Auditing, Assurance, & Services: Key Audit Matters and Going Concern in ANZ Banking

This report examines the application of auditing standards ASA 701 and ASA 570 in the context of ANZ Banking Group. It identifies key audit matters, including credit impairment, valuation of financial instruments, and IT systems and controls, and evaluates their significance in the auditor's report. The report also explores the concept of going concern as defined by ASA 570 and its implications for the audit of ANZ's financial statements. The analysis provides insights into the auditor's responsibilities in assessing the company's financial health and communicating key risks to stakeholders.

Auditing, assurance, & services ACC707
1

Executive summary:
In this report the auditing standards are being taken into account and an understanding of them is
obtained. ASA 701 and ASA 560 are taken into use and with the help of that, the key audit
matters are identified. The requirement of the standard and the aspects which are considered in it
are also explained in the report in the context of the ANZ bank. All of this helps the company in
making of appropriate accounts and there will be proper disclosure of the matters which required
to be brought to the notice of all so that they can make the relevant decisions by taking them in
consideration.
2

Contents
Executive summary:........................................................................................................................3
Introduction:....................................................................................................................................5
1. ASA701...................................................................................................................................6
2. Auditing standard ASA 570.....................................................................................................8
3. Key audit matters in ANZ banking limited:..........................................................................11
4. Evaluation of ASA 701 in ANZ group..................................................................................12
Recommendations..........................................................................................................................13
Conclusion.....................................................................................................................................14
Reference:......................................................................................................................................15
3

Introduction:
The audit is one of the most important aspects which are required to be performed in all the
businesses and in this it is evaluated that whether the company is complying with all the
standards in an appropriate manner. There is the going concern which is involved and is covered
under ASA 570 which will be considered in the report below. The key audit matters which
require disclosure will be identified in the context of ANZ bank. For this, ASA 701 will be used
and the information in relation to it will be determined. Then the ASA 570 will be used and the
going concern objective of the company will be evaluated. The proper findings will be made and
with the help of them, it will be possible to make the interpretation. The recommendations will
be made so that the issues which are identified can be dealt by the company in most effective and
efficient manner.
4

1. ASA701
In the process of auditing, there are several standards which have been set and they are to be
applied by the company so that proper audit process is performed. One of them is ASA 701
which is related to the communication of the key audit matters and they will be disclosed in the
auditor’s report. There were some of the modifications which were made in it and that made this
different from the earlier standard which is ISA 701. The requirements and the manner in which
this shall be applied are described in this standard (Auditing and Assurance Standards Board,
2015). There are various features which are associated with it and they include:
 It is mandatory to communicate the key matters in the reports which are prepared by the
auditor.
 It will also help the auditors to know that whether they need to include the matter of other
auditors.
 The situations in which disclosures are not to be made are also specified in this standard.
 The manner in which auditor will be determining the audit matter is also prescribed.
The main reason for which this is to be made is that with the help of this transparency will be
maintained as there will be proper communication which will be made. The shareholders will be
receiving the required information with them and they can use it for their various purposes. They
will be able to understand the key areas of the company (Olga Savcuk, 2010).
The key audit matters:
From the collected information the matters which are relevant will be determined and they
include:
 The areas in which there are chances of the risk in respect of misstatement or any other
relevant risk.
 The vents which took place in the period which will be affecting the audit.
 The areas in which judgment of the management is involved will be considered by the
auditor such as accounting estimates which are made (Maja Zaman Grof, et. al., 2016).
5

After the identification of the material, maters is made it is required that they shall be
communicated effectively. For this, a separate head with the name of key audit matters will be
developed and under that, all of the findings will be reported in auditor's report. These are those
matters which are relevant to the audit and the opinion which will be framed by the auditor will
be affected by this. There are certain circumstances in which the communication will not make
and they will not be included in the report of the auditor. This includes the case in which the
public disclosure of the information is precluded by the law. In some circumstances, it is
considered that by the disclosure the company will be bearing adverse impact and so they are
excluded from the disclosure.
In the annual report of the company, they will be shown in the auditor’s report section. In that,
all the key matters will be specified and with that, the manner in which they are dealt by the
company in the current period will also be explained. This depends on the professional judgment
and by that the opinion of the auditor will be made. They will be expressing that whether the
company is carrying out all the processes in an appropriate manner or not. All of this is presented
in the report and so will be available to the shareholders and other users of the documents who
can have all the knowledge and can use it for the making of the decision in relation to investment
that is to be made in the company and the risk can be avoided which is involved in the processes
(Christopher, 2012).
6

