Auditor Reporting in Australia

This report analyzes the enhanced auditor reporting practices in Australia, using Wesfarmers Ltd as a case study. It examines the auditor's independence declaration, non-audit services performed, remuneration, key audit matters, and the role of the audit committee. The report also highlights the differences between the responsibilities of directors, management, and auditors in relation to financial reporting.

Auditor Reporting being
Embraced in Australia

EXECUTIVE SUMMARY
In this project, company's auditor report is evaluated based on key information included
in company's annual report. Auditor's independent declaration, audit report, non audit services
performed by auditor is also identified. Various role, functions and composition of audit
committee is analysed. Auditor's independent report to stakeholders is evaluated. All the key
audit matters are noted that are associated with audit procedures. Type of audit opinion was
expressed in this report. At last, how director's and management's responsibilities differ from
auditor's in relation to the financial report are explained under this project.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................1
Main Body.......................................................................................................................................1
Auditor’s Independence Declaration..........................................................................................1
Non-Audit services performed by the Auditor...........................................................................2
Auditor’s remuneration .............................................................................................................3
Key audit matters.......................................................................................................................3
Audit commission.......................................................................................................................5
Follow up question asked to an auditor at company AGM.........................................................6
Directors’ and Management’s responsibilities differ from the Auditor’s responsibilities .........6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
APPENDIX......................................................................................................................................1
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INTRODUCTION
Auditing is an essential examination of various account books those are prepared by the
company during an accounting period of time. It can be systematic and independent evaluation
of statutory records, documents and vouchers of an organisation in order to ascertain the way
financial statements as well as non-financial records shows a fair outcome to the investors. The
aim of this report is to analyse “how is enhanced Auditors reporting being embraced in
Australia”. In order to obtain reasonable assurance that can assist in overall management and
recording of financial statements those are based on accurate finding from the audit perspectives.
The company which has been selected for the purpose of evaluating the auditing statements is
“Wesfarmers Ltd”. It is known as the leading Australian listed company which is been focused
on diverse administration that can provide a satisfactory return to their shareholders (Pittock,
Hussey and McGlennon, 2013).
In this report, auditor's independence Declaration report is discussed to show that auditor
complied with independence requirement. Non-audit services performed by the auditor are
mentioned below. Important role and function of audit committee in the given organisation. Each
key audit matter are summarise and paraphrase to provide assurance over each matter.
Main Body
Auditor’s Independence Declaration
A firm account Observer must remain independent from the organisation. It is defined by
unity and an subjective approach to the accounting activity. This concepts allows the accountant
to perform his work free in order to achieve company goal. Securities and exchange commission
set concept on audit freedom that can be organised into 5 primal region: forbidden non audit
work, Accounting committee pre-Approval of work, relative motion, struggle of power and
enhanced connection and revelation. It is clear that when an auditor of Wesfarmers conduct an
view of business document, he necessary supply a graphic deceleration conforming of no
contravention to attender freedom requirement (Burdett and Crossman, 2012).
According to annual report 2017 of Wesfarmers the management accepted the favorable
alteration from Ernst & young. Some of the following important modification are:
(a) zero dispute to the auditor in the corporation Act 2001 that is in abstraction to the audit and
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(b) none resistance of any relevant tag of vocation conduct in copulation to the audit.
These declaration are in the respect of Wesfarmer and many bodies controlled during the
accounting year. It is clear that auditor complied with their independence requirement according
to the declaration. So it follows the legislation and standard in audit reporting of Wesfarmers:
 It also follow section 307 of the corporation act and predate division three four and five
 There is a code of ethics for trained accountant. Like APES 110
 Accounting regulation ASQC prime control for firm that carry through audit and reviews
of business reports (Griffiths, 2016).
Non-Audit services performed by the Auditor
According to 15 USCS the word non-audit work substance “any professional services
provided to an issuer by a registered public accounting firm or a review of the financial
statements of an issuer. Non audit would be any service not involving the audit of a company 's
financial statements. For example, tax planning and preparation, business consulting and system
integration. According to annual report of Wesfarmers the auditor of the company provide non-
audit services to the consolidated entity during the financial year and received, or is due to
receive. The following amounts for the provision of these services:
Non-audit services
Ernst & Young (Australian & overseas network firms):
Tax abidance $1088
Other services $1219
In this table the total amount of non-audit services fees which is $2307 represent 23.1%
of the full fee paid or payable to external auditor and affiliated practice for the year ended on 30
June 2017. Sum of all non-audit services and authority-affiliated work tip was $3579 thousand
representing 35.8% of the total fees paid to auditor (Wesfarmers. 2017). The board has
considers the audit and Risk committee advice and the non audit services provided by auditor
and is satisfied that the provision of these services during the year by the auditor is compatible
(Zerni, 2012). The general standard of auditor independence imposed by the corporation Act
2001for the following reasons:
 the service provided do not involve auditing the auditor's own work or acting in a
management decision-making for the company.
