Critical Evaluation of Key Audit Matters in Independent Auditor's Report
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This paper critically analyzes and evaluates the key audit matters in the independent auditor's report. It discusses the importance of identifying audit matters, the revision of auditing standards, and analyzes key audit matters in selected banks.
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Running head: CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN
THE INDEPENDENT AUDITORS REPORT
Critical evaluation and analysis of key audit matters in the independent auditors report
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THE INDEPENDENT AUDITORS REPORT
Critical evaluation and analysis of key audit matters in the independent auditors report
Name of the student
Name of the university
Student ID
Author note
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Executive summary:
The paper evaluates the importance of identification of audit matters of the banking
organization. Such explanation has been done in light of introduction of the new auditing
standard that is “ASA 701 communicating key audit matters in the independent auditor
report”. In this regard, the failure of large investment bank has been discussed by reviewing
relevant journal articles. The objective and rationale of ASA 701 has been addressed along
with evaluating the revision of ASA 570. The banking organization that have been evaluated
for its key audit matters include ANZ bank, Commonwealth bank of Australia, Pendal group
limited, Bank of Queensland, Macquarie group limited and QBE Insurance group.
INDEPENDENT AUDITORS REPORT
Executive summary:
The paper evaluates the importance of identification of audit matters of the banking
organization. Such explanation has been done in light of introduction of the new auditing
standard that is “ASA 701 communicating key audit matters in the independent auditor
report”. In this regard, the failure of large investment bank has been discussed by reviewing
relevant journal articles. The objective and rationale of ASA 701 has been addressed along
with evaluating the revision of ASA 570. The banking organization that have been evaluated
for its key audit matters include ANZ bank, Commonwealth bank of Australia, Pendal group
limited, Bank of Queensland, Macquarie group limited and QBE Insurance group.
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Table of Contents
Introduction:...............................................................................................................................4
Discussion:.................................................................................................................................4
Purpose of key audit matters:.....................................................................................................4
Determination and application of key audit matter:...................................................................5
Identifying issues of Lehman brother case:...............................................................................5
How key audit matters address the issues:.................................................................................6
Revision of ASA 570:................................................................................................................6
Importance of going concern issue in the auditor’s report:........................................................7
Analyzing the key audit matters in the independent auditor’s report of the chosen banks:.......7
Do key audit matters serve the purpose in the industry?...........................................................9
Conclusion:................................................................................................................................9
References list:.........................................................................................................................10
Appendix:.................................................................................................................................12
INDEPENDENT AUDITORS REPORT
Table of Contents
Introduction:...............................................................................................................................4
Discussion:.................................................................................................................................4
Purpose of key audit matters:.....................................................................................................4
Determination and application of key audit matter:...................................................................5
Identifying issues of Lehman brother case:...............................................................................5
How key audit matters address the issues:.................................................................................6
Revision of ASA 570:................................................................................................................6
Importance of going concern issue in the auditor’s report:........................................................7
Analyzing the key audit matters in the independent auditor’s report of the chosen banks:.......7
Do key audit matters serve the purpose in the industry?...........................................................9
Conclusion:................................................................................................................................9
References list:.........................................................................................................................10
Appendix:.................................................................................................................................12
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Introduction:
The study is undertaken to evaluate the key audit matters of the organizations selected
from the banking industry listed on the Australian stock exchange. Such analysis has been
conducted in respect of the introduction of new auditing standard “ASA 701 communicating
the key audit matters in the independent auditor report”. The introduction of the new
auditing standard was in the aftermath of financial crisis and was intended to fulfill the
lacking requirements of the old auditing standard which was cited to be the reason for the
failure of some of the organization (Czerney et al. 2019). In this regard, the case of Lehman
brother is explained by emphasizing on the failure of auditors to detect the defective
accounting policy that resulted in the downfall of organization.
