Enhanced Auditor Reporting Embraced in Australia: A Rio Tinto Analysis

This report examines the adoption of enhanced auditor reporting standards in Australia through a case study of Rio Tinto Limited. It provides an overview of audit reporting, including the analysis of financial statements and the role of auditors. The report delves into key aspects such as the auditor's independence declaration, the independent auditor's report, non-audit services, key audit matters, the audit committee's functions, and audit opinions. It also discusses the diversification of responsibilities between auditors and directors, material subsequent events, and the evaluation of assurance services. The analysis includes the examination of auditor remuneration, key audit matters like impairment assessments and provisions, and the audit opinion issued by both PrincewaterhouseCoopers LLP and PrincewaterhouseCoopers. The report also covers the responsibilities of directors in preparing financial statements and the application of International Financial Reporting Standards (IFRS) within the context of Australian auditing regulations. This comprehensive analysis aims to provide insights into how enhanced auditor reporting is implemented and its implications for listed companies in Australia.

How is Enhanced Auditor
Reporting being embraced in
Australia? Background and
Context

EXECUTIVE SUMMARY
This project report is summarises that auditing is a concept which
helps in investigating the accuracy of the financial statements of an
organisation. RIO TINTO limited is an organisation which is listed on
Australian stock exchange is chosen in order to better understand the topic
of auditing. Audit report and opinions provided by its subsidiary and external
auditor Prince waterhouse Coopers are analysed and interpreted in order to
ascertain various issues regarding the process of auditing.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Commentary on Revised auditing reporting standards..........................................................1
Auditor’s Independence Declaration......................................................................................2
Independent auditor’s report...................................................................................................3
Non-Audit services performed by the Auditor.......................................................................3
Key Audit Matters..................................................................................................................4
Audit Committee and its role, functions and composition ....................................................5
Audit opinion..........................................................................................................................5
Diversification between the auditors and Directors responsibilities......................................7
Material subsequent events and elements evaluated by auditors...........................................7
Evaluation of auditor’s assurance services performed for the client company......................8
Follow up questions asked to auditors in AGM.....................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Audit reporting plays vital role in management reporting and decision
making. Auditing standards are reformed and changed time to time to
improve the quality and control of auditing for listed organisations and
entities. This report defines the concept of audit reporting standard that how
these standards are adopted by auditors in Australia (Pittock, Hussey and
McGlennon, 2013). Evaluation of audit report of Rio Tinto Limited that is a
material industry supplies raw material for manufacturing cars, mobiles,
planes, material for building hospitals and houses. There are type of
elements analysed by evaluating the financial reports of company as
Auditor's independence declaration, Key audit matters, non Audit services
performed performed by auditors, Auditor's remuneration, functions and
roles of audit committee, independent auditors reports to the member and
review of all key audit matters with auditing procedures.
MAIN BODY
Commentary on Revised auditing reporting standards
Audit reporting is process contains entire evaluation of main Financial
data, assessment of material errors, auxiliary reports and measures taken
after by entity. The necessity of audit reporting for the most part connected
with improving the extension and expanding the congeniality of Auditors of
company. As indicated by independent declaration under section 307c of
Corporations act 2001, a review or survey must be directed of the Financial
reports for an organization for the financial year or half yearly basis (Oliver,
Vesty and Brooks, 2016). Primary aim of the alterations and changes was to
enhance the qualities and upgrade significance of the Auditor's report
through update under ISA (International standard on Auditing).
A presentation in composed that represents the combined financial
reports are evaluated by individual auditor. Further more, there is no any
contradictions of auditors reports as prerequisites of this demonstration
identified with review or survey and no contradictions of any material code of
1

expert lead in connection to the review or survey (Jones, 2017). Presentation
either should be given when the review report is given to managers ,enlisted
conspire and revealing element, or must fulfill the states of subsection 5(a),
additionally should be marked by the individual making the presentation.
Alterations subject to change the structure of national money related
announcing principles and rules to guarantee the key normal content with
fitting correspondence and reviewing are considered in this setting. The new
examining rules was acquainted subject with help the speculators and
partners. Sufficient changes to decide the correct money related
articulations and the data related with administration considered in
inspecting announcing norms and related accommodating corrections
(Caust, 2015).
Review and analysis of annual report of Rio Tinto limited
Annual report of company is given subejct to analyse the real position
and essential aspect associated with determining the key information
associated to audit reports.
Auditor’s Independence Declaration
An auditor's independence declaration shows the concent and
declaration of auditors that they have audited the reports adequate manner.
Leading auditors subject to audit of Rio Tinto Limited for the year ended
2017, declare that they have been
a) No dispute and conflicts occurs while analysing the independence
requirements as per the corporation act 2001 related to the audit and
b) There was no Dispute and conflicts found regarding implying the code of
professional conduct relation to the audit.
The declaration was made in respect of Rio Tinto and its subsidiary
entities to for better control in a particular financial period. The report was
controlled by the debbie smith and the partner price Waterhouse cooper that
is a liability limited by a scheme approved under professional standard
legislations.
2