2. Auditing standard ASA 570
Going concern
The auditing standard ASA 570 has been represented by Australian government. The auditing
standard replaces the revised ISA 570 Going concern with the current ASA 570. The audit
standard is maintained to conduct higher audit quality and clear public interest focus (Auditing
and Assurance Standards Board, 2015).
The auditing standard ASA 570 has been made by The Auditing and The Assurance Standard
Boards (AUASB). The auditing standard objective is to conduct an audit with the relevance of
the Australian auditing standard (Nie, 2017).
Features of auditing standard ASA 570:
1 The auditing standard has replaces the current ASA 570 in October 2009 by the AUASB with
the earlier ISA 570.
2 In this accounting standard the report that we made should be of great audit quality in
accordance with the Australian legislative environment.
3 The revision of the accounting standard auditor report is developed by the International
auditing and Assurance standard boards (Auditing and Assurance Standards Board, 2015).
Things which are added in the Auditing standard 570:
It requires the relevant period of approx. 12 months from the date of the current report to the date
of expected report of audit. It also requires to check the management going concern report is
appropriate or not from the date of financial statement of minimum 12 month periods. It should
also contain the types of opinion audit and should contain the diagrams of explanation of going
concern (Auditing and Assurance Standards Board, 2015). It is auditor responsibility to contain
the material beyond assessment’s management.
Going concern as a basis of accounting:
7

In this basis of accounting, the assumption is taken that the organisation is going concern and
then the financial report is prepared. This report has been prepared either to liquidate the
organisation or to cease its operation. The going concern basis of accounting should not be taken
into consideration for some special purpose financial reports. In going concern accounting, the
assets and liabilities are recorded at the entity basis and will able to realise or discharge in the
normal business (Auditing and Assurance Standards Board, 2015).
Responsibility of the auditor:
The main responsibility of an auditor is to make the financial report is appropriate with proper
evidence and with the use of going concern management. The auditor’s responsibility is to
manage the enterprise and to check whether the appropriate material is present or not (Husam et.
al., 2013).
Objective of auditor:
The main object is to maintain the report with accordance with the accounting standard. In order
to find out the sufficient audit evidence and appropriate management for the use of going
concern accounting. Also the auditor objective is to conclude whether an uncertainty of material
is existing or not (Mohammed et. al., 2014).
Evaluating management assessment:
It is one of the key parts of the organisation to manage the assessment with the use of going
concern basis of accounting. Management assessment is not the auditor’s responsibility to
correct the analysis. The management has to asses for the future plans which are feasible for the
enterprise. In making the financial report management assessment report is also taken into the
consideration. In going concern even the small enterprises has to maintain the detailed of
management assessment.
Additional audit procedures:
 To analyse the cash flow, profit, balance sheet, etc. with management reference.
8

 To discuss the financial report with the entity.
 If there is any agreement of loan or terms of debentures, Then to determine.
 Shareholder’s meeting, with reference to financial problems.
The third party such as unsecured creditors, liquidators are likely to work with that organisation
who follow the going concern accounting. As their money invested in the company is save or
secured because the company will going to be sustain. The risk of the third party is less as
comparison to other form of accounting. It is a responsibility of auditor to evaluate everything
properly with accuracy so that the third party is likely to invest or feel secured. They also like to
work with that enterprise who evaluates the management assessment properly.
3. Key audit matters in ANZ banking limited:
In the company, there are various key auditor matters which are identified as they are relevant as
per the views of professionals and so are presented in the annual report. Same is done in case of
ANZ and in that also there are various matters which are reported and some of them are provided
hereunder:
 Provision for credit impairment: Under this, the judgments and the estimates which are
made by the company in respect of impairment provisioning are covered. This is relevant
to the credit risk in the company is high. The loans and advances of the company are
significant and complexity is involved in the process of estimation related to them (ANZ
Banking limited, 2014). The risk related to the recoverability of the loan is addressed
with the help of it. This is addressed by the company by the establishment of the proper
control in the company.
 Valuation of the financial instruments held at fair value: The instruments will be
including trading securities, available for sale assets, certain debt securities, policy
liabilities and derivative assets and liabilities. The company will be managing the interest
rate and exchange risk as risk management product. They are considered as key matters
as all of them which are held at fair value are significant.
 IT systems and controls: in the business, there are various complex and interdependent
information technology systems which are used by which high volume of the transactions
will be recorded. By that, the audit procedure differs as it is to be made in a different
9

manner for all the transactions. The control; the environment is tested so that the matter
can be addressed in appropriate manner (ANZ Banking limited, 2014). The governance
will be evaluated so that integrity can be monitored. The segregation of the duties will be
made and for that control will have to be tested.
They all are significant and have been explained in detail in the report and the manner in which
they are addressed by the auditor is also identified. By the help of this, the auditor will be able to
perform the process in an effective manner.
4. Evaluation of ASA 701 in ANZ group:
Banking industry is one of the key strategic industries which engages into high financial
transactions and relates with customers as well. The ANZ is an Australian listed company which
is compulsorily required to adhere to the accounting standards and accounting framework so as
to produce true and fair review. The ASA 701 represents the disclosure and communication of
major key auditing matters with the stakeholders. The auditors of the company presents their
overview regarding the key matters into the auditor’s report and presents any disclosure of
qualifications with regard to transactions held in specific year. The key audit matters includes
those matters which are crucial and are of major concern (in financial and non-financial terms)
for the company and put affect over other items as well.
Further, as far as ANZ group is concerned, the annual statements has presented that the
company’s key auditing matter includes credit impairment, valuation of fair instruments and
regarding IT control and systems. These are key aspects of the company. Credit impairment is
the major risk of the company as it is an banking company and necessarily requires
ascertainment of credit impairment. ANZ majorly involves in providing loans and advances to
institutions and individuals and hence is requirement to maintain the impairment provision. The
company also majorly deals in financial instruments and hence, it is required to maintain the
financial value of these instruments as well so that correct valuation can be done. Lastly, there is
clear description about keeping effective control over IT systems. Being a banking company, it
regulates personal information about large number of personnel’s and hence, it is required to
maintain the system. Thus, it can be assessed that the auditors has correctly applied the provision
10

of ASA 701 and has clearly presented the key auditing matters which are significant and relevant
for the company.
11