Key audit matters are the matters that are considered to be essential by way of their
professional judgment in the auditing process of annual report of entities. The new standard
pertaining to the disclosure of key audit matters is applicable to the financial statements
verification and in the circumstances when it is decided by the auditors to communicate such
matters in the auditor’s report (Czerney et al. 2019). The organizations for which the
evaluation of key audit matters are done in the paper includes are chosen from the banking
industry and they include ANZ bank, Commonwealth bank of Australia, Pendal group
limited, Bank of Queensland, Macquarie group limited and QBE Insurance group.
Discussion:
Purpose of key audit matters:
The principle of incorporating the key audit matters for improving the communicative
value of report by making precision of the information using the key audit matters. Such
matters intend to provide the users of financial statements with additional information that
assist them in understanding the professional judgment of the auditors in preparation of the
auditor’s report. In addition to this, key audit matters also assist uses in gaining an
understanding of the noteworthy judgment along with the nature of entity. Moreover, a basis
is provided to the users with the help of disclosure of key audit matters for further engaging
with the governance people and management in relation to certain matters required in the
preparation of annual report. Communication of key audit matter is in the context of forming
an opinion by auditors on the financial statements as a whole and providing an insight into
the work of audit (auasb.gov.au 2019).
Determination and application of key audit matter:
Determination of key audit matters is done by the auditor by assessing the areas of
significant risks areas that has probability of being misstated materially. Significant judgment
is exercised by the auditors in relation to the areas of significant judgment made by the
management including the assumptions and estimates resulting in areas of high uncertainty.
Furthermore, for the identification of key audit matters, it is essential to engage with the
people entrusted with governance because the matters which are identified by such personnel
are considered as the matters of potential key audit matters. Users will be able to well
INDEPENDENT AUDITORS REPORT
Introduction:
The study is undertaken to evaluate the key audit matters of the organizations selected
from the banking industry listed on the Australian stock exchange. Such analysis has been
conducted in respect of the introduction of new auditing standard “ASA 701 communicating
the key audit matters in the independent auditor report”. The introduction of the new
auditing standard was in the aftermath of financial crisis and was intended to fulfill the
lacking requirements of the old auditing standard which was cited to be the reason for the
failure of some of the organization (Czerney et al. 2019). In this regard, the case of Lehman
brother is explained by emphasizing on the failure of auditors to detect the defective
accounting policy that resulted in the downfall of organization.
Key audit matters are the matters that are considered to be essential by way of their
professional judgment in the auditing process of annual report of entities. The new standard
pertaining to the disclosure of key audit matters is applicable to the financial statements
verification and in the circumstances when it is decided by the auditors to communicate such
matters in the auditor’s report (Czerney et al. 2019). The organizations for which the
evaluation of key audit matters are done in the paper includes are chosen from the banking
industry and they include ANZ bank, Commonwealth bank of Australia, Pendal group
limited, Bank of Queensland, Macquarie group limited and QBE Insurance group.
Discussion:
Purpose of key audit matters:
The principle of incorporating the key audit matters for improving the communicative
value of report by making precision of the information using the key audit matters. Such
matters intend to provide the users of financial statements with additional information that
assist them in understanding the professional judgment of the auditors in preparation of the
auditor’s report. In addition to this, key audit matters also assist uses in gaining an
understanding of the noteworthy judgment along with the nature of entity. Moreover, a basis
is provided to the users with the help of disclosure of key audit matters for further engaging
with the governance people and management in relation to certain matters required in the
preparation of annual report. Communication of key audit matter is in the context of forming
an opinion by auditors on the financial statements as a whole and providing an insight into
the work of audit (auasb.gov.au 2019).
Determination and application of key audit matter:
Determination of key audit matters is done by the auditor by assessing the areas of
significant risks areas that has probability of being misstated materially. Significant judgment
is exercised by the auditors in relation to the areas of significant judgment made by the
management including the assumptions and estimates resulting in areas of high uncertainty.
Furthermore, for the identification of key audit matters, it is essential to engage with the
people entrusted with governance because the matters which are identified by such personnel
are considered as the matters of potential key audit matters. Users will be able to well
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
understand the audit with the help of announcement of key audit matters irrespective of the
auditors expressing adverse or qualified opinion on the financial statements of company
(auasb.gov.au 2019).
