Enhancing Financial Report Quality

This assignment examines the financial statements of Myer Holding Limited, analyzing the role of the auditor in enhancing their quality. It discusses key aspects like auditor independence, financial reporting standards compliance, material disclosure practices, and the impact of subsequent events. The analysis considers factors influencing auditor remuneration and utilizes relevant regulatory guidelines and best practices to assess the overall effectiveness of the audit process.

How is Enhanced Auditor
Reporting being embraced in
Australia?

EXECUTIVE SUMMARY
Auditing always helps in ensuring about procedures and policies which are to be
followed and non compliance is directly reported to management for corrective action. The
present report had analysed auditor section of Myre Holding Limited. It is considered that final
information is always considered in annual financial statement which elaborates responsibility of
management for purpose of accurate representation and preparation of financial statements. Last
but not least, key judgements and estimates must be articulated as effective disclosure.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Auditor compilation with independence requirements...............................................................1
Non Audit Services.....................................................................................................................1
Analysis of Auditor's remuneration............................................................................................2
Represent key audit matter along with audit procedure .............................................................3
Represent audit committee with its role of non-executive directors...........................................5
Audit Opinion..............................................................................................................................5
Difference between responsibility of auditor, management and director ..................................6
Presence of material subsequent events......................................................................................7
Assessment of effectiveness of material information.................................................................7
Disclosure of material information which are effective for financial statements.......................8
Follow-up questions for Auditor at the company’s Annual General Meeting............................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Auditing plays major role in every organization along with each industry. It helps in
improving communication among investors and auditors. The present report would be discussing
about standard set in many jurisdictions which includes New Zealand and Australia along with
issuance of requirements with similar effective date. It will be reflecting Myer holding Limited
annual report which is listed on ASX for analysing major areas of auditing. It would be reflecting
auditor compliance with independent requirements along with presence of non-audit services. It
will also reflect key audit matter and procedure with appropriate classification of its test of
control. In this organization, there is presence of audit, finance and risk committee. The
remuneration of auditor has raised in year 2016 but in 2017 it decreased with huge proportion.
MAIN BODY
Auditor compilation with independence requirements
Myer Holding Limited has conducted audit with context of Australian Auditing
standards. They are independent of its group according to auditor's independence requirements of
its corporation Act 2001. In the same series, its ethical requirements linked to accounting
professional and ethical Standards Board's APES 110 Code of ethics which are relevant to its
audit of financial report with reference to Australia. Further they have complied their ethical
responsibilities in context of code (Chan and Vasarhelyi, 2018).
Non Audit Services
Myer Holdings Limited might decide for employing its external auditor with context of
additional assignments along with statutory audit duties where is presence of expertise and
experience of auditor with group is significant. There is presentation about amount payable or
paid to its auditor for purpose of audit and non-audit services had been stated in financial
statements. Generally, board has considered its position with context of advice extracted via
Audit, finance and Risk Committee. The provision of non-audit services is directly compatible
along with general standards which were imposed through Corporations Act 2001. The nature of
non-audit services had been provided with satisfaction of directors which did not compromise on
basis of independence requirements of Corporation Act 2001 with review of non-audit services
via Audit, Finance and Risk Committee for ensuring about giving less impact on objectivity and
impartiality of auditor (Understanding a financial statement audit, 2017). Services does not
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undermine its general principles related to auditor independence on basis of APES 110 Code of
Ethics for different professional Accountants.
Analysis of Auditor's remuneration
2015 2016 2017
% change
2016 % change 2017
(a) PwC
Australia
Total
remuneration
for audit and
other assurance
services 443350 642600 420850 44.94% -34.51%
Total
remuneration
of PwC
Australia 490250 644600 431976 31.48% -32.99%
(b) Overseas
practices of
PwC
Total
remuneration
for overseas
practices of
PwC 81675 119931 93649 46.84% -21.91%
From the above table, it could be observed that remuneration of auditor has various
differences. From year 2015 to 2016 it increased by 44.94% which is huge variation. From year
2016 to 2017, it got decreased by 34.51% due to low charges of reviewing and auditing financial
statements. The main reason for changes in auditor’s is due to audit and review services of
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financial statements. The trend of past three consecutive year had been observed above. In year
2017, remuneration to auditors was reduced by huge proportion (Annual report of Myre Holding
Limited, 2015).
