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ACC707 - Auditing, Assurance & Services | ABC leaning

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ACC707 Auditing, Assurance & Services (ACC707)

   

Added on  2019-10-30

ACC707 - Auditing, Assurance & Services | ABC leaning

   

ACC707 Auditing, Assurance & Services (ACC707)

   Added on 2019-10-30

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AUDITING &ASSURANCE
ACC707 - Auditing, Assurance & Services | ABC leaning_1
Audit ASA 701Executive SummaryThere have been many instances of corporate collapses that shook the corporate world. The most noteworthy among them are the ABC leaning, Lehman Brother, OneTel, etc. As per the investigation it is noted that the failure happened due to the failure in the policies of the corporate governance. In this report, the major emphasis is on the concept of ASA 701. The collapse of ABC learning centre is discussed in an in-depth manner and the usefulness of the new auditing standard ASA701 is pin pointed. Moreover, the flaws in the auditing system have been adequately highlighted.2
ACC707 - Auditing, Assurance & Services | ABC leaning_2
Audit ASA 701ContentsIntroduction.................................................................................................................................................4Auditing standard ASA701 communicating key audit matters in the independent auditor report......5Factors related to auditing which was responsible for the ABC Learning collapse......................................6Hiding of the manipulated transactions in the financial statements...................................................6Hiding of non-expectance of true sales estimation in the case of ABC Learning.................................6Non-disclosure of proper financial information treatment in Audit report and audit report and.......7The wrong classification of funds rose:................................................................................................7Approval of financial statements that covered faulty transactions:....................................................7Recommendation........................................................................................................................................7Conclusion...................................................................................................................................................9References.................................................................................................................................................103
ACC707 - Auditing, Assurance & Services | ABC leaning_3
Audit ASA 701IntroductionABC learning was incorporated in the year 1988 and had coverage of more than 30 centers by the end of 2000. The listing happened in the year 2001 and spread to more than 660 centers in Australia and more than 2238 centers covering Australia, United States, and the United Kingdom. As defined by CPA (2012), the higher ambition and audit failure on the part of the management led to the downfall ofthe giant. There were several issues pertaining to recording of assets, as well as goodwill. There were two opinions by the auditor that led to the major contravention. The debt was a huge problem that arises from 2007 where ABC was required to renegotiate with the bankers. Also, few long-term loans were not payable and it affected the cash flow of the company. In lieu of this, the share value fell in a drastic mode. Had auditors taken a strong stand then such a drastic scenario could have been changed. The main concern that came in the way was that the ABC learning was reaping profits from the ordinary course of activities1. There was a huge discrepancy because any child care was unable to perform in such a rapid manner. The manner in which ABC rose to significant height was truly commendable and was highly noticed how a child care division rose in such a mammoth wayInadequate presence of relevant matters and negligence that needs to considered during preparation of the financialsThe external auditor of ABC provided an unqualified opinion to ABC since the appointment happened in 2003. After the resignation in 2007, Ernst & Young took charge and took a different evaluation of the profit that was stated previously. KMPG was introduced as a third party so that the differences can be settled. Even after having two major giant audit firms in the organization, no faults were traced (Kruger, 2015). Hence, the case indicates that different auditors provided a different opinion regarding the financial statement and it needs to be noted that the unqualified audit opinion by the giants led to the major scandal and failure of the ABC learning2. Even after having all the major giants, there was a huge mismanagement or pitfalls that ultimately led to the downfall. Instruments coming into actionErroneous usage of the related party transaction was a crucial ruinous and risky decision on the part of the firm. The major reason behind adoption of such decision can be attributed to the fact that a garnished picture of the firm can be depicted in front of the financial institutions and other investors. This can assist in obtaining more borrowings by keeping the securities of the firm as collateral. The related party transaction was in charge for the cry off of the firm by gradually lessening the securities 1Manoharan, T.N., 2011. Financial Statement Fraud and Corporate Governance. The George Washington University.2CPA 2012. ABC learning collapse case study. [online] Available at: <https://www.cpaaustralia.com.au/professional-resources/education/abc-learning-collapse-case-study> [Accessed 5 September 2016]4
ACC707 - Auditing, Assurance & Services | ABC leaning_4

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