Audit, Assurance and Compliance - Analysis of Ausnet Services Ltd

This assignment analyses the financial statement of Ausnet Services Ltd and how the company follows and implements the ASX Corporate Governance Principles in the business. It also assesses the various risks which the business faces and ensures that the financial statements are free from material misstatements. The report includes a common size financial statement and significant ratios. Measures to reduce risks are also suggested.

Running head: AUDIT, ASSURANCE AND COMPLIANCE
AUDIT, ASSURANCE AND COMPLIANCE
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary
The main purpose of this assignment is to analyse the financial statement of Ausnet Services Ltd
which operates in Australia. The assignment will be analysing how the company follows and
implements the ASX Corporate Governance Principles in the business. In addition to this the
assignment will be analysing the various risks which the business faces and also ensure that the
financial statements are free from material misstatements. The assignment will also be assessing
the market overview of the company and include a common size financial statement and along
with this significant ratio will also be demonstrated in the assignment. Lastly the report will be
concluding with measures which can be adopted by the business to reduce the risks.

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Table of Contents
ASX Corporate Governance Principles...........................................................................................3
Risk Assessment..............................................................................................................................6
Nature of the Company................................................................................................................6
Market Overview.........................................................................................................................7
Regulating Authority...................................................................................................................7
Business Strategy.........................................................................................................................7
Ratio Analysis..................................................................................................................................8
Common Sized Profit and Loss A/c................................................................................................8
Common Sized Balance Sheet.........................................................................................................9
Audit Risks....................................................................................................................................10
Measures to Overcome Risks........................................................................................................11
Reference.......................................................................................................................................12

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ASX Corporate Governance Principles
1. Lay Solid Foundations for management and Oversight: The charter which sets out the
responsibilities of the board and the function which are delegated to the management is
adopted by the board. The day to day management of AusNet Services ltd is delegated to
the managing director of the company (Tricker and Tricker 2015). The board is
responsible for reviewing the role and responsibility of the management and ensure that
they are performing with in their scope. The company secretary is directly accountable to
the board, through the chairmen on all matters related to the effective functioning of the
management. For the purpose of appointing new independent Non-Executive Directors,
the nomination committee reviews and recommends to the Board for appointment of an
independent non-executive director (Ausnetservices.com.au. 2018). The company
recognizes that diversity is required in the workforce for attaining long term
sustainability.
2. Structure the board to add value: The board of directors comprises of 9 non-executive
directors which includes the chairman and one executive director which is the managing
director of the business (Beekes, Brown and Zhang 2015). For effective management of
the business and discharge of duties, the board has established nomination committee,
Remuneration Committee and Audit and Risk Management committee (Cybinski and
Windsor 2013). The company has also appointed a new independent non-executive
director who has 20 years of experience in different industries which will be adding value
to the management.
3. Act Ethically and Responsibly: The board of AusNet Services is committed in setting up
an ethical environment for the business dealings. The company has developed a code of

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business conduct which can guide the directors and all other personnel to maintain
integrity and accountability for the activities of the business. In accordance with the code
of conduct of business, the company has developed a Whistleblower policy which can
help the business to respond appropriately to wrongful acts (Dhamija 2014). The
company in order to adhere effectively to the Whistleblower strategy has decided to use
the services of STOPline which is an external, confidential provider of Whistleblower
disclosure services (Devine and Walden 2013). In addition to this, the board has
developed conflict of interest deadline to solve any conflicts which may arise between the
directors and AusNet services ltd which should also be in compliance with the
Corporation Act. It is also an established guideline that relevant persons should not deal
in the securities of the company.
4. Safeguard Integrity in Corporate Reporting: The board is responsible for the effective
representation of the reporting framework of the company. The Audit and Risk
Management committee provides assistance to the board in order to maintain the quality
of reporting standard, monitoring compliance with applicable laws and regulation (Tao
and Hutchinson 2013). The Audit and Risk management committee also has the power to
conduct independent investigation which can ensure whether the reporting framework is
being followed or not. The company has an Auditor Independence policy which the
management intends to maintain by regulating the non-audit services which are provided
by the external auditor (Badolato, Donelson and Ege 2014).
5. Make Timely and Balanced Disclosure: AusNet Services has successfully established and
developed a continuous disclosure policy which guides the management about the
continuous disclosure requirement (Glaum et al. 2013). The company secretary is

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responsible for the maintaining the continuous disclosure policy of the company and also
handles communication with ASX and SGX-ST regarding the continuous disclosure
requirements. In addition to this, the board also discusses issues which the company faces
in continuous disclosure policies in its general meeting.
6. Respect the rights of the Shareholders: AusNet Services holds an annual Investor open
day for all investors, proxy investors which focuses on key issues which impact the
activities of the company and also provides an opportunity to the shareholders to meet the
management of the company and also interact with the CEO of the company. The
investor relations of the company also seek to act as an effective conduct between the
market and AusNet Service board and senior management regularly communicating
feedback from the market. The feedback of the investors is very important as it helps the
management of AusNet Services ltd to frame its strategies and continuous disclosure
plans (Cella, Ellul and Giannetti 2013). All important announcements and declaration of
results are done on the website of AusNet Services ltd. The full year and half year results
of AusNet is also published in the official website of the company. in addition to this the
company has computer-share facilities that provides electronic communication of the
investors with the management of the company (Cheng, Green and Ko 2014). The
company also has a Customer Consultative Committee which meet quarterly with key
investor representatives in order to gain customer insights which helps the business in
decision making process.
7. Recognize and Manage Risk: The company is committed to managing risks of the
business so that the it can provide greater certainty and confidence to the shareholders of
the company. The company aims to provide a right balance between risk and return so

