Comprehensive Audit, Assurance, and Compliance Report: Appen Limited

This report provides a comprehensive analysis of the audit, assurance, and compliance aspects of Appen Limited's annual report. It begins with an overview of the company and then delves into the auditor's independence declaration, exploring the services provided by KPMG, including both audit and non-audit services like employee share schemes, transfer pricing, transaction assistance, and taxation services. The report thoroughly examines auditor remuneration, comparing fees across different service categories and analyzing the percentage changes over time. Key audit matters are discussed, specifically focusing on revenue recognition and the acquisition of Leapforce Inc. and Raterlabs Inc., including the procedures followed by the auditors. Finally, the role of the audit committee is briefly addressed. The report highlights significant financial data, auditor responsibilities, and subsequent events, offering a detailed examination of the audit process and its implications for Appen Limited.

Audit, Assurance
and Compliance

Table of Contents
INTRODUCTION ...............................................................................................1
MAIN BODY......................................................................................................1
Overview of company .................................................................................1
Auditor independence declaration ..............................................................1
Various non- audit services provided by auditor and their nature...............2
Auditor remuneration and its comparisons..................................................3
Various Key Audit matter and procedures...................................................4
Audit committee...........................................................................................5
Audit Opinion ..............................................................................................6
Responsibilities of director's and Auditors...................................................6
Subsequent Events......................................................................................7
Material information reported by Auditor as a stakeholder..........................7
Missing Material information........................................................................7
Follow up question.......................................................................................7
CONCLUSION....................................................................................................7
REFERENCES....................................................................................................9

INTRODUCTION
The process of conducting an analysis on the series of activity of an
individual or within an organisation to check that these activity are
maintained and recorded in respect with appropriate guidelines, laws and
procedures is Known as auditing (Ryan and et. al., 2012.). In company
auditing plays an important role as it help them to ensure that accounts are
accurate and its finance are being used in an suitable and effective manner.
Auditing in an organisation can be internal and external process as internal
process means auditor work on mitigating risk and identifying areas which
can be improved. External process involved independent auditor who
demeanour external audit on company account to get the current position of
company.
This project includes analysis of annual report of Appen Limited to
know the significance of Auditor independence declaration and audit report
their remuneration. Various key audit matter and their procedure develop by
KPMG are discussed in this report.
MAIN BODY
Overview of company
Appen is one of the leading dataset company in Australia that listed on
Australian stock exchange. They help other companies to expand their
artificial intelligence, as company improve search engines, social media
program, various e-commerce websites, voice identification system etc.
Appen operate their business in more that 130 countries and have over 1
million of customer those work in more than 180 languages. It provide best
solution to their customers so they can respond to ever changing needs of
people (Prempeh, Twumasi and Kyeremeh, 2015). Company was established
in Chatswood Australia in 1996 now have approx 500 employee working with
them.
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Auditor independence declaration
Independence of Auditor is defined as the freedom of internal and
external auditors from all those client parties who might have financial
interest. In addition, this concepts means that auditor work is free from any
interruption from client parties and audit must be done in honest and
objective style. An audit or review of financial statements must be performed
at the end of accounting year and should be fair and free from error that
represent the actual position of company. After the audit process auditor
must declare essential information to the directors, satisfy the effect of
subdivision, certified strategy and revealing entity these must be signed by
the individual making the statement. From annual report 2017 of Appen
limited it can be seen that auditing firm KPMG has complied the
independence requirement according to the corporation act 2001 (Mills,
2012). In respect of analyse and review of financial statements of company
the KPMG group in their written statements had declares that:
 There is no disputes to the auditor independence requirement that
was set out in the corporation Act 2001 with relation to the audit
conducting within company.
 No contravention is related to applicable code of professional conduct
that is related to the audit process.
Various non- audit services provided by auditor and their nature.