Represent key audit matter along with audit procedure
Impairment of tangible assets:
Audit matter
The magnitude balance of intangible assets and value applicable for calculation aspect
with requirement of significant judgement via group for estimation of future trading cash flow
was considered as major matter for audit.
Audit procedure
 Testing over mathematical accuracy of basic impairment model had been
performed.
 Discount rate had been compared from long term growth rate which is applied on
impairments of assessment for every CGU of its benchmark data.
 Forecast of annual growth rate is compared to projected cash flow.
 Consideration of projection of financial data like cost of sale, salaries, sales and
occupancy cost which is considered in impairment models.
 Sensitivity analysis has been performed over key assumption.
 Allocation of impairment charge to bid assets and SASS had been considered.
 It would be classified in substantive analytical procedure due to consideration of
every financial data along with mathematical accuracy in above audit matter
(Substantive Analaytical procedures, 2018).
Accounting estimate and disclosure related to implementation of new Myer strategy
Audit matter
There are various assumptions and judgements which were applied through group for
estimating provisioning level required to be recognized as on 29 July 2017.
Audit Procedure
 It would consider assumptions and judgements which are applied for identifying
recognition of provision on basis of committed status and approval of strategic action
plans.
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 Assumption and judgement were compared for calculating new provision of Myer
holdings for: board minutes, historic data, landlord agreements and other supporting
evidence of audit.
 It had undertaken in substantive analytical procedure as it has presence of consideration
of assumptions and judgements for each provision.
Inventory valuation and provision
Audit matter
In this matter, group has applied various judgements and assumption for projecting sell
via inventory rates in hand at ending for estimating inventory valuation which could be sold
under its actual cost in the future. The estimate of inventory shrinkage is directly based on actual
loss which is realised as outcome of inventory counts cycle.
Audit Procedure
 It has effective and designed operation of useful key inventory control.
 It had attended numerous inventory counts at a retail stores and distribution centre.
 The group's inventory provisioning policy has been assessed.
 Historical accuracy has been considered by providing comparison from its provision of
inventory to sold inventory.
 It would be classified in substantive testing which examines financial statements and it
supports documentation. There is requirement of evidence for supporting assertion about
whole financial records of business entity in valid, complete and accurate aspect.
Inventory valuation is major part in this classification (Fitzgerald, Omer and Thompson,
2018).
Supplier rebates
Audit matters
It was referred as key audit matter due to supplier arrangement which is complex in
nature and variable among suppliers. There is requirement of judgement for identifying amount
of rebate of supplier which is recognised in profit and loss statement and amount is deferred to
inventory. There is huge requirement of detail understanding on its contractual arrangements
with appropriate sell and purchase via information.
Audit procedure
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 It would agree on sample of rebate of suppliers which is traced on relevant
agreement of supplier
 Comparison of sample of rebate terms which is applicable for its calculations in
relevant arrangements of supplier and purchase of group's inventory volume data.
 Specific range of group's buyers are interviewed for developing an understanding
about awareness of buying policies of organization. In the same series, nature of
rebate which is It would be classified as test of control, because auditor had taken
sample on its capital expenditure and nature of rebate had been inspected.
Represent audit committee with its role of non-executive directors
Myer Holdings limited have Audit, Finance and Risk committee which consists of
various non-executive directors.
 Joanne Stephenson (Independent Non-executive director): Experience of more than
25 years and strength in accounting, finance, governance and risk management. She is a
member of Australian Institute of Company Directors and Chartered Accountants in New
Zealand and Australia.
 Anne Brennan (Independent Non-Executive director): Chairman of Audit, Finance
and Risk Committee. Her major role is to bring strong financial credentials and provides
quickness and keenness for dealing and understanding business situations. It comprises
senior management role in professional services and large corporate organizations. In the
same series, she has executive role at CSR as Chief Financial Officer.
