Analysis of Audit, Assurance, and Compliance for ADX Energy Limited

This report provides an in-depth analysis of the audit, assurance, and compliance aspects of ADX Energy Limited. It begins with an executive summary and table of contents, followed by an introduction to the audit process. The report examines the company's compliance with auditor independence requirements, non-audit services, and auditor remuneration, along with key audit matters. It discusses the audit committee's roles and responsibilities, the audit opinion provided, and the responsibilities of both management and the auditor. The report also addresses material subsequent events, the effectiveness of reported information, and any missing or under-reported information. The report concludes with follow-up questions for the auditor and a final conclusion. The report analyzes the financial statements, focusing on aspects like cash, and the auditor's opinion, which was unqualified. The report also highlights the importance of independence and the roles of the audit committee and management in the audit process.

Student name:
Student ID:
Assignment Title:
Date:
Word count: 2500 words
Company name: ADX energy limited
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HI6026 Audit, Assurance, and Compliance
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Executive summary
In this report, the matters in relation to the auditing are considered and explained in the
context of ADX energy limited. All of the important aspects such as the independence of the
auditor and the non-audit services have been taken into account. The remuneration which is
paid to auditors is also taken into account and with that, the audit committee involved is
considered and is identified that it is not present. There is a determination of the opinion which
is provided by the auditor in respect of the financial statements of the company. The auditor’s
and management’s responsibilities are also identified and with that the importance of
information for the third parties is ascertained.
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Table of Contents
Introduction:....................................................................................................................................5
Compliance with Independence requirements...........................................................................6
Non-audit services and their nature............................................................................................6
Analysis of Auditor’s remuneration.............................................................................................7
Key audit matters.........................................................................................................................8
The audit committee and its roles and responsibilities...............................................................8
Audit Opinion...............................................................................................................................9
Management and auditor Responsibilities................................................................................10
Material subsequent events......................................................................................................10
The effectiveness of the material information reported...........................................................11
Missing or under-reported Material information.....................................................................11
Follow-up questions for auditor................................................................................................11
Conclusion:....................................................................................................................................13
References.....................................................................................................................................14
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Introduction:
The financial accounts which are prepared in the company represent the position of the
company and for that auditing are required to be undertaken. The same has been carried by
ADX energy which is the company listed on ASX and was incorporated in 1987. It is dealing in oil
and gas exploration in Western Australia. The company is expanding itself by making the
addition to its business activities. All of the concepts which will be providing the assurance
regarding the statements are involved in this report. The proper evaluation is made by the
auditor of all the information and then by proper study and findings which are obtained they
present the opinion in relation to the same. The remuneration is paid to them for all the
services and that will be identified and also the key matters which will be covered by them will
also be discussed. There will be follow up which will be processed and for that questions will be
provided in the last section.
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Compliance with Independence requirements
The business is carried out by the involvement of various operations and it is required that
operations are made in the correct manner. All of the information which is there in relation to
all the activities will be incorporated in the accounts of the company on the basis of which
several decisions will be made (Dawuda, et. al., 2015). It will be required that the accuracy of
them shall be evaluated in a proper manner and for that, company will be an undertaking of the
auditing process. In that auditor will be required to perform the verification of the statements
so that they can present the opinion in respect of their true position (Tepalagul & Lin, 2015).
For performing the best manner it is required that the auditor shall be provided with complete
independence. In that, they will not be restricted by anything and can carry on the process in
the manner they wish. There shall be no interest of the auditors in the company as by that the
effectiveness of the audit and opinion will be affected (Xie, 2016). If they will be having any kind
of personal interest then the opinion will be made in such manner which will be beneficial to
them and so this will be affecting the business in an adverse manner. All of the misstatements
or errors which arise in the business will be determined and reported in a proper manner so
that they are in the notice of all and actions to eliminate the same can be taken by
management (Corplaw, 2018).
In the case of ADX energy, the auditors are independent and there is no restriction which is
imposed on them. They are allowed to take their decisions as per the best of their knowledge
and findings. For the same, a declaration has been made by them in which it is stated that they
are independent and all the requirements of corporation act have been met (ADX energy
limited, 2018). The professional conduct is also followed and the opinion which is made by
them is free from any bias.