Identifying issues of Lehman brother case:
The case of Lehman brothers is discussed with respect to the auditing issues faced by
the organization and their failure of disclose the defective accounting policy of excess
borrowing and misrepresentation of earning capacity of organization. The unforeseen
collapse of large investment bank is partially attributable to the ineffective and weak auditing
practices adopted by the company under the guideline of the old auditing standard that did
not mandated the revealing of the identified key audit matters. The audit report issued did not
make accurate projections of the long term sustainability of the business in light of
uncertainties and risks (Dodo 2017). Moreover, the transactions relating to the repurchase
agreements under the Repo 105 was failed to be disclosed by the auditor. The financing of
daily operations of the firm with the help of Repo markets and the ability of the company to
settle down its Repo positions should have been investigated. The firm would have been
placed in a opposition to manage its accounts and balance sheet that responded to the
fluctuations of market had the external auditing been effective (Cordoş and Fülöp 2015).
Therefore, it can be inferred that the issue surrounding the collapse of the investment bank
was that the risk associated with excess borrowing was not anticipated and accounted for by
auditors and an unqualified audit report was issued by the auditors regarding its financial
position.
How key audit matters address the issues:
From the analysis of the case of Lehman brothers, it is quite evident that there exist a
relationship between the development of new auditing standard and collapse of the large
investment banking firm. The development of ASA 701 was due to the failure of such some
corporate organizations and subsequently the financial crisis. Issues faced by the bank that
was not accounted for previously could have been addressed with the introduction of ASA
701. The high repo transactions which the firm was involved into could be revealed along
with concealing of high financial leverage of bank indicating that the company has borrowed
in excess of its capacity and would have adequately anticipated its downfall. Some of the key
audit matters of the Lehman brothers such as subprime borrowings, Repo 105 and earning
capacity could be communicated to the people charged with governance and management and
accordingly a qualified audit opinion would be issued that provides investors with relevant
view of the financial report (Bédard et al. 2016). Therefore, the shareholders would have
made strategic investment decision under the new auditing standard.
Revision of ASA 570:
Under the ASA 570 revision, it is required by the auditors to evaluate the
appropriateness of the assumptions and accounting of going concern of company the financial
statements compilation. Auditors are accountable for accounting for the issues associated
with going concern and its impact on the financial report. The reporting entity ability to
continue as going concern should be assessed by the auditors as per the auditing standard of
Australia. It is the responsibility of the auditors to obtain sufficient and appropriate audit
INDEPENDENT AUDITORS REPORT
understand the audit with the help of announcement of key audit matters irrespective of the
auditors expressing adverse or qualified opinion on the financial statements of company
(auasb.gov.au 2019).
Identifying issues of Lehman brother case:
The case of Lehman brothers is discussed with respect to the auditing issues faced by
the organization and their failure of disclose the defective accounting policy of excess
borrowing and misrepresentation of earning capacity of organization. The unforeseen
collapse of large investment bank is partially attributable to the ineffective and weak auditing
practices adopted by the company under the guideline of the old auditing standard that did
not mandated the revealing of the identified key audit matters. The audit report issued did not
make accurate projections of the long term sustainability of the business in light of
uncertainties and risks (Dodo 2017). Moreover, the transactions relating to the repurchase
agreements under the Repo 105 was failed to be disclosed by the auditor. The financing of
daily operations of the firm with the help of Repo markets and the ability of the company to
settle down its Repo positions should have been investigated. The firm would have been
placed in a opposition to manage its accounts and balance sheet that responded to the
fluctuations of market had the external auditing been effective (Cordoş and Fülöp 2015).
Therefore, it can be inferred that the issue surrounding the collapse of the investment bank
was that the risk associated with excess borrowing was not anticipated and accounted for by
auditors and an unqualified audit report was issued by the auditors regarding its financial
position.
