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Auditing and Assurance: Analysis of Key Audit Matters in Australian Banking Companies

This is a core subject for the Master of Accounting and Master of Professional Accounting courses at King's Own Institute. The subject focuses on auditing and assurance in the field of accounting.

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Added on  2023-04-04

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This report analyzes the key audit matters in Australian banking companies according to ASA 701. It examines the compliance with accounting standards and the transparency of financial reports.

Auditing and Assurance: Analysis of Key Audit Matters in Australian Banking Companies

This is a core subject for the Master of Accounting and Master of Professional Accounting courses at King's Own Institute. The subject focuses on auditing and assurance in the field of accounting.

   Added on 2023-04-04

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Auditing and Assurance: Analysis of Key Audit Matters in Australian Banking Companies_1
Contents
Introduction............................................................................................................................................2
Collapse of Lehman Brothers................................................................................................................2
Analysis and evaluation.........................................................................................................................3
Westpac Banking Corporation...........................................................................................................3
National Australian Bank..................................................................................................................4
Commonwealth bank of Australia.....................................................................................................6
Bank of Queensland limited..............................................................................................................8
Recommendation...................................................................................................................................9
Conclusion...........................................................................................................................................10
References............................................................................................................................................12
Auditing and Assurance: Analysis of Key Audit Matters in Australian Banking Companies_2
Introduction
This report will scrutinize certain KAMs (key audit matters) according to the newly laid down
ASA 701 communicating key audit matters, which will communicate transparency with the help
of independent report of auditors. In an succinct way, the aim of this report to identify whether
audit matters are relevant and applied to the ASX registered banking companies of Australia.
This standard has been released to determine that to what extend the companies have complied
with the ASA 701 (Omer, Shelley, and Tice, 2018). The need for this standard was felt after the
collapse of Lehman Brothers and global crisis. This report will explore the accomplishment of
ASA 701 by the banking companies such as Commonwealth bank of Australia, Westpac, ANZ,
Bank of Queensland limited, and National Australian bank. Further, it will examine importance
of materiality concept and analyze whether the auditors ensures the financial reports as
transparent. It is important to build confidence among the external stakeholders so that they can
think of investment by ensuring that auditors have passed their report after monitoring financial
reports in the light of accounting standards.
Collapse of Lehman Brothers
This disruptive collapse of Lehman Brothers was because of non-compliance of material
auditing and lack of transparency of audit matters. This has led to the development of strict
Australian Accounting standard (AAS) so that auditors can ensure that the organization have
complied to other accounting standards on the accounts and the reporting of the transactions.
The event of misrepresenting the data has led to the act of liquation and events of bankruptcy
that also has led to inclusion of great depression (Cordoş, and Fülöp, 2015). While complying
Auditing and Assurance: Analysis of Key Audit Matters in Australian Banking Companies_3
with the ASA 701, it is quite visible that the company should establish certain rules so that they
can directly communicate the key audit matters according to AASB in order to monitor high-
risk areas such as financial assets and hedging items of the statements. In case of Lehman
Brother, it is seen that there are many loopholes between the management and the customers
that does not lead to any transparency. In this regard, misconduct, inadequate, and internal
auditing has been addressed (Cohen, Krishnamoorthy, Peytcheva, and Wright, 2013). Lack of
application of transparency and non- compliance of few regulations led to Lehman Brothers
scandal. The company has allowed loans to the UUS people and during the financial crisis of
2008, it is seen that low capital market and low market rates, people could not get same level of
return at which the value of their property (Boolaky, Soobaroyen, and Quick, 2018).
Analysis and evaluation
Key audit matters (KAMs) consider the professional judgment that is directly significant to the
financial statements and its monitoring. Auditors have given their opinion for the financial
statements where the description of audit will be addressed as a guidelines for the next year`s
operations (Auditing and Assurance Standards Board, 2015).
Westpac Banking Corporation
Provisions of the impairment changes
The auditors have addressed and examined operating efficiency of main controls for the
impairment charges (Westpac banking corporation, 2018). These key controls include
governance, continuous assessment, credit risks for the company`s portfolios, inherent control
for IT system which will manage and certainly communicate the data with the help of
underlying data, approval procedure, impairment models, and economic outlays. ASA 701
Auditing and Assurance: Analysis of Key Audit Matters in Australian Banking Companies_4

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