Impact of Royal Commission hearing on audit plan and major audit risk areas for AMP

This article evaluates the impact of Royal Commission hearing on the audit plan and identifies two major audit risk areas for AMP. The first risk area is the assertion level of material values, and the second risk area is the evaluation of sales value due to its operation in diverse areas. The article also explains the potential impact of audit risk on the company’s financial statements and details the auditing procedures to verify the account balances impacted by the risk.

ASA 315
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Table of Contents
Introduction................................................................................................................................2
1. Evaluate how revelations during the Royal Commission hearing would affect your audit
plan.............................................................................................................................................2
2. Identify two major audit risk areas for AMP, and explain why you have identified these
accounts as being significant. Discuss the potential impact of the audit risk on the company’s
financial statements; and detail the auditing procedures to verify the account balances
impacted by the risk...................................................................................................................3
References..................................................................................................................................5
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Introduction
In recent changes of accounting standard there are numerous objectives that must be
evaluated or amended by the organisation AMP Limited. With every changes in how auditing
principles must work, auditor of every organisation ensure that their ways are in accordance
to those changed policy always.
1. Evaluate how revelations during the Royal Commission hearing would
affect your audit plan.
The new change in the accounting standard that is ASA 315 clearly states that it will be
helping in identifying and assessing the risk of material misstatement keeping in mind the
nature of the entity and the environment the business is operating. Now before considering
how the new auditing policy will impact the way the auditor the organisation the application
of it must be evaluated to understand whether the organisation will be at all impacted by its
aspect.
The auditing standards apply to an organisation which course by the Corporation Act 2001
and the financial report or the audit financial report is prepared half yearly. With this standard
the organisation selected is applicable and its operation will get impacted (Auasb.gov.au,
2018).
Now for the second objective, the organisation must have an audit of a financial report or a
complete set of financial statement. Keeping in mind this standard the organisation selected
qualified to get impacted by the change in the auditing standard as per ASA 315
(Auasb.gov.au, 2018)
To understand the potential impact that will be inducted over the financial statement being
provided by the auditor we need to understand the objective that the new amendment of ASA
315 has.
The objective that the auditing standard infers is that the auditor will be entitled to identify
and evaluate asset every week of financial statement in material understanding. The risk that
the auditor will be identifying can be from any cause including error or fraud. The objective
also specifies that the auditor must have knowledge regarding the challenges that could be
brought forward by environment or the internal control of the organisation which in turn may
impact the rising cause of risk in material misstatement.
Now the present auditing plan does not considered the natural ways that is faced by the
organisation within its financial period of time. To evaluate and we considered the problem
or the issues that the natural calamities our environment provide in the organisation the plan
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of auditing needs to be amended in accordance to that. To plan the process of auditing auditor
must have every aspect of the new standard of auditing. To incorporate the new changes
provided in ASA 315, the comparison of the previous way and the new way will be essential
creating a long time consuming process of work for the auditors of AMP Limited. According
to the new standard of auditing of identifying assessing the risk of material misstatement the
auditor needs to evaluate every internal control means and processes that are designed from
past operation. The risk assessment procedure also gets infected and the auditor has to
understand every aspect of environment including the risk of materialistic factors that are
vulnerable to fraud and other error.
The contents of internal control needs to be evaluated by the auditor in more advanced and
Critical way that would help in understanding the business risk that significantly affect in the
entity or Ability to understand and achieve the objective of an organisation (Auasb.gov.au,
2018).
2. Identify two major audit risk areas for AMP, and explain why you have
identified these accounts as being significant. Discuss the potential impact
of the audit risk on the company’s financial statements; and detail the
auditing procedures to verify the account balances impacted by the risk
In consideration of the organisation chosen, the AMP limited, Avail to be knowledgeable in
consideration of understanding the new changes in the auditing standards. The
acknowledgement that the organisation has provided in accordance to the changes with the
implementation of ASA 315, has clearly justified or greater chance of minimising the risk
that are generally faced by the organisation (Contessotto and Moroney, 2014).
However, as risk is eminent and will occur even if there is enough planning done, AMP
limited will surely face risk during its operation. By considering the recent aspects that the
organisation has considered for fulfilling their requirement in success one of the prime area of
risk that may hamper the general business run in the financial period is the area of stating the
values of materials in assertion level (Chang, 2017). The material value when stated wrongly
creates to be a situation where issue becomes risk in operating the business by a smooth note.
Mistake mint of the material value would lead to a situation where the auditor may not
understand the originality of the financial statement by the values of the materials is provided
(Abdallah, 2018). If there is improper understanding of the values being provided to the
materials then under the subjection of ASA 315, the whole act of auditing may be considered
as fraud or a illegitimate course of action.
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Another auditing risk that may be faced by the organisation selected above is the Evaluation
of the cells value due to its operation in diversifies area. The improper valuation which will
lead to understatement or overstatement of sales value may be due to the differences in the
currency value undertaken by the organisation during their sales (tot Babberich et al. 2018).
Differences in the currency value being provided in the statement of cells may not coincide
with that of the actual values being provided in the financial statement leading to a situation
where the values which is actually to be provided maybe in a position of understatement or
overrated. Search values will create authentic problems that may lead to Wars improper
judgement of financial statement that the organisation is operating in and may lead common
people towards unwanted misconception (Sanderson, 2014)
For both these is considered the values must be authenticated by evaluating all other cross
connected figures including trial balance, financial statement, income statement, sales value
and cash receipts of the organisation
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References
Abdallah, S., 2018. External auditor type, discretionary accruals and investors’ reactions.
Journal of Accounting in Emerging Economies, 8(3), pp.352-368.
Auasb.gov.au, (2018) AUDITING STANDARD 315 Accessed from
https://www.auasb.gov.au/admin/file/content102/c3/ASA_315_Compiled_2015.pdf
[Accessed on 14 September 2018]
Chang, K.H.V., 2017. Internal audit quality and its association with financial distress: An
Australian context (Doctoral dissertation, Curtin University).
Contessotto, C. and Moroney, R., 2014. The association between audit committee
effectiveness and audit risk. Accounting & Finance, 54(2), pp.393-418.
Sanderson, J., 2014. Audit issues. SMSF Guide: Current Issues and Strategies for the Self-
Managed Superannuation Funds Adviser, p.377.
tot Babberich, M.P.D.N., Detering, R., Dekker, J.W.T., Elferink, M.A., Tollenaar, R.A.,
Wouters, M.W., Tanis, P.J., Beets-Tan, R.G.H., Bemelman, W.A., Boerma, D. and Coenen,
P.P., 2018. Achievements in colorectal cancer care during 8 years of auditing in The
Netherlands. European Journal of Surgical Oncology, 44(9), pp.1361-1370.
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