
surrounding condition; and the nature and size of the material misstatements affect the audit
judgements (auasb.gov.au, 2019). In auditing, materiality level is determined through three
stages.

3AUDITING AND ETHICS
Stage 1 – Selection of the appropriate and applicable benchmark is vital in the ascertainment
of level of materiality. The selection of the correct benchmark is largely dependent on the
consideration of the industry in which Amcor Plc operates and its nature. There are many
benchmarks utilized by the auditors in materiality determination process such as earnings
before tax, total revenue, total assets, gross profit and others (Jacoby & Levy, 2016). 2019
Annual Report of Amcor Plc shows $604.1 million as the income from continuous operations
before income taxes; and this is earnings before tax. This would be the benchmark for
materiality determination of Amcor Plc.
Stage 2 – Selection of the appropriate and applicable percentage is also vital in the
materiality determination process and correct quantitative threshold must be selected as
guidance to ascertain the materiality level. AASB 1031 Materiality prescribes two
quantitative thresholds for the determination of materiality. They are as follows:
a) An amount which is greater than or equal to 10% of the certain benchmark may be
considered as material; and
b) An amount which is less than or equal to 5% of the preferred benchmark may be
considered as material (aasb.gov.au, 2019).
Apart from these quantitative thresholds, professional judgement of the auditor and the
entity’s characteristic also matter in the materiality determination process. In case of Amcor
Plc, 5% would be considered as the relevant percentage.
Stage 3 – It is now needed to calculate the materiality level for the 2019 audit of Amcor Plc
after choosing the relevant benchmark and percentage and then justification needs to be
provided. The calculation is shown below:
Materiality Level = Earnings before Tax × 5%
= $604.1 million × 5%