Auditing, Assurance & Services: A Deep Dive into ASA 701 and ASA 570

This report delves into the crucial auditing standards ASA 701 and ASA 570, focusing on the auditor's responsibilities regarding going concern assumptions and key audit matters. It examines the scope and application of ASA 701, including the identification and reporting of key audit matters, using real-world examples from AGL Energy Limited, ADX-energy Limited, and Acacia Coal Limited. The report also explores the scope and applicability of ASA 570, outlining the auditor's and management's responsibilities in assessing and reporting on going concern. By understanding these standards, readers gain valuable insights into the auditor's role in ensuring the accuracy and reliability of financial statements.

Auditing, Assurance & Services

Executive summary:
Auditing is an important event which is conducted to ensure the true and fair view of financial
statements. ASA 701 and ASA 570 are related to investor interest and this assessment is made to
give depth knowledge of these auditing standards. ASA 701 “Communicating Key Audit Matters
in the Independent Auditor’s Report” explains the liability of auditor to disclose the Key matter
of financial statement which is founded in the auditing process. ASA 570 “Going Concern” also
defines the responsibility of auditor to investigate and report the going concern ability of a listed
company.
Present scope: AGL energy limited, ADX-energy limited and Acacia Coal Limited is leading
companies in Australia which is engaged in the generation and distribution of energy resources.
The assessment explains the auditor discloser requirements about the key matters under ASA
701 and ASA 570. On the basis of this assessment, the user will be able to understand the key
facts of these two standards along with the disclosers which are made by the auditors of above
companies.

Table of Contents
Introduction:....................................................................................................................................4
ASA 701 “Communicating Key Audit Matters in the Independent Auditor’s Report”..................5
ASA 570 “Going Concern”...........................................................................................................11
Conclusion:....................................................................................................................................15
References:....................................................................................................................................16

Introduction:
ASA 701 and ASA 570 are going to be explained in this report and the explanation is based on
the responsibility of auditor regarding the compliance and reporting of going concern assumption
and key auditing matter. The report describes the ASA 701 “Communicating Key Audit Matters
in the Independent Auditor’s Report” along with the scope of the standard and mean of key
auditing matters. The report also includes an overview of the Key auditing matters of three ASX
listed companies which are reported by the auditor of these companies. ASA 570 “Going
Concern” is also going to be explained in this report. The explanation includes the scope of
standard and applicability of standard along with the responsibility of auditor and management.
After the learning of this description, the learner will be capable to deeply understand the object
and importance of these two auditing standards.

ASA 701 “Communicating Key Audit Matters in the Independent Auditor’s
Report”
The financial statement related to period completing after December -15-2016, are coming under
the surveillance of ASA 701. Standard is applicable to the financial reports of a company and
describes the responsibility of auditor to explain the Key auditing matters in his report.
Key Audit Matter:
Those issues that, inside the analyst's master judgment have been of most centrality within the
audit of a financial paper of the present time era. Key survey topics are browsed issues talked
with the ones blamed for business enterprise (AASB, 2015).
Generally, following Terms are known as Key Audit Matters:
(a): Areas which contains high risk or significant risks of material misstatement (ASA 315)
(b): Those matters which have a significant impact on audit (paragraph 25)
(c): judgement regarding zones inside the cash related report that included simple agency
judgment, together with accounting tests that have been diagnosed as having excessive
estimation uncertainty.
The scope of the standard:
This Auditing Standard offers with the evaluator's commitment to skip on input survey topics in
the inspector's document. It is proposed to address both the examiner's judgment with reference
to what to pass on inside the commentator's record and the casing and substance of such
correspondence. The motive at the back of giving key audit topics is to overtake the beneficial
estimation of the evaluator's record by means of giving more great straightforwardness about the
survey that becomes performed (Seyam and Brickman, 2016). Passing on key audit subjects
offers additional information to customers of the cash associated reaction to help them in know-
how those problems that, inside the evaluator's master judgment, have been of most centrality in
the survey of the financial record of the present time allotment. Granting key survey subjects
may also in like manner help arranged clients in know-how the factor and districts of primary
corporation judgment in the analysed financial record (Paragraph A1 to A4).

Documentation related to Key audit matters:
AS per the ASA 230, an auditor should make proper documentation for audit work to provide
supportively proves his opinion.
Concerning key audit matters, those grasp judgements be a part of the confirmation, from the
issues talked with the ones blamed for the company, of the troubles that required critical
commentator idea, and what is more paying little mind to whether or not every one of these
issues is a key survey rely on. The evaluator's judgements in such manner are maximum in all
likelihood going to be maintained by using the documentation of the analyst's exchanges with the
ones blamed for the agency and the survey documentation regarding each man or woman trouble
and furthermore sure other audit documentation of the simple problems rising inside the midst of
the survey
Reporting of Key Auditing Matters
Putting the one of a kind Key Audit Matters territory in proximity to the inspector's selection can
also offer unmistakable fine to such information and perceive the clean estimation of obligation
particular statistics to proposed customers (AASB, 2015). Company asked for the demonstration
of different individual troubles in the Key Audit Matters territory consists of successful
judgment. Exactly while comparative financial statistics is shown, the right off the bat vernacular
of a Key Audit Matters segment is uniquely crafted to attract in keenness in regards to the
manner that the key survey topics portrayed relate to only the survey of the coins related
document of the existing time span.