How key audit matters address the issues:
From the analysis of the case of Lehman brothers, it is quite evident that there exist a
relationship between the development of new auditing standard and collapse of the large
investment banking firm. The development of ASA 701 was due to the failure of such some
corporate organizations and subsequently the financial crisis. Issues faced by the bank that
was not accounted for previously could have been addressed with the introduction of ASA
701. The high repo transactions which the firm was involved into could be revealed along
with concealing of high financial leverage of bank indicating that the company has borrowed
in excess of its capacity and would have adequately anticipated its downfall. Some of the key
audit matters of the Lehman brothers such as subprime borrowings, Repo 105 and earning
capacity could be communicated to the people charged with governance and management and
accordingly a qualified audit opinion would be issued that provides investors with relevant
view of the financial report (Bédard et al. 2016). Therefore, the shareholders would have
made strategic investment decision under the new auditing standard.
Revision of ASA 570:
Under the ASA 570 revision, it is required by the auditors to evaluate the
appropriateness of the assumptions and accounting of going concern of company the financial
statements compilation. Auditors are accountable for accounting for the issues associated
with going concern and its impact on the financial report. The reporting entity ability to
continue as going concern should be assessed by the auditors as per the auditing standard of
Australia. It is the responsibility of the auditors to obtain sufficient and appropriate audit
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
evidence for ascertaining whether there any uncertainty prevails about the ability of entity to
continue as going concern. However, there are some inherent limitations the liability of the
auditors for predicting the future conditions or events. Therefore, if the reference to the
material uncertainty about the liability of entity to continue as going concern is not present,
the auditor report in such case cannot provide guarantee on the ability of the entity to
continue as going concern (Brunelli 2018).
Importance of going concern issue in the auditor’s report:
The entity’s ability to prolong as going concern is considered to be important for the
auditors. This is because of the fact that existence any material uncertainty that create a
uncertainty on the company’s ability to continue as going concern would be treated as key
audit matters. Therefore, as per the revised ASA 570, such material uncertainty should be
reported by the auditor in their audit report as key audit matter. In the absence of any
appropriate and sufficient audit evidence regarding the accounting policy for evaluating the
position of entity as going concern, it is not necessary that the auditors will issue an
unqualified and adverse audit opinion on the financial position of the company. However, it
is important for the auditors to conduct an assessment about the going concern issue by
obtaining appropriate and sufficient audit evidence regarding the same (Tsay and Chen
2015). Therefore, auditors are supposed to make conclusion on the going concern ability of
the firm by addressing the matter is the section of key audit report.
Analyzing the key audit matters in the independent auditor’s report of the chosen
banks:
The analysis of the companies in the banking sector is done in this sector by
evaluating their key audit matters in the audit report. The quality of audit is vital for the users
and quality of audit is supported by the recent requirement of communicating key audit
matters and thereby responding to growing demand of stakeholders and investors by gaining
an insight into the auditing process (Zang 2019). The banking companies that have been
chosen for analysis of the key audit matter include ANZ bank, Commonwealth bank of
Australia, Pendal group limited, Bank of Queensland, Macquarie group limited and QBE
Insurance group.
Analyzing the financial report of Macquarie group limited, it is deduced that the audit
opinion on the financial statements of company is formed by auditors by accounting for the
matters that are of significant important in the auditing of financial statements. The audit
matters that are identified by the auditors are related to account such as valuation of financial
liabilities and assets, IT control and system, provision for loss and deferred tax liabilities and
assets. Moreover, all the identified key audit matters have been adequately addressed by
auditors using the appropriate technique and adopting the analytical procedures and sampling
plan as per the suitability of account (Static.macquarie.com 2019).
The auditor of Bank of Queensland has obtained appropriate and sufficient audit
evidence on the basis of which formation of opinion on financial information is done.
Identification of key audit matters for the consolidated entity are done for the bank in relation
to the account such as valuation of goodwill, collective and specific impairment provisions
for advances and loans, fair value measurements for financial instruments, intangible
computer software valuation and system and control of IT. All the key audit matters have
been addressed by adopting the appropriate sampling plan and according to the requirement
of the auditing standard. Auditing procedures also involved assessing the effectiveness of the
INDEPENDENT AUDITORS REPORT
evidence for ascertaining whether there any uncertainty prevails about the ability of entity to
continue as going concern. However, there are some inherent limitations the liability of the
auditors for predicting the future conditions or events. Therefore, if the reference to the
material uncertainty about the liability of entity to continue as going concern is not present,
the auditor report in such case cannot provide guarantee on the ability of the entity to
continue as going concern (Brunelli 2018).