Independent auditor’s report
The price-water house coopers LLP giving opinion on the financial statements of the
members of Rio Tinto Plc
 On 31 December 2017 the financial statement define as a true and fair view of Rio's
tinto affairs and the group in the year ended group's profit and cash flows.
 On the behalf of international financial reporting standards prepared group's financial
statement by the European union
 In accordance with united kingdom generally accounting practice prepared Rio Tinto Plc
financial statement
 It is considered that the financial statements are consolidated with effect of relevant
rules and legislation related to European union. There are type of accounting rules and
objectives are evaluated with effect of GAAP and IFRS (Annual report of RIO TINTO
Limted, 2017).
 Financial statement also prepare according to requirements of the companies act 2006
 the audit reporting structure and the international accordance with IFRS and the
reformed rules of 2016/17.
Non-Audit services performed by the Auditor
Role of non- auditing services was also found subject to audit of non
financial services. It is required to analyse the occasionally events and
transactions while considering the knowledge and facts. The efficient use of
auditing reports and evaluation of different type of financial records were
undertaken to simply the information and utile the auditing standards.
Safeguards and legislations were followed by external auditors for managing
the management (Armstrong, Brown and Smith, 2014).
There are type of transactions was made in terms of assessing the
audit program as managing the flow of operations and management. Setting
the criteria of audit for financial and non financial transactions.
3

Auditors’ remuneration
The remuneration policy is quite clear subject to determine the policies
regarding consulted with shareholders and other stakeholders in the UK and
Australia. The board has published that 80% of vote was in favour with effect
of investors and fluctuations in acceptable outcomes. As per the auditing
fees report it is considered that $14.3 million dollars were paid in terms of
audit fees. Non auditing fees was categorised in three sections as assurance
services of $3.3 million, taxation services by 0.5 million and all other fees
was calculated as 0.7 million. In total the non auditing fees was paid 4.5
million. Which was the approximate of 31% of total fees.
There are some facts clarified regarding the assurance services that in
2017 divestment and preliminary work was supported with normal annual
fees that was associated with other corporate projects. Sustainability
assurance and the review of projects also considered with the reports.
Key Audit Matters
 Impairment/reversal of impairment assessment: Goodwill of this Group
is US$1,037 million. Auditors tested for impairment of Cash Generation
Units (CGU) and also determined recoverable amount. Some CGUs
assessed were Oyu Tolgoi, Argyle, Grasberg, Uranium assets. Auditor
assessed whether impairment model is prepared according to
impairment methodology, performed sensitivity analysis (Mills, 2012).
 Provisions for close-down, restoration and environmental obligations:
Provision of US$9,983 million for close-down, restoration and
4

environmental obligations has been maintained by the Group. Auditors
tested objectivity of cos estimates, checked mathematical accuracy,
consistency of provisions relating to close-down, restoration and
environmental obligations.
 Provisions for uncertain tax positions: The Group has current and non-
current taxes payable of about US$2,248 million.
Review all Key Audit Matters noted and the associated audit
procedures
There are two separate opinions of auditors for the company. Prince
waterhouse Coopers LLP give opinion on the financial statements of Rio Tinto
plc and PrincewaterhouseCoopers to the members of Rio Tinto Limited.
Group financial statements are prepared for Rio Tinto plc and Rio Tinto
Limited as parent companies and their subsidiaries (Tepalagul and Lin,
2015).
Audit Committee and its role, functions and composition
Audit committee of Rio Tinto Limited contains the criteria of evaluation,
control and management of audit program. This committee keep changes as
on specific financial period (Whitaker, 2013). The committee contain the
board members, internal and external auditors and subsidiary group
partners. There are five main members are the part of audit committee of
company as Ann Godbehere (Chairman), Paul Tellier, Simon Henry, Simon
Thompson, John Varley and Robert Brown.
Key functions of Audit Committee
The committee mainly assist managers to assess the main objective of
organisation to correlate the functions. The key responsibilities contains;
 Integrity policy of financial reporting process and providing
recommendations regarding financial statements and reports.
 Management of risk and fractionate the activities of the audit report.
 Internal control and financial reports consolidation for internal audit
program
5

