HI6026 - Audit & Assurance: Enhanced Auditor Reporting in Australia

This report provides a detailed examination of audit and assurance compliance within the Australian context, focusing on enhanced auditor reporting practices for ASX-listed companies. It delves into the compliance of auditors with independence requirements, analyzes non-audit services provided, compares auditor remuneration across different years, and identifies key audit matters. The report also outlines the audit procedures employed, the role of the audit committee, and the audit opinion rendered. Furthermore, it differentiates between the responsibilities of directors and management versus those of the auditor in relation to financial reporting, and presents potential follow-up questions for auditors at an Annual General Meeting. The analysis is based on a review of Rio Tinto Group's financial reporting and related audit documentation, highlighting the company's adherence to international standards and regulatory requirements. Desklib provides access to similar solved assignments and past papers for students.

Running head: AUDIT AND ASSURANCE COMPLIANCE
Audit and Assurance Compliance
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Executive Summary:
This report has been design for a purpose to go into the inspection that every listed company on
ASX S&P 300 must serve as the regulations procedure are supervised and reviewed by ASX.
The companies are complaining with the improved quality of audit reporting. The report also
contains the selected company has meet the IAASB requirement relating to the Auditor`s role
while providing assurance over the company`s financial statement and also controlling the
environment. Rio Tinto Group has successfully working on its strategy for creating an
appropriate and well-being society.

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Table of Contents
Introduction......................................................................................................................................3
Discussion:.......................................................................................................................................4
Auditor complied with Independence requirements:...................................................................4
Non-Audit Services.....................................................................................................................4
Auditor Remuneration Comparison.............................................................................................5
Key Audit Matters.......................................................................................................................6
Audit Procedure...........................................................................................................................6
Audit Committee.........................................................................................................................7
Audit Opinion..............................................................................................................................8
Directors’ and Management’s Responsibilities Differ from the Auditor’s Responsibilities in
relation to the Financial Report...................................................................................................8
Follow up Question Asked on Annual General Meeting to an Auditor......................................9
Conclusion.....................................................................................................................................10
Reference:......................................................................................................................................11

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Introduction
Every business at the time of beginning has two major concerns which are adjoined by
management and risk. This possesses through the business and gets carry forward in coming
years of it. As these two are the key of healthy business, it requires special diligence from
different perspective of business organization. In every step which is put forward for well-being
or growth of business put forward risks. The nature of every business is zestful, is kept changing
that attracts vast size of risk for the company. Every business needs a path to ride on the paths
are paved on basis of distinct legal process, sets of standing orders given by concerned team of
the organization. This report is designed for a comprehensive scrutiny regarding the role of
auditor and the procedure of audit management and practice of standing orders by which belong
to financial sector. ( Morawska and Staszkiewicz 2016).

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Discussion:
Auditor complied with Independence requirements:
PricewaterhouseCoopers is the independent auditor of Rio Tinto Limited. The report has
significant terms used by auditors. In the independent report we and our is replaced for PWC
LLP related to UK professional ,legal, responsibilities relating to regulatory and reporting the
obligations to the individuals of Rio Tinto plc and PWC is related to Australian legal, Tinto
Limited. The report stated that the Rio Tinto plc and Rio Tinto Limited as Parent Company and it
are governed by UK companies Act 2006. The amended of ASIC is followed by Rio Tinto
Limited. The report stated that the auditor independent opinion was based on the principles based
on International Standards on Auditing of UK and Australian Auditing Standards (ASAs). In the
annual report under the independence as stated that auditors maintained the ethical standards to
be maintained as it is applicable for listed public companies. PWC has full filed the requirements
that have been stated by the Accounting Professional and Ethical Standards Board’s APES 110
Code of Ethics for Professional Accountants and Corporations Act 2001. These requirements are
relevant requirements as per financial report in Australia. All other responsibilities that are
ethical as per APES 110 are fulfilled too.( Riotinto.com, 2018)
Non-Audit Services
The independent declaration of auditor stated that Rio Tinto Limited and Rio Tinto plc has not
received non-audit services as it was banded by FRC`s Ethical Standard. Only non-audit services
are provided in regard to the financial statements to Rio Tinto plc.