Importance of going concern issue in the auditor’s report:
The entity’s ability to prolong as going concern is considered to be important for the
auditors. This is because of the fact that existence any material uncertainty that create a
uncertainty on the company’s ability to continue as going concern would be treated as key
audit matters. Therefore, as per the revised ASA 570, such material uncertainty should be
reported by the auditor in their audit report as key audit matter. In the absence of any
appropriate and sufficient audit evidence regarding the accounting policy for evaluating the
position of entity as going concern, it is not necessary that the auditors will issue an
unqualified and adverse audit opinion on the financial position of the company. However, it
is important for the auditors to conduct an assessment about the going concern issue by
obtaining appropriate and sufficient audit evidence regarding the same (Tsay and Chen
2015). Therefore, auditors are supposed to make conclusion on the going concern ability of
the firm by addressing the matter is the section of key audit report.
Analyzing the key audit matters in the independent auditor’s report of the chosen
banks:
The analysis of the companies in the banking sector is done in this sector by
evaluating their key audit matters in the audit report. The quality of audit is vital for the users
and quality of audit is supported by the recent requirement of communicating key audit
matters and thereby responding to growing demand of stakeholders and investors by gaining
an insight into the auditing process (Zang 2019). The banking companies that have been
chosen for analysis of the key audit matter include ANZ bank, Commonwealth bank of
Australia, Pendal group limited, Bank of Queensland, Macquarie group limited and QBE
Insurance group.
Analyzing the financial report of Macquarie group limited, it is deduced that the audit
opinion on the financial statements of company is formed by auditors by accounting for the
matters that are of significant important in the auditing of financial statements. The audit
matters that are identified by the auditors are related to account such as valuation of financial
liabilities and assets, IT control and system, provision for loss and deferred tax liabilities and
assets. Moreover, all the identified key audit matters have been adequately addressed by
auditors using the appropriate technique and adopting the analytical procedures and sampling
plan as per the suitability of account (Static.macquarie.com 2019).
The auditor of Bank of Queensland has obtained appropriate and sufficient audit
evidence on the basis of which formation of opinion on financial information is done.
Identification of key audit matters for the consolidated entity are done for the bank in relation
to the account such as valuation of goodwill, collective and specific impairment provisions
for advances and loans, fair value measurements for financial instruments, intangible
computer software valuation and system and control of IT. All the key audit matters have
been addressed by adopting the appropriate sampling plan and according to the requirement
of the auditing standard. Auditing procedures also involved assessing the effectiveness of the
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
internal control system (Boq.com.au 2019). In addition to this, the reason why the accounts
are considered to have material impact is explained by referring to the relevant notes to
financial statements.
For the ANZ bank, auditors have made a detailed description of the key audit matters
identified in a separate section. All such matters are addressed in the context of auditing the
financial statements as a whole. Key audit matters include customer remediation provision,
credit impairment provisions and disclosures of impact of AASB 9 financial instruments. In
addition to this, there was also other account that was assessed for materiality such as
accounting for divestments, valuation at fair value relation to financial instruments and IT
control and system. Moreover, there was also a detailed description of how such matters were
addressed in the report. Such method includes adopting the sampling plans, testing the key
controls and analytical procedures that are appropriate to the account (Shareholder.anz.com
2019).
Identification of key audit matters by the auditors of Commonwealth bank relates to
the company and the group as a whole with the exception to the valuation of liabilities of
insurance policy holders that is related only to the group. The comment on the outcome of the
procedures of auditing is made in the context of key audit matter. The key audit matters
identified are provision for loan impairment, judgment involved in the valuation if financial
instruments, regular action and conduct risk provisions and the insurance policyholder
liabilities valuation and financial reporting information in relation to IT control and system
(Commbank.com.au 2019). Furthermore, it has been observed that the assessment of such
accounts is done in reference to the requirements of the applicable accounting standard.
