Auditing and Assurance: Analysis of IDP's Annual Report

This article provides an analysis of IDP's annual report from an auditing and assurance perspective. It includes information on the company's financials, audit opinion, fees, and inherent risks. The article also discusses the nature of the client's business and potential fraudulent reporting.

Running head: AUDITING AND ASSURANCE
Auditing and assurance
Name of the student
Name of of the university
Student ID
Author note

1AUDITING AND ASSURANCE
Table of Contents
Attachment 1..............................................................................................................................2
Attachment 2..............................................................................................................................4
Reference....................................................................................................................................9

2AUDITING AND ASSURANCE
Attachment 1
Name of Company: IDP (International Education Specialists)
Insert the url (link) to the
entity annual report
site/location:
https://investors.idp.com/FormBuilder/_Resource/_module/v1AiEHYL20-
_Rje11PzkYA/financial-reports/FY18_Full_Year_Results.pdf
1. Balance date (year-
end)
30th June 2018 (pg no. 56)
2. Date of the audit
report
22nd August 2018 (pg no. 55)
3. Name of the auditor
(firm) signing the report
Deloitte Touche Tohmatsu (pg no. 55)
4. To whom the audit
report is addressed
Audit report is addressed to The board of Directors (pg no. 55)
5. Type of audit opinion
expressed in the audit
report
Unqualified (pg no. 108)
6. Explanation(s) for any
modification
(what was the reason for
any modification)
As per the audit report no modification was required
7. Which ASA does the
audit report comply
with?
APES 110 code of ethics (pg no. 108)
#For EACH of the
remaining items please

3AUDITING AND ASSURANCE
show the amounts
(indicating the
applicable currency $A
and amounts in
thousands or millions)
8. Assurance (audit) fees $ 952.445 Thousand (pg no. 99)
Breakdown for fees are as follows –
Group auditor of Deloitte Touche Tohmatsu
Audit and review of the financial statements - $ 460,000
Other consultancy services - $ 49,750
Member firms of Deloitte Touche Tohmatsu related to subsidiaries
Audit and review of the financial statements - $ 377,988
Taxation advisory services - $ 12,916
Other advisory services - $ 51,791
9. Non-assurance (non-
audit) fees
The annual report of the company did not show the fees paid to the
auditors for providing non-audit services separately. However, the
following services may be considered as non-audit services –
Member firms of Deloitte Touche Tohmatsu related to subsidiaries
Taxation advisory services - $ 12,916
Other advisory services - $ 51,791
10. The industry (or
industries) the company
operates in
International education services
11. Operating revenue $ 487,155,000 (pg no. 56)
12. Operating profit
before tax
$ 73,870,000 (pg no. 56)
13. Operating profit after $ 51,481,000 (pg no. 56)

4AUDITING AND ASSURANCE
tax
14. Equity $ 101,286,000 (pg no. 58)
15. Total assets $ 288,848,000 (pg no. 58)
16. Total liabilities $ 187,562,000 (pg no. 58)
Attachment 2
Name of the
company
Discussion
Factor Inherent risk Low Moderate High
Nature of client’s
business
IDP education is the leader in the
International education services all over the
world. 50% of the company is owned by 38
universities from Australia. It is also the co-
owner of IELTS (International English
Language Testing System). It is providing
education services for more than past 45
years and is engaged in teaching of English
language since the year 1988 and carries on
the school for English language over
Cambodia, Vietnam and Thailand (Idp.com,
2018).

Result of
previous audits
For last 3 years, audit is carried out by
Deloitte Touche Tohmatsu. In each of the
years the auditor provided unqualified audit
report to the company (Investors.idp.com,


5AUDITING AND ASSURANCE
2018).
Initial versus
repeat audits
For last 3 years audit is carried out by
Deloitte Touche Tohmatsu. Hence the auditor
is providing repeat audit for the same client.
Repeat audit will attract self-interest threat
that will have an adverse impact on the
auditor’s independence as per APES 110 on
Code of Ethics for Professional Accountants
(Apesb.org.au, 2018)

Quantity of non-
routine
transactions
Low quantity of non-routine transactions
related to inventories, receivables and
revenues. Though it is not clearly visible
from the annual report of the company which
transactions are routine and which are non-
routine, the above mentioned items shall be
considered for finding out the non-routine
transactions (Legoria, Melendrez &
Reynolds, 2013).