Non-audit services and their nature
The auditor of the company performs the audit services but in the company, there are various
other services also which are required and they are classified as non-audit services (Berg &
Moré, 2016). Auditor of the company is not allowed to perform any such service by which the
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independence of them will be affected. This is said because if they will be involved in some
other actions then it will develop an interest and by that fair decision and opinion will not be
made. There are several services which can be rendered and they involve management
services, taxation services, advisory services and various others (Svanström, 2013). It is required
that if there is any such service which is involved in the business then it shall be identified and
checked that it is approved by management. The amount which is paid in regards to this will
also be evaluated. In the given case the ADX limited is not involving any such service which can
be termed as non-audit service and this is stated by the auditor in their report (ADX energy
limited, 2018).
Analysis of Auditor’s remuneration
All the services which are obtained by the business come for a charge that is required to be
made by the company to the party providing the services. The payment which is made by the
company to the auditor also lies in this scope and is determined as the remuneration (Okolie,
2014). It will be including all the payments which are made to them and this will be covering
both the audit and non-audit services. The details of the payment which are made in the
current year are as follows:
Particulars 2017 2016 % Changes
Audit of financial statements 29500 28000 5.36%
In ADX energy limited there are no non-audit services which are provided and so all the
payment which is made is in relation to auditing. The remuneration in the current year has
increased at the rate of 5.36% in comparison to last year (ADX energy limited, 2018).
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Key audit matters
The auditor is required to consider all the aspects of the business but there are certain key
matters which are more relevant and it is needed that they are considered in a more effective
manner. They are to be involved as the opinion which is made by the auditor will be based on
this also and so it will be important to have the proper information in relation to them. The
procedures are followed so that they can be dealt with in the best manner and there is no issue
which is faced due to them in the coming period. For that, they are to be identified and the
same in the given case are as follows:
Cash: In the company, there is a high amount of the cash and that constitutes the 92% of the
total assets which are held by the company. In the carrying out of all the activities and
operations, this is considered to be a most important element. This is one of the most liquid
assets and due to this, it is considered that there is no high amount of risk which is involved in
relation to it and there is no judgment which is required to be made in relation to this (ADX
energy limited, 2018). In the given case this is most important as this will be affecting all the
processes involved in the business such as the allocation of the resources and all the other
strategies which are made in the company. In the completion of the audit, it will be required
that they shall be taken into consideration in an appropriate manner. There are various
procedures which are adopted in the company in which the completeness, valuation, and
existence of the balance are ensured. There were proper confirmations which are obtained
from the client so that the balance which is there can be evaluated (ADX energy limited, 2018).
All the disclosures which are made in the reports in this context are assessed so that their
appropriateness is considered. Proper entries in relation to them are provided in the notes
which are made in relation to them.
The audit committee and its roles and responsibilities
In the audit process, there are various requirements which are to be met by the auditor and for
that, they will be requiring the assistance of the board. In order to fulfill this condition, it is
required that there shall be a proper committee which shall be framed so that they can deal
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with this (Al-Matari, et. al., 2017). It will be possible and for that audit committee is established
in which there are members of the board of the company. They will be required to ensure that
the auditor is independent and they are provided with all the required assistance which helps
them in performing an audit in a proper manner (AICD, 2018). There is the charter which is
framed for them in which all the information in relation to the committee and the
responsibilities which are to be met by them are presented.
The company which is selected is ADX and it is small in size and there are not much of the
operations which are performed by it (ADX energy limited, 2018). Due to this factor, there is no
requirement to have the separate audit committee in the company and the tasks will be
managed by the board itself. in this, they will be ensuring the integrity and checking all the
statements and the requirements will also be fulfilled by them.
Audit Opinion
The audit is carried in the company so that all of the aspects which are involved and the reports
that are made by the company can be evaluated in the most effective manner. They will be
reviewing them with the help of the information which is available and then the opinion will be
presented by them (Tian & Xin, 2017). This will be specified about the accuracy of the financial
information that is provided in the financial statements. There are various opinions which can
be framed and if the auditor is of the view that the reports of the company are presenting the
true position of the business then the unqualified opinion will be provided (Narvas, 2018). In
case of the issues which are there and there is no proper information which is identified in
relation to them then the qualified opinion will be framed (Public Company Accounting
Oversight Board (PCAOB), 2013). There will be making of the adverse opinion of the situation in
which the reports are representing the errors and mistakes and they will be having the adverse
impact on the company.