Key audit matters identified by the auditors of Pendal group limited have made
disclosure to the audit committee and the accounts for which materiality have been accounted
such as fee revenue recognition, investment management contracts, intangible assets moving
value and accounting for remuneration scheme of employees. All the key audit matters have
been addressed by adopting the analytical procedures such as testing the mathematical
accuracy and assessing the key estimates, assumptions and judgment made by management
(pendalgroup.com 2019). Some of the recent report concerning the recognition of fees has
also been tested for evaluation.
The auditors of QBE Insurance group have presented in a separate section with such
matters comprising of valuation of goodwill, adequacy probability, IT system and control,
investment valuation, valuation on the net outstanding claims and recoverability of deferred
tax assets. In addition to this, a detailed disclosure is presented by the auditors such as why
the accounts are treated to be material and it provided an explanation by referring to the notes
to financial statements (Qbe2018.qreports.com.au 2019). There has been the development of
adequate audit procedures in relation to all accounts and the opinion has been formed
accordingly by obtaining adequate audit evidence.
From the analysis of all the key audit matters of companies selected, it can be
observed that all such matters have been identified with respect to the preparation of the
financial report and for the group as a whole. However no auditors have provided a separate
opinion on all the key audit matters identified but there is a separate presentation of the key
audit matters.
INDEPENDENT AUDITORS REPORT
internal control system (Boq.com.au 2019). In addition to this, the reason why the accounts
are considered to have material impact is explained by referring to the relevant notes to
financial statements.
For the ANZ bank, auditors have made a detailed description of the key audit matters
identified in a separate section. All such matters are addressed in the context of auditing the
financial statements as a whole. Key audit matters include customer remediation provision,
credit impairment provisions and disclosures of impact of AASB 9 financial instruments. In
addition to this, there was also other account that was assessed for materiality such as
accounting for divestments, valuation at fair value relation to financial instruments and IT
control and system. Moreover, there was also a detailed description of how such matters were
addressed in the report. Such method includes adopting the sampling plans, testing the key
controls and analytical procedures that are appropriate to the account (Shareholder.anz.com
2019).
Identification of key audit matters by the auditors of Commonwealth bank relates to
the company and the group as a whole with the exception to the valuation of liabilities of
insurance policy holders that is related only to the group. The comment on the outcome of the
procedures of auditing is made in the context of key audit matter. The key audit matters
identified are provision for loan impairment, judgment involved in the valuation if financial
instruments, regular action and conduct risk provisions and the insurance policyholder
liabilities valuation and financial reporting information in relation to IT control and system
(Commbank.com.au 2019). Furthermore, it has been observed that the assessment of such
accounts is done in reference to the requirements of the applicable accounting standard.
Key audit matters identified by the auditors of Pendal group limited have made
disclosure to the audit committee and the accounts for which materiality have been accounted
such as fee revenue recognition, investment management contracts, intangible assets moving
value and accounting for remuneration scheme of employees. All the key audit matters have
been addressed by adopting the analytical procedures such as testing the mathematical
accuracy and assessing the key estimates, assumptions and judgment made by management
(pendalgroup.com 2019). Some of the recent report concerning the recognition of fees has
also been tested for evaluation.
The auditors of QBE Insurance group have presented in a separate section with such
matters comprising of valuation of goodwill, adequacy probability, IT system and control,
investment valuation, valuation on the net outstanding claims and recoverability of deferred
tax assets. In addition to this, a detailed disclosure is presented by the auditors such as why
the accounts are treated to be material and it provided an explanation by referring to the notes
to financial statements (Qbe2018.qreports.com.au 2019). There has been the development of
adequate audit procedures in relation to all accounts and the opinion has been formed
accordingly by obtaining adequate audit evidence.
From the analysis of all the key audit matters of companies selected, it can be
observed that all such matters have been identified with respect to the preparation of the
financial report and for the group as a whole. However no auditors have provided a separate
opinion on all the key audit matters identified but there is a separate presentation of the key
audit matters.