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 All these non audit services are subject to corporate governance
 policies adopted by the company have been reviewed by the audit and the risk committee
to ensure they do not affect the integrity and objectives of the auditor.
Auditor’s remuneration
Any fee, rewards for the work done or employments in the form of pay, salary, or wages
that also includes allowance, benefits, bounces, cash incentives and monetary value is termed as
remuneration. So, A fees company pay to its external auditor in exchange for performing an
audit. The remuneration of auditor are prefixed by the management on the following basis:
 company shall fixed in its general meeting about the remuneration.
 The remuneration will include expenses incurred by the auditor in connection with the
audit of company.
According to the annual report of Wesfarmers for the financial year 2017 auditor are
remuneration are done in various ways. Remuneration for auditing and review of financial
reports for Wesfarmers in Australia and overseas network firm have been paid to external
auditor. In Australian firm external auditor is paid with the amount of $5780 in 2016 and
$5723in this ended financial year. Similarly, remuneration paid to auditor in the overseas firm
for year 2016 is $577 and in year 2017 company pay $702. These remuneration provided by the
company also consist an amount of various assurance-related services. In 2016 company pay
$2215 for assurance-related services in Australia & overseas network firm and for year 2017
Wesfarmers pay $1272. Remuneration for assurance-related services other than audit firm in
year 2016 is $112 as compared to $218 in year 2017 (Nielsen and Roslender, 2015). The auditor
remuneration also includes amount paid for non-audit services such as tax compliance in
Australian & overseas firm like for tax compliance company pay $1096 in year 2016 and $1088
in year 2017. Amount paid for other non-audit services in year 2016 is $882 and $1219 in year
2017.
Key audit matters
It is essential matters which is most important in our auditing of the financial reporting of
present period. For evert matter mentioned below, company’s description of how audit would be
addressed the necessary matter which is been provided by the company (MacDermott, 2013). It
is associated with Supplier rebates which is mentioned under the financial statement of the Wes-
farmer annual report. It consists of the rebates received by the group from overall suppliers those
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are related with the retail operations. It has been analysing as key audit matter as because of the
quantum of commercial profit arises during the year and decision are made on the basis of below
mentioned factors such as:
 The profitable terms of every specific rebate.
 Consideration of the nature of rebate and deicide, whether the value would be taken into
account among during carrying out the value of stock recorded into the statements.
Process to addressed the key audit matter:
 Auditor must have gained proper understanding of effective nature of every material and
types of commercial profit that consist of assessing the important of agreement in place.
 Auditor has also assessed the design and operating more effectively of relevant control in
accordance to recognition and measurement of rebate amount.
 It has been performed valuable comparison of the different rebate arrangement in
accordance with the prior year and budget that consist of aging profiles and material
variance were examination and supporting evidence (Zhang and et. al., 2012).
 Auditor of Wesfarmers work with the representatives that consists of product details such
as supply chain managers and procurement staffs present of any kind of non-standard
agreement or side arrangement.
Finalisation of acquisition accounting of Homebase: This particular group is accountable for
acquisition of Hamden group ltd as business combination as per the AASB 3. As per this specific
standard a 12 months provisional accounting duration during which acquisition accounting can
be easily be revised to indicate the facts and situation that can exists at the period of time.
auditors have determined that there is key audit matter because of the size of acquisition and
judgement is associated with determining the fair value of assets those are needed to be assumed
by the company.
Process:
There audit process in accordance of finalisation of proper acquisition accounting that
consists of below mentioned matters such as:
 Auditor of the Wesfarmer group acquisition for accounting method consists of assessing
all changes to key decision and estimation that can supports the updating fair value of
assets amount and debts obligations.
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 Auditor also assessed, whether there have been any kind of changes to the overall
provision that are based on the fair value of determined assest and debt which are taken
into account during the time of acquisition from the disclosure of 30 June, 2016 in the
financial report of the company.
Audit commission
It is a administrative body that is selected by number of member of an organisation
commission of director who all are responsible for helping auditor but remain independent of
management. The audit committee show a carping function in supply omission and helping as a
appraisal and equality on a company's financial coverage scheme. In Wesfarmers this committee
give self-directed reviews and direction of a company financial reporting processes, internal
control and independent auditors. According to annual report of Wesfarmers there is an audit
committee , the board currently comprises nine director, including eight non executive director
(Lodhia and Stone, 2017). The role of non administrator directors is to be market emulous: it
aims to set fees at a level contending with non decision maker director in comparator. They also
help in safeguard independence that not to include any performance related elements to preserve
the independence of non executive directors.
 revaluation and assessing the group processes which ensure the integrity of financial
statement's and reporting that is associated compliance with accounting, legal and
regulatory requirement.
