(PDF) The Company Audit : HIH Insurance Limited
Added on 2021-02-19
12 Pages2094 Words107 Views
AUDIT ESSAY
EXECUTIVE SUMMARYThe essay summarized the different issues of HIH Insurance Limited company and theirimpact on stakeholders, Auditors and shareholders of the company. During the period of collapsethe have to face policyholder and corporate governance has to face various problems because ofthe misleading of HIH director and senior management. The commission is appointed byAustralian government to identify the reason behind the insufficiency of fund and collapsing ofHIH. HIH royal commission found that the board of HIH was not able to identify the fraud andmisleading of senior management. In royal commission it was found that Alder mislead the data,manipulate the stock market, acting dishonestly and use his power in wrong manner. It has beenidentified that it suffer from the heavy losses but the Auditor are not able to find the problemswhich increases their debt. Firm need to choose specific audit approach in order to ensure thatsufficient step was taken before collapse of company. Auditor focus is on large size transactionsthat happened at workplace during a year. It helps them to manage their accounting statements.The collapse of company make negative impact on the trust and confidence of customer on theinsurance company. It also summarized that the proper auditing of company financial statementshelps to identify the various fraudulent and misconduct activity of management.
Table of ContentsEXECUTIVE SUMMARY.............................................................................................................2INTRODUCTION...........................................................................................................................4MAIN BODY...................................................................................................................................4CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8
INTRODUCTIONAudit is the process of inspecting and examining different accounting statements by theauditor to ensure that the accounting practices and concepts are properly followed and managedby the company. Audit is conducted to ensure that the present data in annual report are accurateand free from error and biases. HIH Insurance Limited is second largest general insurancecompany and largest corporate failure in Australia. The essay highlights the reason behind thecollapse and the key people who are involved in the collapse. It explains the various implicationof collapse on the different entity and stakeholders. It also highlights the importance of auditingto reduce the likelihood of collapse if auditing is taken before to the collapse.MAIN BODYHIH Insurance Limited is second largest general insurance company which providevariety of insurance schemes to their policyholders such as home insurance, vehicle insurance,employee compensation, life insurance etc. (Damiani, Bourne and Foo, 2015). In March 2001HIH collapse its business because off the various reason. They apply in court to place provisionalliquidation in 15 march 2001. The commission is appointed by Australian government to identifythe reason behind the insufficiency of fund and collapsing of HIH. They identify that there arevarious reason behind collapsing such as poor management, conglomerate complexity, underprovisioning, lack of integrity of information, inadequate and inappropriate asset valuation etc. The asset of company is not properly managed and the financial information provided bythem are also mismanaged which increases liability of HIH Insurance. The poor corporategovernance lead to ineffective decisions regarding the business policy and strategies. They arefailed to recognize the accounting responsibilities and abnormalities which increases theirliability. It also results to delay in the payment of policyholders (Othman and e.al., 2015). HIHroyal commission found that the board of HIH was not able to identify the fraud and misleadingof senior management. They had to paid attention on the activities of senior management to dealwith the situation and may be the prior control on management reduce the chances of insolvency.The key people involved in the collapse are CEO, CFO, management team and internalauditor etc. The internal management of HIH was not too strong and because of their self-interestthey mislead the financial data in the final report. The internal auditor are also not able toidentify the accurate position of company and the misleading of data which create the situationof liquidation or insolvency. Key person involve in collapse is Rodney Alder the former director
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