Key Auditing Matters in companies:
AGL energy limited: following Key Auditing Matters are disclosed by the Auditor of AGL in
auditor’s report of 2017.
Item Key matter In the words of the auditor
Unbilled
revenue:
Unbilled earnings of $889 million
uncovered in Note 10 addresses the
estimation of power and gas gave to
customers between the date of the
remaining meter examining and the
noteworthy date wherein no bill has
been issued with the aid of AGL to the
consumer toward the completion of
the itemizing time span (Annual
Report, 2017).
In conjunction with Auditor data
exam authorities survey aggregate
figured a free take a look at of the
standard unbilled pay on an
individual meter start using
company's purchase volumes and
esteeming statistics and stood out
our self-ruling measure from
company's represented Unbilled
pay. Analyst moreover studied the
abundance of the company's
revelations in respect of unbilled
Amounts.
Financial
instruments
AGL goes into numerous coins
associated with devices which include
auxiliary financial contraptions to
assist the affiliation's advent to
irregularity in credit score prices,
remote alternate improvements and
imperativeness costs. As at 30 June
2017, affiliation holds auxiliary
monetary property of $349 million and
subordinate cash associated liabilities
Evaluator of association Obtain an
appreciation of inside danger
employer methodologies and the
structures and controls related to the
start and renovation of complete
and correct records regarding
subordinate contracts

of $873 million.
Deferred tax
asset
As revealed in Note eight, at 30 June
2017 the Group has recorded a
surrendered price asset of $778
million referring to survey hardships
found out by using the reinforcement
AGL Loy Yang. The recoverability of
this yielded pressure asset is
depending on the period of pleasant
destiny assessable benefit to make use
of those duty setbacks.
Analyst reviewed and tried agency's
judgements relating to the figures of
destiny assessable advantage and
evaluated the sensibility of the
doubts shrouded the arranging of
those guesses along with the
consistency of the assumptions used
with those used to survey the
recoverable measure of AGL's
coins delivering devices where
vital.

Acacia Coal Limited:
Following Key Auditing Matters are disclosed by the Auditor of Acacia Coal Limited in
auditor’s report of 2017.
Key matters:
The Group holds a non-current asset held accessible to be sold regarded at $750,000 talking to a
fundamental phase (40. %) of the company's total belongings.
The appraisal of the recoverable measure of this advantage is depending on the getting
substance's ability to obtain posting on the ASX and their potential to elevate enough resources
from which to assist the favourable position obtaining.
The evaluation of the recoverable measure of this preferred point of view calls for excellent
judgment as for recognizing the parts to assure utilize and perceiving recommendations of
inability.
Actions performed by the auditor:
The auditor gets a awareness of the important thing controls associated with the game plan of the
valuation models used to overview the recoverable degree of the Group's held on hand to be
received property. Outside attestation took through the Auditor approximately the predominant
mining loft is held via the Group as at modifying date. Auditor coordinates a evaluation of ASX
releases on 29 September 2017 concerning the offer of the noncurrent asset held reachable to be
acquired. Analyst in like way coordinated an exam of contracts as for the pending asset bargain
for signs supporting the passing on satisfactory and appropriateness of the collection of the
favoured point of view.

ADX-energy limited: The auditor of ADX Limited informed following points as Key Auditing
matter:
Cash: The Group's cash makes up 92% of general property via regard and is thought to be the
important thing driver of the Group's assignments and exam works out. We don't see cash as at a
high peril of notable blunder, or to be obligated to a huge level of judgment because it is a liquid
asset. In any case in view of the materiality regarding the cash related decrees quite often, Cash
is thought to be the district which had the best effect on our trendy strategy and segment of
benefits in organizing and completing our survey.
Auditor action:
Auditor of the company identified and investigates the internal control on the cash transaction.
Auditor also receives the confirmation from the third party about the cash holdings.