Non-audit services are referred to those work done by auditor that is
not related with audit process or review of financial statements within
organisation. Basically auditor provide these services to the company to
increase the effectiveness and improve the performance required. KPMG is a
auditor group that has conducted and provided number of non audit services
other than audit and review of financial statements (Whitaker, 2013). Non-
audit services are transfer pricing, transaction assistance, employee share
scheme and taxation planning. All this information is gained from auditor's
independent report and declaration done by them. For providing these
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services auditor charge certain amount from the company such as taxation
fee within Australia of about $72514 in 2017 and in overseas of about
$85793 in 2017. They also charge $153750 for other non audit services with
Australia and $42561 in overseas office in year 2017. Nature of these
services are discussed underneath:
Employee share scheme: This means employee of company has
given an option to buy company share in very low price or may be free
sometime. So group of KPMG provides this service to help Appen limited that
help in developing employee stock exchange schemes for their employee's.
Transfer pricing: It is referred to a price or value that is connected to
transfer of goods and services from one place to another, assuming that two
units are at different location but within the same company. Auditor of Appen
limited fix price for transfer of goods and services within their organisation.
Transaction assistance: This means auditor develop guideline
through which company develop effective and non time consuming activity
to face various upcoming challenges. From annual report it can be said that
this non audit service has been conducted by KPMG in Appen limited.
Taxation services: Tax services are very important for every
organisation as every company or individual has to bear tax at the end of
financial year. So Auditor in Appen limited also conduct taxation service and
facilities the work of management.
Auditor remuneration and its comparisons
Auditor remuneration is defined as the reward or payment for the work
performed by them. These are in the form of wages, salary that also includes
additional benefits like allowances, bonus, cash incentive (Knechel and
Salterio, 2016). According to the corporation Act 2001 remuneration are
those fees payable to auditor for their work done and accompanied by other
expenses that an auditor has incurred with regard to to audit of organisation
annual reports. This also includes sum of fees for non-audit services provided
by auditor. Basically the earnings of auditor are fixed in annual general
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meeting (AGM) by Board of directors. KPMG are the group auditor of Appen
limited who have conducted external audit. So company is liable to pay
certain amount to their auditor fixed in AGM by director.
From Annual report Appen Limited has paid their auditor with both
Auditing and non auditing services fees during an accounting year 2017.
Auditor conduct auditing services like examine of checking accuracy of
financial statements in accordance with accounting standard. KPMG group
also provide non Auditing services like employee's share scheme, transaction
help etc. Payment done to Auditor for the year 2017 by Appen limited is
shown below Along with comparison has been shown:
Services 2016 2017
Changes in
%
Audit of the
financial
statements $150000 $212534 41.68%
Taxation and
compliance
services $256375 $72514 -71.71%
Other services $75000 $153750 26.00%
Audit of financial
statements –
overseas firms $14548 $33197 56.17%
Taxation and
compliance
services $69480 $85793 23.47%
Other services $42561 -
Total fee $84028 $161551 92.25%
From the table above, examine and comparison of auditor
remuneration in current year and past year are shown. Amount paid by
Appen limited in 2016 for Audit and review of financial statements id about
$150000 and in year 2017 is $212534 which is $62534 more and its
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percentage change is about 41.68%. Amount paid as remuneration For
performing non audit services of taxation and compliance within Australia is
approx $72514 for year 2017 that is $183861 less to the amount paid during
financial year 2016. There is a drastic change in the percentage about 71.6%
that means that Appen limited has now tried to stop making payment for this
services. Amount spent on other services during year 2017 is $153750 that
is $78750 more paid in 2016. Appen limited also pay remuneration for audit
services performed by auditor in overseas firm like for Audit review $33197
in past year, $85793 for taxation and compliance services during year 2017
and for other services they pay $42561 in 2017. there percentage varies as
56.17%, 23.47% respectively.
Various Key Audit matter and procedures.