Recommendations:
ANZ is a banking company which is listed and need to comply with the accounting framework,
legislations, and other acts and regulations of the company as well. Hence, the company is
necessarily required to assess the auditing function, in order to assess, if the organisation is
working in accordance with the accounting standard ASA 701 which implies that the necessary
key auditing matters are communicated with relevant personnel. The major objective of
communicating key auditing matter is to eliminate the key risk of fraud or error or omission or
such other errors.
The accounting standard “ASA 570” is another useful accounting standard which defines the
logical use of going concern in an organisation. An auditor must implement the accounting
standard which provides an idea to the auditor with regard to ascertainment of material
misstatements in the financial statements. In a financial statements, it is highly required that the
company must be established with a view to going concern and works in for infinite time.
Considering the concept of going concern, the auditors need to make thorough auditing of the
financial statements considering material misstatements that might occur.
12

Conclusion:
ANZ banking group compliance with the accounting framework ASA 701 and ASA 570, which
both are significant considering the true and fair overview of the company. The above report
presents the description of accounting meaning and implications of the accounting standards.
The ASA 701 clearly describes the communication of key auditing matters of an organisation
and states the importance of auditor’s report in the financial statements. The fair and true
presentation presents the clarification of estimation and omission or risk associated with the key
transactions of the company. There is also in-depth analysis of ASA 570 which presents that a
company must have obligation towards going concern and therefore, auditors must be careful
with regard to material misstatement. Material misstatement could be occurred due to any of the
reason such as omission, error or due to any fraudulent activity. Thus, overall, it can be assessed
that an ANZ is complying with all those matters and is clearly presenting its financial
publications in accordance with accounting standards.
13

Reference:
1. ANZ Banking limited. (2014). Annual report. [Online]. ANZ Banking limited. Available
at: http://shareholder.anz.com/sites/default/files/2017_anz_annual_report.pdf. [Accessed:
14 May 2018]
2. Auditing and Assurance Standards Board. (2015). Auditing Standard ASA 701
Communicating Key Audit Matters in the Independent Auditor’s Report. pp, 1-23.
(http://www.auasb.gov.au/admin/file/content102/c3/ASA_701_2015.pdf).
3. Auditing and Assurance Standards Board. (2015). Auditing Standard ASA 570 Going
concern. pp, 1-25.
(http://www.auasb.gov.au/admin/file/content102/c3/ASA_570_2015.pdf).
4. Débora Lage Martins Lélis, Laura Edith Taboada Pinheiro, (2011). Auditor and Auditee
Perceptions of Internal Auditing Practices in a Company in the Energy Sector.
(http://www.scielo.br/pdf/rcf/v23n60/en_a06v23n60.pdf).
5. Ebrahim Mohammed Al-Matari, Abdullah Kaid Al-Swidi, Faudziah Hanim Binti Fadzi,
(2014). The Effect of the Internal Audit and Firm Performance: A Proposed Research
Framework. International Review of Management and Marketing, Vol. 4, No. 1, 2014,
pp.34-41. (http://dergipark.gov.tr/download/article-file/366666).
6. Husam Al-Khaddash, Rana Al Nawas and Abdulhadi Ramadan, (2013). Factors affecting
the quality of Auditing: The Case of Jordanian Commercial Banks. International Journal
of Business and Social Science, Vol. 4 No. 11; September 2013.
(https://www.tandfonline.com/doi/abs/10.1080/16111699.2007.9636180).
7. Jingwen Nie, 2017. When Internal Control Meets Internal Audit: Conflict or Combine?.
Open Journal of Accounting, 2017, 6, 43-51.
(https://www.scirp.org/journal/PaperInformation.aspx?PaperID=75727).
8. Joe Christopher, 2012. The adoption of internal audit as a governance control mechanism
in Australian public universities – views from the CEOs. Journal of higher education
policy and management, volume 34, issue 5.
(https://www.tandfonline.com/doi/abs/10.1080/1360080X.2012.716001).
14

9. Maja Zaman Grof, Roberto Di Pietra, and Aleša Saša Sitar, (2016). Contemporary role of
internal auditing in corporate governance. Dynamic Relationships Management Journal,
Vol. 5, No. 1, May 2016. (http://www.sam-d.si/Upload/Articles/DRMJv05n01a04.pdf).
10. Olga Savcuk, 2010. Internal audit efficiency evaluation principles. Journal of business
economics and management, Volume 8.
(https://www.tandfonline.com/doi/abs/10.1080/16111699.2007.9636180).
15