 Bob Thorn (Independent Non-Executive director): His major role is to bring business
as he has experience of senior retail management as Managing Director.
 Dave Whittle (Independent Non-Executive director): His major role is to provide
innovative data, advice and software for helping business entities for engaging and
understanding its customers.
Audit Opinion
Myer Holding's opinion was to accompanying its financial report along with controlled
business entities in context of Corporations Act 2001. It provides fair and true aspect of financial
position of group and its performance for year end. It is directly complied with Australian
Accounting Standards and Corporations Regulations 2001. They have audited its consolidated
financial statements along with its notes and director's declaration.
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audit was conducted with context of Australian Auditing Standards. Their main
responsibility under these standards is to provide description about Auditor's responsibility for
audit of financial report. The main objective is to extract reasonable assurance from its material
misstatement, it might be because of error or fraud. The report of remuneration of Myer holdings
limited via PwC is complied with Section 300A of Corporation Act 2001.
Difference between responsibility of auditor, management and director
The final information is always considered in annual financial statement which elaborates
responsibility of management for purpose of accurate representation and preparation of financial
statements. Generally, this statement marks particular division of its responsibilities which are
directly involved through financial statement's publication. For the purpose of forming financial
statements, management is highly responsible along with estimation of useful life of plant,
equipment and property which is applicable for extracting depreciation (Financial and
accounting duties and responsibilities of directors, 2018).
On the contrary, independent auditor has responsibility for examining its information of
financial statement which is formed via management. It also comprises reasonableness of
estimates and provides opinion on accuracy aspect. Auditors might assist management in
preparing financial statements. For example, auditor could give guidance on following
accounting standards which would impact presentation of financial statements and disclosure of
information. However, preparing financial statement is responsibility of management.
Usually, management is responsible for objectivity and integrity of financial statements.
The estimates are essential requirement for preparing statements on basis of careful observation
which are appropriately affected. Management has framed system of internal control for
providing reasonable assurance through which assets are protected from unauthorised use and
loss. In the same series, it generates reliable records of accounting for purpose of preparing
financial information.
The directors are responsible for ensuring about fulfilling its major responsibility for
internal control and financial reporting. The board's audit committee consists of solely directors
but not company's employees as they are appointed through board of directors on annual basis.
There is regular meeting of board's audit committee, financial management of organization and
shareholder's independent auditor for discussing on its audit matters, internal control, auditor
remuneration, audit scope and issues of financial reporting. The auditor of independent
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shareholder has unrestricted access on its Board audit committee. This annual financial
statements and reporting are reviewed through audit committee and recommendations are framed
with context of acceptance. Recommendations are also given to board by committee for
remuneration and appointment of auditor of organization (D'Onza and Sarens, 2018).
Furthermore, management recognizes its major duty for conducting affairs of
organization in compliance with framed financial standards and applicable laws. In the same
series, proper standards are maintained to conduct its activities.
Presence of material subsequent events
There is presence of subsequent events which had incurred after specific reporting period
as dividends on the organization's ordinary shares. In this context, directors have identified
payment of final dividend of 2 cents per share, fully franked at 30% corporate income tax rate
which is payable for period ending on 29 July 2017.
These subsequent events are adjusted in statements of financial position in equity as
dividends. Its aggregate amount of dividend proposed which is expected payment after period
ending but not considered as liability.
The above material subsequent event would represent franking accounts balance at its
reporting date. The franking credit would raise from payment of provision for income tax of
specific amount and its debit would have arisen via payment of dividends which is considered as
liability and credits by receipt of dividends as receivables of report.
The franking account would impact on dividend which is recommended through directors
at end of reporting period but it would not be considered as liability on reporting data. It would
be directly reduced by franking account.
Assessment of effectiveness of material information
There would be application of component materiality for audit and review of its financial
information. The information could be termed as material when its omission or misstatement
might influence user's economic decision which are taken with context of financial statements. It
directly depends on nature and size of item or identified mistake in specific circumstances of its
misstatements and omission (Annual report of Myre Holding Limited, 2017).