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Do key audit matters serve the purpose in the industry?
The revised auditing standard was introduced to bring transparency in the financial
information presented by different entities. Auditors has presented and informed about the
key audit matters in accordance with the requirements of the ASA 701 in the independent
auditor report. Identification of such matters would assist the users in gaining an
understanding the nature of entity and any existence of any material account that would have
impact on their investment decision making process. There is an enhancement in the
information transparency as the matters have been communicated and accordingly the
opinion has been made by auditors. Moreover, all the key matters are addressed by
developing the appropriate analytical procedures so that the materiality of the identified
accounts has been addressed.
Conclusion:
The paper addresses the impact of communicating the key audit matters that is
communicated as per the requirements of new auditing standard. The auditors create an
emphasis on such matters based on the professional judgment, by disclosing such accounts
that can have material impact on the process of making decision. It is therefore required by
the auditors to communicate and identify such matters in the auditor report. Furthermore, in
the current study, the importance of going concern issue has been accounted by auditors and
have been ascertained that issue of going concern is regarded as key audit matters and hence
should adequately assessed by auditors by gathering appropriate evidence.
INDEPENDENT AUDITORS REPORT
Do key audit matters serve the purpose in the industry?
The revised auditing standard was introduced to bring transparency in the financial
information presented by different entities. Auditors has presented and informed about the
key audit matters in accordance with the requirements of the ASA 701 in the independent
auditor report. Identification of such matters would assist the users in gaining an
understanding the nature of entity and any existence of any material account that would have
impact on their investment decision making process. There is an enhancement in the
information transparency as the matters have been communicated and accordingly the
opinion has been made by auditors. Moreover, all the key matters are addressed by
developing the appropriate analytical procedures so that the materiality of the identified
accounts has been addressed.
Conclusion:
The paper addresses the impact of communicating the key audit matters that is
communicated as per the requirements of new auditing standard. The auditors create an
emphasis on such matters based on the professional judgment, by disclosing such accounts
that can have material impact on the process of making decision. It is therefore required by
the auditors to communicate and identify such matters in the auditor report. Furthermore, in
the current study, the importance of going concern issue has been accounted by auditors and
have been ascertained that issue of going concern is regarded as key audit matters and hence
should adequately assessed by auditors by gathering appropriate evidence.
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
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Annual-report-2018.pendalgroup.com., 2019. [online] Available at: https://annual-report-
2018.pendalgroup.com/uploads/Pendal_FinancialStatements2018.pdf [Accessed 23 May
2019].
Auasb.gov.au., 2019. [online] Available at:
https://www.auasb.gov.au/admin/file/content102/c3/ASA_701_2015.pdf [Accessed 23 May
2019].
Auasb.gov.au., 2019. [online] Available at:
https://www.auasb.gov.au/admin/file/content102/c3/ASA_570_2015.pdf [Accessed 23 May
2019].
Bédard, J., Coram, P., Espahbodi, R. and Mock, T.J., 2016. Does recent academic research
support changes to audit reporting standards?. Accounting Horizons, 30(2), pp.255-275.
Boq.com.au., 2019. [online] Available at:
https://www.boq.com.au/content/dam/boq/files/shareholder-centre/financial-results/2018/
FY2018_Annual_Report.pdf [Accessed 23 May 2019].
Brasel, K., Doxey, M.M., Grenier, J.H. and Reffett, A., 2016. Risk disclosure preceding
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Brunelli, S., 2018. The Firm’Going Concern in the Contemporary Era. In Audit Reporting for
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Cordoş, G.S., 2015. Implications of the current exposure draft on audit
reporting. Management Intercultural, (33), pp.61-70.
Czerney, K., Schmidt, J.J. and Thompson, A.M., 2019. Do investors respond to explanatory
language included in unqualified audit reports?. Contemporary Accounting Research, 36(1),
pp.198-229.
Dodo, A.A., 2017. Corporate collapse and the role of audit committees: A case study of
Lehman Brothers. World Journal of social sciences, 7(1), pp.19-29.