Those matter which are discussed with those related to the
governance are then calculated by the auditor then identify those matter
which required important auditor attending during the activity of the audit
process performed with an organisation are called Key audit matter. In
addition, it is defined as the professional judgements that were most
important in the audit of annual report for the current financial year
(.Fiolleau and et. al., 2013). KPMG the audit group identified two key audit
matter in context to Appen limited such as, Revenue recognition and
Acquisition of leapforce Inc and Raterlabs Inc.
 Revenue Recognition: Amount of income of group is related to the
income from rendering the services, two largest revenue services
where auditor focus more is, explanation of language resources and
rendering of content connected services. This basically includes
contract accounting that relay on calculation of management like
foreseen time and price to absolute a project and tally the number of
lines is compared to the total number of lines for the whole project.
Revenue that hike up from content connected services like high bulk
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of dealings with customer, that shows the effort made by them in
these revenue.
Procedures- Auditor test key control for the revenues of team process
that also includes approval of manager for sales bills and on monthly project
reporting. They also select a statistical sample of language resources that is
based on work value done in a financial year. Under this sample the perform
the comparison of time and costs budgeted with detail given by report
manager on customer project. They also re-evaluate total percentage
evolved in completion of project by agreeing the number of lines at the end
of financial year. Auditor ensure the logged performance date of customer
project work across annual period. They also help to check the accuracy of
all project in progress, check every receivables and revenue on balance
sheet form bill embossed and cash receiving from customers (Tepalagul and
Lin, 2015). KPMG performed various analytical procedure finished revenue
from language and content that is the compared to cash receipts of the year.
They also select a revenue sample dealing form months December 2017 to
January 2018 to check that revenue was recognised at the time when service
provided.
 Acquisition of leapforce Inc and Raterlabs Inc- Auditor identified
this key audit matter during the year an income from relevance
service. They identify that in the financial year explanation for
business collection was a key matter in Appen limited because the
Size of dealing with other organisation and level of judgements. This
includes various key areas of functionary such as, identification of
purchase circumstance, exact value of involved assets and liabilities at
acquisition date, disclosure of transfer in final statements.
Procedure- Auditor adopts process to solve this matter as they form a
purchase agreements, key term of payment are understand. They calculate
transfer circumstance and transaction costs to make sure that these are
under criteria of accounting standard. They start testing transfer date
balance with provided documents that includes fair values at that date. They
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also check numerical quality of the team procedure of goodwill at the time of
transfer. Auditor also aid management in the formation of those business
combination revelation that are shown in the accounting year (Jones, 2017).
Audit committee
It is refereed to the group of individual or team member who comes
together to perform a common task like auditing within an organisation is
known as audit committee. These committee member are executive
director's and non-executive director who inspect and analyse the accuracy
and correctness of financial statements of a company. From the annual
report of it is clear that Appen limited has A chairman named Robin Low and
two supporting member Chris Vonwiller and Deena shiff those are
responsible to inspect final report.
The other Non-executive directors of the company are independent
external auditor that are not a part of Appen limited they comes form outside
to audit statements. There were six non-executive managers which are
responsible for audit work and has been paid by company accordingly. The
total amount spent by management on non-executive director during current
year 2017 is approx $70000. Main motive of this committee is to develop
audit report free from error that help the management and other investor to
know about the financial position of Appen limited.
Audit Opinion
As the process of Auditing complete within an organisation auditor
have their opinion on the report and statements provided by the company
(Audit Opinion, 2017). These opinion may be real unbiased and free from any
type of frauds that shows the result given by auditor. Auditor may give their
opinion in document form that shows the accuracy of organisation financial
statements and reporting. These documents of audit opinion are further
classified such as Adverse opinion, qualified opinion and disclaimer of
opinion.
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From the annual report of Appen Limited external auditor KPMG has
provided unmodified opinion. This type of opinion means that auditor has
given all the information related to the financial statements in a adequate
and befitting manner and these opinion are not required to be changed in
future. This opinion further help shareholder and other investor as the know
more about the company (Ng, Chong and Ismail, 2012). So group auditor of
Appen limited has provided their opinion in the audit report that state that all
the financial information and statements are being made by accountant in
accordance to the corporation Act 2001.