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that it can enhance the profitability and performance of the business (Dionne 2013). The
board continuously manages the risk management and internal control system of the
company and also ensures that the shareholders are well informed about the risk position
of the management of the business. The board also receives assistance from the Audit and
Risk Management committee in discharging its functions effectively. The managing
director of the business is accountable for the risk management implementation process.
The board also has internal audit plans to ensure that the risk management policies of the
company are working effectively or not. The internal auditor conducts risk based internal
audit and reports the results of the same to the Audit and Risk Management Committee
and in times also directly to the CEO of the company.
8. Remunerate Fairly and Responsibly: The board recognizes the fact that the company
needs to have an appropriate remuneration policy in order to attract talented directors and
other personnel and also retain the same (Ben Shlomo, Eggert and Nguyen 2013). The
details about the remuneration which is provided to key directors are clearly given in the
director’s report which is shown in the financial statement of the company. The company
has also set a remuneration committee which is responsible for such matters. The
committee also reviews matters related to superannuation and other employment benefits
and entitlements.
Risk Assessment
Nature of the Company
AusNet Services ltd is engaged in distribution of safe and reliable gas and electricity to
more than 1.3 million customers. The company is a developing company and are leading energy
delivery service providers which has an asset of approximately of $ 11 million of electricity and

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gas network. The company has more than 2,200 employees working across our regulated
network for the new commercial Energy Services (Ausnetservices.com.au. 2018). The company
is also in the process of developing new products which can be more useful to the customers of
the company. The company plans to to make the distribution of electricity and gas safe and free
from trouble for the customers. In addition to this, the company is regarded as Australia’s
Largest ASX-listed regulated energy infrastructure company which has an asset base growth of
3% per annum.
Market Overview
AusNet Services ltd is engaged in distribution services in both Australia and Singapore
and it is listed in both the stock exchanges. The headquarter of the company is situated in
Melbourne, Australia. The company is regarded as Australia’s Largest ASX-listed regulated
energy infrastructure company and moreover the company has been attaining continuous growth
in asset base of the company of 3% (Ausnetservices.com.au. 2018). The aim of the management
of AusNet Services is to improve the services and further develop the business by the year end
2020. As per the financial statement of the company the company has made a growth in the
assert base of 5%. The company has acquired new customers worth 28,919 which shows the
company’s development and reputation in the market (Ausnetservices.com.au. 2018). The
company is also one of the leading provider of electricity and gas in Australia and also has an
established business in Singapore.
Regulating Authority
The business of AusNet Services is regulated by Australian Stock Exchange (ASX)
where the business is listed and also by the relevant accounting standards which are in force in
the country.

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Business Strategy
The company is trying to expand the operation of the business by developing a new
product which can empower the customers and also be useful to them. The mission of the
company is to ensure that the services which are provided are safe and secure. For such purpose
the company the company has launched missionZero strategy which supports safety leadership,
safe behavior, continuous improvement in safety systems and commitment in making the
workplace environment safer.
Ratio Analysis
Statement Showing ratios
Particulars 2017 2016
Profit and Loss A/c ratios
Operating Profit Ratio 34.41% 39.09%
Net Profit ratio 13.56% 25.50%
Return on Shareholder's Equity 17.50% 21.09%
Balance Sheet Ratio
Current ratio 0.833609 0.62538
Debt equity ratio 1.802212 1.938754
Total Asset Turnover ratio 0.160039 0.164354
Common Sized Profit and Loss A/c
Statement Showing Income and Expenses
Particulars 2017 2016
Amou
nt
Percent
age
$-
million
$-
million
Revenue
$
1,881.50
$
1,919.00
-
37.500
0 -0.0195
Expenses
Use of system and associated charges
$
99.30
$
98.30 1.000 0.010
Easement and land tax
$
115.90
$
116.50 -0.600 -0.005
Employee benefits expenses $ $ 16.800 0.071