Dosdall, H. and Rom-Jensen, B.Z., 2017. Letting Lehman Go: Critique, Social Change, and
the Demise of Lehman Brothers. Historical Social Research/Historische Sozialforschung,
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Gaynor, L.M., Kelton, A.S., Mercer, M. and Yohn, T.L., 2016. Understanding the relation
between financial reporting quality and audit quality. Auditing: A Journal of Practice &
Theory, 35(4), pp.1-22.
INDEPENDENT AUDITORS REPORT
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support changes to audit reporting standards?. Accounting Horizons, 30(2), pp.255-275.
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Brasel, K., Doxey, M.M., Grenier, J.H. and Reffett, A., 2016. Risk disclosure preceding
negative outcomes: The effects of reporting critical audit matters on judgments of auditor
liability. The Accounting Review, 91(5), pp.1345-1362.
Brunelli, S., 2018. The Firm’Going Concern in the Contemporary Era. In Audit Reporting for
Going Concern Uncertainty (pp. 1-25). Springer, Cham.
Commbank.com.au., 2019. [online] Available at:
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/results/
fy18/cba-annual-report-2018.pdf [Accessed 23 May 2019].
Cordoş, G.S. and Fülöp, M.T., 2015. Understanding audit reporting changes: introduction of
Key Audit Matters. Accounting & Management Information Systems/Contabilitate si
Informatica de Gestiune, 14(1).
Cordoş, G.S., 2015. Implications of the current exposure draft on audit
reporting. Management Intercultural, (33), pp.61-70.
Czerney, K., Schmidt, J.J. and Thompson, A.M., 2019. Do investors respond to explanatory
language included in unqualified audit reports?. Contemporary Accounting Research, 36(1),
pp.198-229.
Dodo, A.A., 2017. Corporate collapse and the role of audit committees: A case study of
Lehman Brothers. World Journal of social sciences, 7(1), pp.19-29.
Dosdall, H. and Rom-Jensen, B.Z., 2017. Letting Lehman Go: Critique, Social Change, and
the Demise of Lehman Brothers. Historical Social Research/Historische Sozialforschung,
pp.196-217.
Gaynor, L.M., Kelton, A.S., Mercer, M. and Yohn, T.L., 2016. Understanding the relation
between financial reporting quality and audit quality. Auditing: A Journal of Practice &
Theory, 35(4), pp.1-22.
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
George-Silviu, C. and Melinda-Timea, F., 2015. New audit reporting challenges: auditing the
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INDEPENDENT AUDITORS REPORT
George-Silviu, C. and Melinda-Timea, F., 2015. New audit reporting challenges: auditing the
going concern basis of accounting. Procedia Economics and Finance, 32, pp.216-224.
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Zang, H., 2019. Case Study: The Development of Shareholder Activism in Japan since the
Lehman Shock. The Journal of Investing, pp.joi-2019.
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Appendix:
Commonwealth bank of Australia:
INDEPENDENT AUDITORS REPORT
Appendix:
Commonwealth bank of Australia:
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
INDEPENDENT AUDITORS REPORT
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
ANZ bank of Australia:
INDEPENDENT AUDITORS REPORT
ANZ bank of Australia:
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
INDEPENDENT AUDITORS REPORT
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
QBE Insurance group limited:
INDEPENDENT AUDITORS REPORT
QBE Insurance group limited:
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
INDEPENDENT AUDITORS REPORT
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
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Macquarie group limited:
INDEPENDENT AUDITORS REPORT
Macquarie group limited:
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
Pendal group limited:
INDEPENDENT AUDITORS REPORT
Pendal group limited:
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
INDEPENDENT AUDITORS REPORT
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CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
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Bank of Queensland:
INDEPENDENT AUDITORS REPORT
Bank of Queensland:
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
INDEPENDENT AUDITORS REPORT
CRITICALLY ANALYZE AND EVALUATE KEY AUDIT MATTERS IN THE
INDEPENDENT AUDITORS REPORT
INDEPENDENT AUDITORS REPORT
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