Responsibilities of director's and Auditors
Director are the main part of company who manages internal activity
and are responsible for internal control (Nicolăescu, 2013). In Appen limited
director's plays an important role some of these are described below:
 They make sure that report give the actual view of financial
performance and these must be prepared in accordance to Australian
Accounting standard.
 These report are maintained and prepared by effective internal control
and there must be free from error and frauds.
 They also select best method for Appen limited like director decide to
follow going concern method and there is no need to change this
method and strategy.
Auditor are the one who inspect the financial report and statements and
make sure that these are formed according to standard within an
organisation. From the annual report of Appen limited different role
performed by Auditor are described underneath.
 To assure that reports prepared does not have any material
information
 They must ensure that all the procedures are done with fair perception
and account depicts true value
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Subsequent Events
It is refereed to those events that occur after the financial reporting
period with an organisation but may be presented in the accounting
statements of financial year are known as subsequent events. In analyses of
annual report of Appen limited it can be observed that there is only one such
type of event that is dividend declaration which is being reported after
reporting period (Sarkar and Sarkar, 2012).
Material information reported by Auditor as a stakeholder
There are shareholder, other investors and supplier those wants exact
information about the company performance and current position. From their
point of view material information from the annual reports of Appen limited
are profitable ratio, various budgets that shows the realistic position of
company.
Missing Material information
From the analyses of annual report of Appen limited there is no such
missing information related to any event happen within company (Greiner,
Kohlbeck and Smith, 2013). This state that information provided by the
auditor shows the actual performance and market standing about the
company.
Follow up question
Q1) Have accounting standard are complied and processed by Appen
limited?
Q2) All those account prepared by audit team are free from error and fraud?
Q3) Was audit committee is aware about the changes in accounting polices?
CONCLUSION
In this project report it has been concluded that audit is the most
important process for every organisation that shows the exact position about
company. From analyses of annual report of Appen limited KPMG has given
their unmodified opinion about the financial statements and various key
Audit matter are identify and they develop procedure regarding them.
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REFERENCES
Books and Journals:
Mills, J., 2012. Quality auditing. Springer Science & Business Media.
Ryan, K., and et. al., 2012. Development of a standardised approach to
observing hand hygiene compliance in Australia. Healthcare
infection. 17(4). pp.115-121.
Prempeh, K. B., Twumasi, P. and Kyeremeh, K., 2015. Assessment of financial
control practices in Polytechnics in Ghana. A case study of Sunyani
Polytechnic.
Whitaker, S., 2013. PMP Rapid Review. Microsoft Press.
Knechel, W. R. and Salterio, S. E., 2016. Auditing: Assurance and risk.
Routledge.
Fiolleau, K., and et. al ., 2013. How do regulatory reforms to enhance auditor
independence work in practice?. Contemporary Accounting Research.
30(3). pp.864-890.
Tepalagul, N. and Lin, L., 2015. Auditor independence and audit quality: A
literature review. Journal of Accounting, Auditing & Finance. 30(1).
pp.101-121.
Jones, P., 2017. Statistical sampling and risk analysis in auditing. Routledge.
Ng, T. H., Chong, L. L. and Ismail, H., 2012. Is the risk management
committee only a procedural compliance? An insight into managing
risk taking among insurance companies in Malaysia. The Journal of
Risk Finance. 14(1). pp.71-86.
Sarkar, J. and Sarkar, S., 2012. Auditor and audit committee independence in
India.
Greiner, A., Kohlbeck, M. and Smith, T., 2013. Do auditors perceive real
earnings management as a business risk?.
Nicolăescu, E., 2013. Understanding Risk Factors for Weaknesses in Internal
Controls over Financial Reporting. Journal of Self-Governance and
Management Economics. 1(3).
Online
Audit Opinion . 2017. [Online]. Available through:
<https://www.dvphilippines.com/blog/understanding-audits-the-four-
types-of-audit-reports>
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