Quantity of
judgements and
estimates
required for
accounts
Accounting judgements and estimates are
made for various accounts like Income tax
matters, intangible assets, fair value for
financial instruments, share based payments
(Vîlsănoiu & Buzenche, 2014).

Potential for
fraudulent
financial
reporting and
AS per ASA 240, fraud is intentional act
done by one or more people from the
management team including those in charge
with governance, third parties and employees,


6AUDITING AND ASSURANCE
misappropriatio
n of assets
to gain illegal or unjustified benefits. It can
be identified that Trade and other payable’s
amount increased significantly over the past
years. Likelihood is there that the
management has misstated the amount
intentionally to enhance the liability or the
payables were not paid as per the due date
(Legislation.gov.au, 2018).
List any other
factors
The company is subjected to wide number of
jurisdictions and various audit activities
regarding tax matters, assumptions and
estimates (Ruhnke, Pronobis & Michel,
2014). These require significant judgement
by the managements. Further, the accounts of
inventories, receivables and revenues are
regarded as material due to the nature and
amount involved (Auasb.gov.au, 2018).

Conclusion Taking into consideration the disclosures and
accounting treatment provided in the annual
report of IDP, above mentioned conclusions
are provided on the basis of the following –
 As the education service business
is quite stable are less likely to be
fell suddenly, the risk level is low.
 As the auditor provided qualified
report the risk level is low

7AUDITING AND ASSURANCE
 It can be found out from the audit
report of last 3 years that the audit
is carried out by the same auditor
Deloitte Touche Tohmatsu.
Hence, the repeat audit by the
same auditor will raise the self-
interest threat and therefore the
risk level is high
 Though transactions details for
various items were not available
from the annual report of the
company, some of the accounts
like inventories, receivables and
sales are material owing to their
nature. Hence, the risk level is
low.
 Increasing numbers of estimates
and judgements will eventually
increase the level of risk. As
accounting judgements and
estimates are made for various
accounts like Income tax matters,
intangible assets, fair value for
financial instruments, share based
payments the risk level will be

8AUDITING AND ASSURANCE
moderate.
 Trade and other payables have
been increased from $ 50,277,000
to $ 69,344,000. It states that the
liquidity position of the company
deteriorated. Hence, the risk level
is moderate.
Overall risk As most of the associated risks of the entity
are at low level, the overall inherent level of
risk will be low.

9AUDITING AND ASSURANCE
Reference
Apesb.org.au. (2018). [online] Retrieved 10 October 2018, from
https://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf
Auasb.gov.au. (2018). [online] Retrieved 10 October 2018, from
https://www.auasb.gov.au/admin/file/content102/c3/ASA_315_Compiled_2015.pdf
Idp.com. (2018). History of IDP | IDP Australia. [online] Retrieved 10 October 2018, from
https://www.idp.com/australia/why-idp/history/
Investors.idp.com. (2018). [online] Retrieved 10 October 2018, from
https://investors.idp.com/FormBuilder/_Resource/_module/v1AiEHYL20-
_Rje11PzkYA/file/IDP_FY17_Annual_Report.pdf
Legislation.gov.au. (2018). ASA 240 - The Auditor’s Responsibility to Consider Fraud in an
Audit of a Financial Report - April 2006 . [online] Retrieved 10 October 2018, from
https://www.legislation.gov.au/Details/F2006L01368
Legoria, J., Melendrez, K. D., & Reynolds, J. K. (2013). Qualitative audit materiality and
earnings management. Review of Accounting Studies, 18(2), 414-442.
Ruhnke, K., Pronobis, P., & Michel, M. (2014). Audit materiality disclosures and credit
lending decisions.
Vîlsănoiu, D., & Buzenche, S. (2014). Determining Audit Materiality in the Banking
Industry–A Knowledge Based Approach. Procedia Economics and Finance, 15, 935-
942.

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