Auditing in Business: Analysis of Collapse of HIH Insurance and ABC Learning

Running head: AUDITING IN BUSINESS
Auditing in Business
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1AUDITING IN BUSINESS
Executive Summary
The concern of audit independence has fundamental importance in analyzing the corporate
collapse of HIH Insurance and ABC Learning Company. Considering such statement, the current
report to analyze the ways in which auditor’s processes, professional and ethical behavior issues
resulted in collapse of selected companies named HIH Insurance and ABC Learning. The report
revealed that audit failure was observed to be the major cause behind collapse of these
companies and the mismanagement of affairs was observed through observing lack of attention
to detail, absence of performance accountability along with absence of integration in internal
processes of these companies. Certain recommendations were also offered such as non-
adherence with the corporate governance and ethical standards by the companies are required
being decreased through appointing effectible authorities those can implement stringent
regulations in penalizing the associated members.

2AUDITING IN BUSINESS
Table of Contents
1. Introduction of Selected Companies................................................................................3
2. Auditor of Companies Collapsed.....................................................................................3
3. Audit Processes Contribution to Collapse.......................................................................4
4. Auditor’s Independence, professional and Ethical Behavior..........................................7
5. Recommendations in Auditing Profession Improvements..............................................9
6. Conclusion.....................................................................................................................10
References..........................................................................................................................12

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1. Introduction of Selected Companies
ABC Learning was observed to operate as a leader within the Australian childcare
educational sector. The company was listed in “Australian Securities Exchange (ASX)” and was
observed to have a market capitalization of AUD 2.5 billion (Agostini and Favero 2017). Due to
an increased mortgage crisis the company faced managerial receivership because of which a
considerable debt might be considered responsible for its collapse.
HIH Insurance was positioned as among the largest insurance companies those have its
operation all over Australia. The organization recorded a rapid progress between 1997 and 1998
because of its successful international expansion strategies because of which it got listed in ASX
(Bhadily and Hosie 2016). In this company few board members of the company were observed
to be guilty because of which they were sentenced imprisonment as they were associated with
manipulations and financial frauds.
Focused on the reasons based on which the selected Australian companies failed, the
major objective of the report will be to analyze the ways in which auditor’s processes,
professional and ethical behavior issues resulted in collapse of these two selected companies.
2. Auditor of Companies Collapsed
The audit partner that was responsible for carrying out auditing operations within ABC
Learning Company is Pitcher Partners. The audit person Simon Andrew Peter Green was
responsible to causing the company’s failure because of his conduct of “material misstatements”
in the financial report. The auditor of the company was suspended for five years as the audit
partner failed to perform suitably and accomplish his responsibilities as auditor (Carnegie and