 Managing the flow of information among internal and external
auditors.
 Granting access to internal and external auditors to access audit
records.
Audit opinion
Separate opinion
The group applying IFRS adopted as the European union and issued by the IASB
(Fiolleau and et. al ., 2013). The separate opinion contains the financial statements of
determining the policies and plans with applied rules and legislation under IASB. The other
ethical responsibilities subject to separate opinion measured as APES 110.
Opinion on the financial report
it is considered that the financial reports mainly assisted to advise rules and policies
according to Corporation Act 2001 (Knechel and Salterio, 2016). the corporations act
2001 has accompanying the financial report define below:
 As per the annual report the opinion reading financial statements presents fair and clear
view of the group of financial position as on 31st December 2017.
 The rules are complied in respect of understanding the Australian Standards and as per
the corporation regulation act 2001.
Basis of opinion
Australian auditing rules and standards on auditing, ISA and IASB rules
are determined in respect of standards are further described with audit
responsibilities. Auditor's responsibilities for the audit financial statements
are compressed with audit evidence and explanatory reports. The subsidiary
documents and evidences are also considered to explain the financial
records (Yates and et. al., 2016).
Opinion of PrincewaterhouseCoopers LLP to Rio Tinto plc:
Financial statements are prepared in accordance with IFRS
(International Financial Reporting Standards) by European Union and also
applied IFRSs issued by IASB(International Accounting Standards Boards),
6

United Kingdom Generally Accepted Accounting Principles, Companies Act
2006 , also they give a true and fair view of financial position.
Opinion of Prince waterhouse Coopers to Rio Tinto Limited:
Financial Reports are made according to Corporations Act 2001 and
also showing true and fair view of financial position for the year ended 31
December 2017 following Australian Accounting Standards and Corporations
Regulations 2001.
They audited Director's Remuneration Report, Group cash flow statements,
changes in equity, significant accounting policies.
Independence:
Both Prince Waterhouse Coopers LLP and Prince waterhouse Coopers,
as independent auditors fulfilled their ethical responsibilities in accordance
with FRC's Ethical Standard. And they did not provided non-audit services to
the Group.
Audit approach:
Group of Rio Tinto plc engaged in production activities of minerals and
metal exploration. Materiality of overall Group is US$350 million (2016:
US$275 million) and of Rio Tinto plc is US$ 325 million (2016: US$250
million). There are 49 business units of this Group and done special audit of
Pilbara business unit due to its financial significance. Key audit matters are
those which are most important in financial statements and financial
reports. Audit report is mainly focussed on assessing risks of material
misstatements.
Diversification between the auditors and Directors responsibilities
Responsibilities of Director
 They are responsible for preparing financial statements and reports on
the basis of financial statements frameworks.
 It is essential for director to possess internal control while preparing
financial statements and reports.
7

 They ensure that all the information presented in financial statements
and reports required to be fraud free.
 It is the responsibility of director to assess the parent company ability
to continue as going concern.
Auditors responsibilities
 They have the responsibility to provide assurance that financial
statements are free from material misstatements
 They have the responsibility to provide true and fair opinion through
which decisions are taken by investors
Material subsequent events and elements evaluated by auditors
There are type of factors and elements were audited while preparing the financial
statements of organization. It is audited that the reports of subsidiary and group of Rio Tinto
Limited are disclosed with proper procedure and aspects. The financial reports are prepared for
the year 2017. group of financial statements, comprehensive income statements,c ash floes and
the group segments are considered to elaborate the financial reports of group.
 On 31 DEC 2017 financial report for the year ended including that the directors report
and directors remuneration.
 The group financial statement including description of the significant accounting policies
and other information.
 Rio Tinto plc financial statement include explanatory information and
significant accounting policies description.
Evaluation of auditor’s assurance services performed for the client company
It is analysed that type of figures are considered to assess the internal
program and assurance engagements for revising the financial information.
The internal standard on Assurance engagement 3401 contains the
statements as the complying the independence for ethical requirements for
plans performance and effectively (Ryan and et. al., 2012). Process and
control are considered the capturing the collating and summarised the
performance of reports to the design. Mattes and evaluating the design the
process and control.
8

Accuracy subject to analyse the injury regarding the accuracy of
classification applied for a samples. Athematic accuracy and sample of
multiple computations were performed with the Green House gas and
emission subject to intensity. Undertaking related to analytical procedures
with performance of data. There are type of commitment to include the
diversities for determining the background and reflect the procedures related
to policies and the availability of resources (Prempeh, Twumas and
Kyeremeh, 2015).
Follow up questions asked to auditors in AGM
Q1 how much share of profits will be proposed for auditors and
directors remuneration?
Q2 Did organisation comply the Australian Auditing standards and
corporate rules 2001 ?
Q3 whether any modified opinion was produced by non auditing
services?
Q4 whether the management committee and department provide
adequate support to auditors?
CONCLUSION
From the above project report, it has been concluded that in order to
enhanced auditor reporting there are various key application are needed
to be taken into account. for this purpose, various auditor independence
declaration as well as report is used in context to the “Rio Tinto Ltd”
is examine effectively. Certain non-audit services are performed through
the auditor point of view are analysed properly. Some other information
such as audit remuneration, role, function and overall composition of
audit committee is also being evaluated clearly provided in this report.
Various key audit matters and its related procedure are used in
accordance with the company to take future decision more profitable in
near future time.
9