 Review the process and control the recognition of commercial income by the retail
division to ensure in accordance with the accounting standard and accepted industry
practice
 Monitoring the ethical sourcing of product for resale through the group retail networks to
ensure that there are appropriate safeguard and processes in place.
 Review and evaluate the adequate of the group insurance arrangements to ensure
appropriate cover for identified operational and business risk (Haque, Deegan and Inglis,
2013).
 Monitoring the retail shrinkage control measure and reporting procedure in the group
division
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 Monitoring the company tax compliance program both in Australia and overseas,
including cross-border intra group transaction, to ensure its obligations are met in the
jurisdiction in which the company operates.
 Monitoring the group cyber security frame-work including data protection management
and the reporting structure and escalation process on information security risk.
Follow up question asked to an auditor at company AGM
Basically shareholder asked most of the question to the auditor regarding their financial
position, return on investment, position in the market etc. some of the most commonly asked
question are:
Q1) Who is responsible to submit a supplement to the notice of remuneration paid in previous
year?
Q2) what is the amount of dividend to be paid by company in this financial year?
Q3) why does the company board propose an authorization to repurchase own share?
Q4) what is the process of dividend taxed if shareholder is a register on ADR holder?
Directors’ and Management’s responsibilities differ from the Auditor’s responsibilities
Directors of an organisation are concerned with the proper maintenance of annual reports
but auditors are concerned with the proper examination of the reports. Managers are liable to
manage the financial reports in a proper way and record each and every transaction in the reports
which may help the auditor to analyse the actual position of the company and its financial status.
Directors are mainly liable to direct each and every employee of the organisation. In Wesfarmers
managers prepare the financial reports and the auditors analyse those reports and find out that all
the recorded elements are true and relevant to the company. Auditors of the company take
charge to analyse the financial reports to measure the actual performance in a particular period of
time.
In Wesfarmers the main role of managers is to manage the record of each activity and the
role of auditors is to analyse the recodes and check the transparency of the reports. If they found
any mistake in the reports he is liable to give the information to the directors so that they may
take action to resolve the mistake and make the reports transparent to ignore legal interferences
in the company. Directors focused with the organisational goals which can be achieved with the
help of actual and accurate reports (Parker, 2013).
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CONCLUSION
It is clear to conclude that audit reporting are essential for company. In this report
company annual report is evaluated in order to attracted stakeholder. Under this project auditor
independence requirements according to independent auditor report have been shown. Auditor
provide various non audit services which is discussed above in the report. Auditors are given
remuneration for the audit services they give to the company. Importance of audit procedure test
are discussed for each key audit matters like lest of control, substantive test of detail, substantive
test of balance and analytical procedures. There are broad of audit committee and non executive
member who manage and audit the report of company.
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REFERENCES
Books and journals
Burdett, J. and Crossman, J., 2012. Engaging international students: An analysis of the
Australian Universities Quality Agency (AUQA) reports. Quality Assurance in
Education. 20(3). pp.207-222.
Griffiths, P., 2016. Risk-based auditing. Routledge.
Haque, S., Deegan, C. and Inglis, R., 2013. Disclosure of climate change-related corporate
governance practices.
Lodhia, S. and Stone, G., 2017. Integrated reporting in an internet and social media
communication environment: conceptual insights. Australian Accounting Review. 27(1).
pp.17-33.
MacDermott, K., 2013. Whatever Happened to Frank and Fearless?: The impact of new public
management on the Australian Public Service. ANU Press.
Nielsen, C. and Roslender, R., 2015. Enhancing financial reporting: The contribution of business
models. The British Accounting Review. 47(3). pp.262-274.
Parker, L., 2013. The accounting communication research landscape. In The Routledge
Companion to Accounting Communication (pp. 21-39). Routledge.
Phillips, S.D. and Smith, S.R., 2014. A Dawn of Convergence?: Third sector policy regimes in
the ‘Anglo-Saxon’cluster. Public Management Review. 16(8). pp.1141-1163.
Pittock, J., Hussey, K. and McGlennon, S., 2013. Australian climate, energy and water policies:
conflicts and synergies. Australian Geographer. 44(1). pp.3-22.
Zerni, M., 2012. Audit partner specialization and audit fees: Some evidence from Sweden.
Contemporary Accounting Research. 29(1). pp.312-340.
Zhang, L. and et. al., 2012. The AICPA assurance services executive committee emerging
assurance technologies task force: The audit data standards (ADS) initiative. Journal of
Information Systems. 26(1). pp.199-205.
Online
Wasfarmers. 2017.[online]. Available through: <https://www.wesfarmers.com.au/docs/default-
source/default-document-library/2017-annual-report.pdf?sfvrsn=0>
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APPENDIX

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