Auditing Case Study of HIH Insurance Ltd

Running head: AUDITING
Auditing
Name of the student
Name of the university
Student ID
Author note

1AUDITING
Executive summary
This report is based on a real-life case study of an organization that have been collapsed due
to lack of adequate approaches of auditing. In this context, this report has analyzed the case
study of HIH Insurance Ltd that collapsed in the year 2001 due to presence of ineffective
auditing approaches and non-compliance with the auditing standards. The report has
specifically investigated the issue related to corporate governance, executive director, non-
compliance with the laws and use of aggressive accounting policies and misappropriation that
resulted in the downfall of the corporation. At last, it has presented recommendation deduced
from the overall analysis of the case of HIH Insurance Ltd in context of these issues for the
business corporations worldwide.

2AUDITING
Table of Contents
Introduction................................................................................................................................3
Methodology..............................................................................................................................3
Findings from the case study of HIH Insurance.........................................................................3
Background of the case..........................................................................................................3
Business risk, control risk, inherent risk and other risk.........................................................4
Corporate governance, directors, executives and non-compliance of laws...........................5
Going concern, liquidation and administration......................................................................7
Fraud, misappropriations and aggressive accounting policies...............................................8
Role, reporting obligations and auditor’s negligence............................................................8
Conclusion..................................................................................................................................9
Reference..................................................................................................................................10

3AUDITING
Introduction
The report will demonstrate the case study of HIH Insurance Company regarding its
liquidation during the year 2001. This will be done for developing an insight into the
approaches, concepts and standards of auditing that needs to be complied by an organization
for eliminating the risks related to auditing. In this context, the report provides an evaluation
of the case of HIH Insurance, an Australian insurance company that was 2nd largest general
insurer from Australia before its liquidation and was operating over various countries. The
company was listed on the ASX and attained a position of a world leader in its field before it
went into liquidation on 15th March 2001. The major reason of the collapse was breaches of
various criminal as well as civil laws by the managers of the company which in turn forced
the company’s liquidation. The report has examined the facts of the case study to gain an
understanding of the auditing issues and the significant changes occurred in relation to the
auditing approaches after the occurrence of the corporate scandal (Hih.com.au 2018).
Methodology
The investigation of the case study of HIH Insurance has been carried out with respect
of auditing approaches and standards to identify the major reason for the occurrence of
scandal and to suggest some measures for overcoming their occurrence in future. The
relevant facts and issues have been gathered through exploring the relevant information from
the online sources containing sufficient information related to the case study.
Findings from the case study of HIH Insurance
Background of the case
HIH insurance was established in the year 1968 by Michael Payne and Ray Williams
when it was known as M W Payne Underwriting Agency Pty Ltd. it was acquired by CE
Health PLC and Ray Williams was the appointed in the board of the company. However, it
changed its name to HIH Winterthur. In 1999, the company sold its 51% share to public and
changed the name to HIH Insurance Ltd. In March 2001 at the time of the company’s
collapse it sent shockwaves to the business community of Australia. Now various findings
will be identified that has led to the failure of HIH Insurance Ltd (Gaber and Lusk 2015).