Key Audit Matters in Independent Auditor’s Report

Key audit matters in independent auditor’s report

Running Head: Report
Contents
Introduction.................................................................................................................................................2
About ASA 701...........................................................................................................................................2
Mining Industry...........................................................................................................................................5
Key audit matters for BHP Billiton.........................................................................................................5
Key audit matters for CSR Limited.........................................................................................................7
Analysis of new standards: ASA 701..........................................................................................................8
Recommendations.....................................................................................................................................10
Conclusion.................................................................................................................................................10
References.................................................................................................................................................12
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Running Head: Report
Introduction
This report is based on the critical analysis and evaluation key audit matters in the auditor’s
matter. This research will highlight the new auditing standard ASA701 and its compliance in the
context of the mining industry. The mining industry has been selected for this research and many
industries such as BHP Billiton, CSR limited and Alumina limited is taken as examples in ASX
100 listed companies. The main purpose of this research is to evaluate the efficiency of the
auditing reports and key audit matters in the independent auditor’s report (Commonwealth of
Australia, 2017).
About ASA 701
The development and implementation of the auditing standard ASA-701 came into existence
after the economic slowdown in the year 2008 and collapse of Lehman Brothers. According to
this new standard, it is mandatory for all the independent auditors of organization to talk about
the effective matters of concern to improve the quality of the audit information and enhancing
the transparency while preparing the financial statements and conducting the audit. Lehman
Brotherswere established in the year 1850 and it was a global financial service company.
Lehman brothers faced the largest bankruptcy in the history of the country because of the
economic slowdown and prices in the year 2007 and the company collapsed which results in the
unqualified audit. Young and Ernst were the independent auditors of Lehman and it is analyzed
that they were aware of the Repo policies and transactions but they did not communicate about
these transactions and the ongoing relations of the company with Hudson Castle because it helps
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Running Head: Report
in displaying these transactions as the sales of the company (E&Y, 2018). This raised the
questions for the organization in relation to the responsibility of the auditors in the
communication of the material facts. It is very essential for the preparation of material
misstatement and error free financial statement of the organization.
The collapse of Lehman Brothers and its bankruptcy situation give rise for the adoption of the
latest auditing standards ASA-701 which focuses on communication about the key matters of
auditing. This latest rule of auditing is the substitution of ASA 570 according to which,
information regarding any material uncertainty needs to be included in the reports for the going
concern basis of the organization. The auditors are assigned various jobs and tasks that result in
improving the overall efficiency of the organization. According to the Australian accounting
standards board committee (AUASB), the key audit matters are those areas that require attention
of the auditors as per their personal judgment and analysis and of great significance in the
financial reporting. The key audit matters are selected from the governance framework managed
by the organization. The adoption of the new standard is useful as it assists the organizations and
its important members of the top management to focus more on key matters and discussion of
those matters among the organizational member to maintain the consistency of the annual reports
(KPMG team, 2019).
The ASA 701 Standard of accounting states the commitment of the company and it shows the
recent developments and changes made by the IAASB (International auditing and assurance
standards board) in relation to the auditing reports. The standard ASA 701 involves the following
features:
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