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Auditor Remuneration Comparison
Calculation of percentage in Auditors Remuneration
Particulars
2017 2016 2015
Change
in 2017 %
change
in 2017
Change
in 2015 %change
in 2016US$M US$M US$M US$M US$M
Audit of the Company 6.2 4.5 4.3 1.7 38% 0.2 5%
Audit of Subsidiaries 8.1 9 10.1 -0.9 -10% -1.1 -11%
Total Audit 14.3 13.5 14.4 0.8 6% -0.9 -6%
Audit related assurance service 1 0.9 0.9 0.1 11% 0 0%
Other assurance service 2.3 0.6 0.9 1.7 283% -0.3 -33%
Total assurance services 3.3 1.5 1.8 1.8 120% -0.3 -17%
Tax Compliance 0.3 0.5 0.5 -0.2 -40% 0 0%
Tax advisory services 0.2 0.1 0.4 0.1 100% -0.3 -75%
Services related to corporate finance transaction
services in connection with bond issues/ capital raising 0.2
Other non-audit services not covered above 0.7 1.8 1.1 -1.1 -157% 0.7 64%
Total non-audit services 4.5 3.9 4 0.6 13% -0.1 -3%
Total Group Auditor`s remuneration 18.8 17.4 18.4 1.4 7% -1 -5%
Audit fees payable to others accounting firms
Audit of the financial statements of the Group`s subsidiaries 2 2.1 1.9 -0.1 -5% 0.2 11%
Fees in respect of pension scheme audits 0.5 0.3 0.2 0.2 40% 0.1 50%
Total audit fees payable to other accounting firms 2.5 2.4 2.1 0.1 4% 0.3 14%
PWC`s remuneration is approved by the Audit Committee. The increase of 6% in total audit and
13% increment in non-audit work approved by committee set by the policy, this increment was
done for maintaining the independence of auditor. The increment of non-audit service is related
to assurance and regulation related work. The above table consolidated overall payments that are
processed in the favors of individual firms of PWC by the companies and subsidiaries of the
company. Reduction in tax compliance is seen. The review of tax compliance is done for returns
on corporation, income statement taxes on sales and excise. The total remuneration of auditor is
increased as compared to other years. Even tax advisory is being given on transfer pricing,
employee worldwide mobility and non-recurring acquisition. (Riotinto.com, 2018)

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Key Audit Matters
Listed entities auditor needs to include information in respect to the matters where their
judgment would contain the most significance audit of the financial report in the present year.
Determination of following key matters is done by the auditors for Rio Tinto is as follow:
 Assessed impairment that includes indicator and reversal of impairment.
 Focusing on exploration and evaluating assets and property, plant and equipment.
 Intangible assets that is lived and indefinite regarding Rio Tinto Aluminum.
 Provisions for restoration, close down, obligations by environment and uncertain tax
positions.
 Focus on certain transaction on transfer pricing regarding the commercial center of the
group located in Singapore.
 Auditors notified defined advantage pension plan surpluses as a shortfall regarding the
key matter that was compared with the last year risk of material misstatement. Auditors
stated it to be deficits. There were no new risk factors identified for this year.
Audit Procedure
 Tests of Controls: Provisions for close-down, restoration and environmental obligations
were assessed through tests of control. Detail testing of 8 reporting units was performed
by the auditor regarding the selected units. Auditors examined the mathematical accuracy
for monitoring discounting rate through our valuation expert.
 Substantive Tests of Detail: Provisions for uncertain tax positions were assessed through
this process. The auditors occupied their tax specialist to study and understand the present