ASA 570 “Going Concern”
This ASA is applicable to those financial statements which are prepared after the December-15-
2018. This standard explains the responsibility of an auditor on the assessment and reporting of
going concern assumption (Feng and Neely, 2017).
Mean of going concern Assumption:
Going concern is an essential hid assumption in accounting. The supposition is that an
association or company will have the capacity to retain operating for a term that is sufficient to
finish its obligations, obligations, targets, and so forth. Toward the day's give up, the affiliation
may not trade or be compelled bankrupt inside a realistic time span.
Management responsibility for going concern assumption: Auditing standard makes
management more responsible to ensure the compliance of going concern assumption. Australian
Accounting Standard AASB 101 elucidates that management will make an examination of a
substance's ability to retain as a going concern (Berglund, 2015). The factor through guide
necessities with deference toward business enterprise's responsibility to assess the thing's ability
to continue as a going challenge and related cash related assertion disclosures can also in like
manner be set out in law or control.
Corporation act 2001 also describes a formal liability of management to give a clarification
about the going concern ability. This clarification is also a part of financial reporting to ensure
quality reporting.
The responsibility of auditor for going concern:
The commitments of evaluator are to get sufficient becoming audit confirm as for, and close on,
the appropriateness of employer's usage of the going problem introduce of accounting in the
arranging of the budgetary record, and to complete, in attitude of the survey demonstrate
procured, paying little heed to whether a material helplessness exists approximately the
substance's ability to keep as a going concern (Chen, 2016). These commitments exist paying
little appreciate to whether the economic maintaining framework used as a bit of the practice of
the cash related record excludes an unequivocal important for an organization to make a specific
evaluation of the substance's capacity to retain as a going issue.

ASA 2002 additionally gives basic elucidation about the identical. ASA 2002 depicts the ability
consequences of intrinsic boundaries at the analyst's potential to understand material
misrepresentations are more imperative for destiny events or situations which can have an impact
on a substance to stop to preserve as a going situation (Read, 2015). The controller cannot
suspect such future events or conditions. In like manner, the nonattendance of any connection
with a cloth weak point approximately the substance's ability to keep as a going strain in a
commentator's document cannot be viewed as an accreditation with appreciate to the element's
capacity to continue as a going challenge.
Some examples of ASA 570 “Going concern” discloser:
AGL Energy Limited: The financial statements of AGL is made according to the ASA 570 and
auditor of the company also gives a clear clarification about the Going concern assumption. The
responsibility of auditor is that auditor should make a relevant assessment of potential risk and
should identify the threats related to going concern. The annual report also describes the
responsibility of management about the going concern assumption and a regular analysis of
possible risk areas are conducted by the company (Annual Report, 2017).
Following are identified risk areas of AGL:

ADX-energy limited: going concern status of ADX Limited is as follows:
The budgetary variables have been set up on the possibility that the Company will hang on
meeting its duties and may on this way proceed with ordinary business undertaking practices and
famous resources and settle liabilities inside the typical course of business. As an examination
gathering, the Company and its controlled elements don't make cash streams from their working
games to bring down back these physical exercises. As a final product, the capacity of the
Company to continue as a going circumstance is hard to the satisfaction of capital hoisting guide,
far mounts of endeavours or diverse financing openings. The Directors assume that the Company
will proceed as a going concern. Along these lines, the financial data has been introduced on a
going circumstance start (Annual Report, 2017). At any rate, should hoist help, some separation
mounts or any non-required financing openings be unsuccessful, the Company will most likely
be not able to continue as a going subject.

Acacia Coal Limited: company is providing following description about the going concern
assumption under ASA 570.
Management View about going concern:
The budgetary clarifications were installation on the going subject commence of accounting,
which acknowledges the congruity of average enterprise practices and the confirmation of
beneficial situations and agreement of liabilities inside the everyday direction of the commercial
enterprise. The wage of association gauges for the year completing 30 September 2018 reveals
that the association can be in a circumstance to fulfil its gave operational and definitive usage
and in this manner preserve operating as a going problem. In the appraisal of the boss, there are
sensible grounds to expect that the joined association will have the capacity to pay its
commitments as and after they end up due and payable (Company Annual report, 2017).
Auditor View about going concern:
We lure consideration concerning Note 2(a) inside the mixed cash related report which exhibits
that the Group expedited a hardship from continuing with exercises of $2,470,979, operating cost
surges of $1,544,159 and money and cash inverse numbers change of $973,694 as at and for the
year finished 30 June 2017. Demonstrate the nearness of a material powerlessness which could
strong tremendous vulnerability around the Group's ability to continue as a going circumstance.

Conclusion:
Auditing standards are very important part of audit process because these are useful for auditor
and user both. On the basis of auditing standard, a user can easily evaluate the opinion of the
auditor, on another hand; auditor can conduct more quality audit as per legal requirements. In the
above-discussed report, auditing standard 701 and 570 is explained and the explanation
concludes that both standards are introduced to make the auditor more responsible for their
opinion. ASA 570 proves that the management is also responsible to investigate and ensure the
going concern assumption in accounting and financial statements. Above report also involves a
discussion about the discloser of key auditing matters and proves that these items are explained
separately in the auditor’s report which is the part of financial statements.

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