Overall group's materiality was of $4.9 million, which is approx. 5% of profit before tax
which is adjusted for separate material item disclosed as store exit costs, impairment of assets,
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onerous lease expense and restructuring. In the same series, threshold has been applied along
with qualitative consideration for identifying scope and nature of audit. The timing and extent of
procedure of audit has been determined for evaluating impact of misstatements on whole
financial report. Its profit before tax had been selected and there is disclosure of individual
material items due to performance of group referred as very common measure through its users.
Individual material items are adjusted as these incur on infrequent or unusual aspect
which impacts loss and profit. In the same series, 5% on basis of noting of professional
judgement in specific range of profit which is commonly acceptable associated to materiality
thresholds.
Disclosure of material information which are effective for financial statements
It must disclose about key management personnel compensation along with transactions
of related party. In the same series, there was uncertainty with context to going concern. It must
state significant accounting policies which are relevant and specific to organization. Along with
materiality of transaction or balance which is impacted through policy factors consist on
company's operation with consideration of its nature. Method of applying policies must be
specific and clear. Last but not least, key judgements and estimates must be articulated as
effective disclosure (Mock, Ragothaman and Srivastava, 2018).
Follow-up questions for Auditor at the company’s Annual General Meeting
 What are the disagreements among management and external auditors? How it is
resolved?
 The organizations internal control has been monitored through audit committee or not? Is
there any discussion about restructuring or downsizing external control?
 Does audit committee obtain similar comments on internal control by its auditor and
management as well?
 Is there any extraction of issues via external auditors which are essential for enhancing
procedure of fraud?
CONCLUSION
From the above study, it has been concluded that communication among investor and
auditor is improved through auditing. It is shown that assurance has been provided which is
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presented by management is true and fair aspect. In the same series, it enhances degree of
confidence in its financial statements which consist of qualified external party. Further it has
been articulated that there must be appropriate disclosure of material information which is
effective for Myer Holding limited. In the same series, it had also shown percentage change in
remuneration of auditor as it is decreasing from year 2016 to 2017. This organization has
presence of subsequent material events which are treated in efficient aspect. It could be summed
by stating that auditor plays very important role for enhancing financial report.
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REFERENCES
Books and Journals
Chan, D. Y. and Vasarhelyi, M. A., 2018. Innovation and practice of continuous auditing.
In Continuous Auditing: Theory and Application (pp. 271-283). Emerald Publishing
Limited.
D'Onza, G. and Sarens, G., 2018. Factors that enhance the quality of the relationships between
internal auditors and auditees: Evidence from Italian companies. International Journal of
Auditing. 22(1). pp.1-12.
Fitzgerald, B. C., Omer, T. C. and Thompson, A. M., 2018. Audit Partner Tenure and Internal
Control Reporting Quality: US Evidence from the Not‐For‐Profit Sector. Contemporary
Accounting Research. 35(1). pp.334-364.
Mock, T. J., Ragothaman, S. C. and Srivastava, R. P., 2018. Using Evidential Reasoning
Technology to Enhance the Audit Quality Assurance Inspection Process. Journal of
Emerging Technologies in Accounting. 15(1). pp.29-43.
ONLINE
Annual report of Myre Holding Limited. 2015. [Online]. Available
through:<http://www.annualreports.com/HostedData/AnnualReportArchive/M/
ASX_MYR_2015.pdf>.
Annual report of Myre Holding Limited. 2017. [Online]. Available
through:<http://www.annualreports.com/HostedData/AnnualReportArchive/M/
ASX_MYR_2017.pdf>.
Financial and accounting duties and responsibilities of directors. 2018. [Online]. Available
through:<https://www.icaew.com/membership/regulations-standards-and-guidance/
membership/financial-and-accounting-duties-of-directors#ICAEW112>.
Substantive Analytical procedures. 2018. [Online]. Available
through:<https://pcaobus.org/Standards/Auditing/Pages/AU329.aspx>.
Understanding a financial statement audit. 2017. [Online]. Available
through:<https://www.pwc.com/im/en/services/Assurance/pwc-understanding-financial-
statement-audit.pdf>.
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