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picture of tax assessments. Monitoring developments caused in outgoing conflicts. Going
through the current rules and communication with local tax authorities, as well as exterior
opinion received by the Group where pertinent, to satisfy that the tax provisions had been
suitably recorded or attuned to replicate the latest exterior developments. ( Tsipouridou and
Spathis 2014)
Audit Committee
Risk Management framework and internal control of both the Group’s system that studies the
reliability of the financial report presented by the Group. This vital failure to notice the role is
full filled by the audit committee on behalf of Rio Tinto board.( Riotinto.com, 2018)
PWC in office an external auditors is not been permitted by the regulations for tendering in
regard to their tenure’s length. Audit committee has put stress on enabling the new service
provider for non-audit services. Identification of defining the roles, responsibilities, planning the
scope of tendering the services and providing the information to the firm and selection criteria
for management and committee. Auditors have compared the lead prospective with the other
audit firms. Audit Committee has monitored the different aspects of areas that need to be audited
such as sources of assurances. The committee suggested the company for continuing the business
on a going concern basis. The audit committee had perilously analyzed the projections of
upcoming time’s cash flow as per distinct scenarios also comparing these with the cash balance
and the facilities that were committed to the Group. Reviewing the management projections that
followed testing of stress of the Group’s planning the medium-term business.( Riotinto.com,
2018)

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Audit Opinion
The audit firm stated that the company’s financial statement presents a true and fair view. The
statement has been prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. It stated that Rio Tinto plc has prepared its financial statement
in accordance to GAAP. Even the Group has presented its financial statement in accordance with
IFRS and ASSB. It was Unqualified Opinion given by the auditor.( Tsipouridou and Spathis 2014).
Directors’ and Management’s Responsibilities Differ from the Auditor’s
Responsibilities in relation to the Financial Report
Responsibilities of the Directors
In the annual report it stated the responsibility of directors for preparing the financial statements
and report as per the guidelines of framework. It is director’s responsibility to state that the
statements are free of material misstatement, whether due to deception or fault. While preparing
financial report and statement it is director’s responsibility to assess the parent company and
Group’s potential for continuing as a going concern. Disclosing matters related to going concern
even using basis of going concern for preparing accounts until the director decided to wind up,
cease the operations or there is no other choice is available for doing so for the Parent company
or the Group.
Auditors’ Responsibilities
Auditor’s main objective is to obtain the reasonable assurance that the financial report and
statements are liberated from the material misstatement in regard to fraud or error. Reasonable
assurance is considered to be of high level assurance where audit conducted in accordance with
ISAs (UK) and ASAs that would detect material misstatement where it lies. Misstatement

9AUDIT AND ASSURANCE COMPLIANCE
detected from fraud and error is considered material if they are reasonably found to influence the
economic decision in average or through individual as the base of financial statement and
reports.
Follow up Question Asked on Annual General Meeting to an Auditor
1. How Does Company ensures the investors understood its policy and performance?
2. As the US market is unpredictable, how is the performance of the company’s stock in
compare to overall market?
3. How much ratings the company has received by the other parties on corporate
governance?
4. What were the majors issued identified by the board last year?
5. What are the recruitment strategies adapted by the company for directors? Does the
company forms committee for nominating the independent director as member of board?
6. Does any relationship exist between the CEO, chairman and current members of the
board?
7. What policy is adopted by the company for payments of dividends?
8. What is the auditor’s opinion on valuation of company’s stock? Is it fairly valued?
9. At the meeting were the entire director was present?
10. How election of the members for audit committee is done?

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Conclusion
The report is constructed in order to bring a comprehensive view of the practice of following the
audit and assurance guidelines structured by the international accounting standard and audit and
assurance board. The auditor stated that if companies go for liquidation then the agreement of
share that is provided for a valuation that is obtained from the surplus assets of both the
companies. If the additional assets obtainable for allotment by one corporation on each of the
shares held by its shareholders go above the additional assets available for allotment by the other
corporation on each of the shares held by its shareholders, then an equalizing compensation
between the two companies shall be made, to the degree allowable by appropriate law, such that
the quantity available for allocation on each share held by shareholders of each corporation
conforms to the Equalization Ratio. The purpose is to guarantee that the shareholders of both
companies have correspondent entitlements to the assets of the joint Group on a per share
foundation, taking account of the Equalization Ratio. The Sharing conformity does not
endowment any enforceable privileges to the shareholders of whichever company upon
insolvency of a company. (Riotinto.com, 2018)

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