The auditor has provided the unqualified opinion in the current year of ADX energy and for that
declaration has also been made. they have accepted and assured that by the financial
statements there is the true and fair view which is attained about the position of the company
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(ADX energy limited, 2018). All of the requirements of the corporation act 2001 has been
complied with and also the standards which are framed by the government are also taken into
account in the making of the financial statements.
Management and auditor Responsibilities
Management responsibility: The main role which is to be played by the management is in
relation to the making of the financial reports in which all of the information will be presented
with accuracy (Clikeman, 2018). They will be ensuring that they are made by following all the
accounting standards and also true and fair view is provided by accounts. They will be
evaluating and making such internal control by which proper reporting will be made possible.
By the help of evaluation made, it will be confirmed that the financial statements are free from
any kind of error and misstatements. The various other aspects which are relevant will also be
taken into consideration in this process and that involves disclosures, going concern and other
matters in relation to them.
Auditor’s Responsibility: The main aim of the auditor is to obtain the assurance in relation to
the accuracy of the financial statements. They will be reviewing that the accounts of the
company are free from any misstatements and errors which are caused (Turnkey, 2018). On the
basis of the findings which will be made by them, there will be an opinion which will be
presented. There is the assurance which will be provided but then also there may be some
misstatement which has remained from being detected. There will be the identification of them
and then the opinion about the position of the company will be provided in the report
prepared.
Material subsequent events
In the business, there are various activities which are undertaken and out of them some of
them take place after the making of the accounts and they are considered as subsequent
events (Ozdemir & Gokcen, 2016). It will be essential that the identification of them is made so
that they can be dealt with in accordance with the standards which are specified. There will be
adjusting and non-adjusting events which take place and the treatment of them will be made
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accordingly (Al Nawaiseh & Jaber, 2015). By them, the balances in the company will be affected
if they will be incorporated in the accounts of the company (ACCA, 2018).
In ADX energy there are some of the transactions which are identified and will be considered as
the subsequent events. There is the issue of the shares which has been made after the closing
of the accounts (ADX energy limited, 2018). Also, there is the agreement which has been
entered by the company, in respect of the investment which is made.
The effectiveness of the material information reported
In the company, there are several parties which are associated with it and it is required that
interest of all shall be taken into consideration. The third party stakeholders will also be
covered and they will be making the use of the information for the taking of right decisions
(Drogalas, et. al., 2017). In this, the employees, customers, investors, and government will be
included. They are to be provided with the required information so that can use them as per
their needs. The government will be ascertaining the tax amount and investors can take the
decision in relation to the investment which is to be made. The information will be very
important for them and so shall be provided with accuracy.
Missing or under-reported Material information
In the making of the report, all of the areas have been considered in relation to the audit which
is taking place. In this process, there is a requirement of a lot of information and sometimes
there is such information which is required to be present but is not made (Kipp, 2017). The
company is disclosing all the required information in a proper manner and there is no such data
seemed to be underreported. All of the data is provided in the required details and is
understandable in a proper manner.
Follow-up questions for auditor
The company will be required to have the follow up for the shareholders in which they will be
provided with the opportunity to clarify the doubts which they have. For this, they will be
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interacting with the auditor in the annual general meeting and asking them with the required
questions. Some of the sample questions are provided hereunder:
 Did you come across any kind of internal control issues in the company?
 Are there any factors by which your audit independence is affected?
 Have you determined any errors which are required to be reported as they will be affecting
the company in a great manner?
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Conclusion:
The report that is presented above elucidates all the requirements which are to be met in the
audit of the company and kept in the notice by the auditor. For that the evaluation is made
about the independence of the auditor and also the remuneration which is paid to them is
taken into consideration. It is identified that there are no non-audit services in the business and
also the audit committee has not been formulated. The key audit matters which are involved in
the audit process are also determined and explained in an effective manner. The subsequent
events which took place have also been reported in an adequate manner. The responsibility of
the auditor and management is also ascertained and mentioned in the report.
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References
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Clikeman, P.M. (2018). Managers' and Auditors' Responsibilities for Evaluating Going
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Tian, J., & Xin, M. (2017). Literature Review on Audit Opinion. Journal of Modern Accounting
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