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252.40 235.60
External maintenance and contractors’ services
$
97.80
$
104.00 -6.200 -0.060
Materials
$
42.00
$
38.90 3.100 0.080
Information technology and communication costs
$
54.90
$
48.70 6.200 0.127
Operating lease rental expenses
$
13.80
$
15.00 -1.200 -0.080
Administrative expense
$
42.30
$
55.00
-
12.700 -0.231
Service level payments
$
19.10
$
6.90 12.200 1.768
Disposal of property, plant and equipment
$
6.10
$
6.20 -0.100 -0.016
Other costs
$
64.60
$
51.40 13.200 0.257
Total expenses excluding depreciation, amortisation,
interest and tax
$
808.20
$
776.50 31.700 0.041
Earnings before interest, tax, depreciation and
amortisation
$
1,073.30
$
1,142.50
-
69.200 -0.061
Depreciation and amortisation
$
425.90
$
392.30 33.600 0.086
Profit from operating activities
$
647.40
$
750.20
-
102.80
0 -0.137
Finance income
$
18.20
$
23.00 -4.800 -0.209
Finance costs
$
302.30
$
315.30
-
13.000 -0.041
Profit before income tax
$
363.30
$
457.90
-
94.600 -0.207
Income tax (expense)/benefit
$
108.20
$ -
31.40
139.60
0 -4.446
Profit for the year
$
255.10
$
489.30
-
234.20
0 -0.479
Common Sized Balance Sheet
Balance Sheet
2017 2016 Amount Percentage
Assets $- million $- million
Current assets

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Cash and cash equivalents 328.8 441.4 -112.600 -26%
Receivables 214.1 198.5 15.600 8%
Desalination licence receivable 12.4 12.5 -0.100 -1%
Inventories 43.3 52 -8.700 -17%
Derivative financial instruments 5.7 89.1 -83.400 -94%
Current tax receivable 25.9 0 25.900
Other assets 25.1 28.5 -3.400 -12%
Total current assets 655.3 822 -166.700 -20%
Non-current assets
Inventories 17.4 18.5 -1.100 -6%
Property, plant and equipment 10000 9597.1 402.900 4%
Intangible assets 554.8 561.2 -6.400 -1%
Desalination licence receivable 189.6 198.4 -8.800 -4%
Derivative financial instruments 306 476.3 -170.300 -36%
Other assets 33.4 2.5 30.900 1236%
Total non-current assets 11101.2 10854 247.200 2%
Total assets 11756.5 11676 80.500 1%
LIABILITIES
Current liabilities
Payables and other liabilities 271.3 338.2 -66.900 -20%
Provisions 106.1 110.6 -4.500 -4%
Borrowings 398.4 843.5 -445.100 -53%
Derivative financial instruments 10.3 18.8 -8.500 -45%
Current tax payable 0 3.3 -3.300 -100%
Total current liabilities 786.1 1314.4 -528.300 -40%
Non-current liabilities
Deferred revenue 73.7 57.8 15.900 28%
Provisions 41.9 51.7 -9.800 -19%
Borrowings 6266.9 6054.2 212.700 4%
Derivative financial instruments 303.1 174.3 128.800 74%
Deferred tax liabilities 586.4 465.8 120.600 26%
Total non-current liabilities 7272 6803.8 468.200 7%
Total liabilities 8058.1 8118.2 -60.100 -1%
EQUITY
Contributed equity 5153.2 5057.3 95.9 2%
Reserves -1464.5 -1529.4 64.9 -4%
Retained profits 1104.8 1125 -20.2 -2%
Other equity -1095.1 -1095.1 0 0%
Total equity 3698.4 3557.8 140.6 4%
Total Equity and Liabilities 11756.5 11676 80.5 1%

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AUDIT, ASSURANCE AND COMPLIANCE
Audit Risks
The various audit risks which the business faces are given below in the points form:
1. The debt-equity ratio of the company shows that it has reduced from the previous year’s
figure, however there is still significant amount as shown in the ratio analysis table as
shown above. The financial statements also show that the company uses more of debt
capital as compared equity capital which is a bit risky (Li 2014).
2. The asset turnover ratio of the company has fallen from previous year which means that
the company is not using the assets of the company properly in order to generate
revenues which is a possible risk for the company (Delen, Kuzey and Uyar 2013).
3. The cash and cash equivalent has decreased from previous year and the amount of debt
which the business has taken signifies that the company is facing liquidity crisis which is
a risk for the business.
Measures to Overcome Risks
The measures which can be suggested to overcome the risks which are provided above are given
below:
 The company needs to lower the amount of debts so that the burden of leverages can be
lowered on the company. In addition to this, the management needs to ensure that the
debts amount is correctly stated in the financial statements considering all payback of
debts. The auditor while conducting the process of audit needs to verify the same and also
ensure that the debts are accurately recorded and no misstatements are present.
 The management of the company needs to utilize the assets of the company properly and
ensure that no resources of the company is wasted in order to ensure that the company

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does not miss out on any revenues. The auditor needs to verify the value of assets of the
company and ensure they are valued according to the relevant standards (Haimes 2015).
 The management of the company needs to look after its liquidity requirements and
maintain a minimum cash balance so that the operation of the business can be handled
smoothly. The cash balance can be verified by reviewing the cash book and all related
ledgers.
Reference
Ausnetservices.com.au. (2018). Home. [online] Available at: https://www.ausnetservices.com.au/
[Accessed 26 Apr. 2018].
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financial sector: Evaluation of recent reforms in Europe. Qualitative Research in Financial
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AUDIT, ASSURANCE AND COMPLIANCE
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