HI6026 Audit, Assurance and Compliance Report on BHP Billiton 2018

This report provides a detailed analysis of the audit, assurance, and compliance aspects of BHP Billiton, focusing on the HI6026 course. It begins with an executive summary highlighting the audit report's focus on auditor responsibilities, independence, and the audit opinion. The introduction sets the stage by emphasizing the role of auditors and the International Auditing and Assurance Board's guidelines. The report then delves into auditor independence, non-audit services provided by KPMG, and auditor remuneration, including a breakdown of fees. Key audit matters are examined, including audit procedures and classifications, and the audit committee structure, functions, and responsibilities are outlined. The report also compares the responsibilities of management and auditors, discusses material subsequent events, and concludes with a summary of the findings. References support the analysis of the audit report and annual report of the company.

HI6026 Audit, Assurance and Compliance
Trimester 2 2018
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EXECUTIVE SUMMARY
This report emphasises upon the audit report and auditor’s responsibilities, their
independences, opinion and audit activities and audit program undertaken by the auditors.
BHP Billiton Company has been chosen for this assignment to prepare the report on the audit
opinion and their responsibilities towards the stakeholders. Each and every company needs to
take audit report of their prepared financial statements before filing it with the financial
authority. There are several auditing and non-auditing services have been given by the
auditors to company. This report explained the role of the auditors, responsibilities and their
opinion given to company on the basis of the audit performed on the annual report of
company.
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Table of Contents
EXECUTIVE SUMMARY........................................................................................................2
INTRODUCTION......................................................................................................................3
AUDITOR’S INDEPENDENCE...............................................................................................3
PROVISION OF NON-AUDIT SERVICES.............................................................................3
AUDITER REMUNERATION.................................................................................................4
KEY AUDIT MATTERS..........................................................................................................4
AUDIT COMMITTEE & AUDIT CHARTER.........................................................................6
STRUCTURE............................................................................................................................6
FUNCTIONS.............................................................................................................................6
RESPONSIBILITIES.................................................................................................................6
AUDIT OPINION......................................................................................................................7
DIFFERENCE BETWEEN THE RESPONSIBILITIES OF MANAGEMENT AND
AUDITOR..................................................................................................................................7
MATERIAL SUBSEQUENT EVENTS....................................................................................7
CONCLUSION..........................................................................................................................8
REFERENCES...........................................................................................................................8
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INTRODUCTION
This report emphasises upon the auditing requirement and role played by auditors in
organization. The international auditing assurance board have been several audit assurance
program which needs to be followed by auditors while preparing the financial statements.
This report reveals the declaration for the auditor’s independence, auditor’s roles and given
audit services. The audit report analysis of the BHP Billiton is done by evaluating the audit
report and annual report of company. This report assists in evaluating the audit program and
disclaimer given by auditors in its audit report. In addition to this, auditors need to comply
with the certain audit rules and regulations while auditing the financial statements of
company. In context with the further details of company it is analyzed that the outgoing
chairman of the company is Jac Nasser and the incoming chairman is Ken Mackenzie and the
chief executive officer of the company Andrew Mackenzie (BHP Billiton Company. 2016).
In this report, the main detail explained the role of the auditors, responsibilities and their
opinion given to company on the basis of the audit performed on the annual report of
company.
AUDITOR’S INDEPENDENCE
It is analyzed that auditor’s independence is based on the several factors such as their
relation with company and time they have spent while auditing the financial statement of
particular company Auditors who are auditing the financial statement of company should not
be having any pecuniary relation with the company in any manner. Currently, the financial
statement of company is audited by the biggest audit firm named KPMG. However, in future,
EY will be hired as new auditors to audit to financial statement of company (BHP Billiton
Company. 2016).
It is analyzed that audit committee should also be convinced by auditors that the auditors are
independents in their operations will be allowed to check the financial statements. However,
in this case, in order to justify the auditor’s independence auditors needs to give declaration
regarding with the independence in written. In this written declaration, they will state that
they are not having any sort of pecuniary relation with the company. Nonetheless, it is
considered that auditors are in the fiduciary position of company and takes all the required
actions in the best interest of the stakeholders. Therefore, they should be having no relation
with the company and independently audit the financial statement of company so that it could
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showcase the true and fair views to the stakeholders. Under section 307C of the Australian
corporation act 2001 the auditor's independence declared by KPMG. Under International
Financial Reporting Standards (IFRS's) the consolidated financial statements are prepared as
issued by the International accounting standard board (IASB). The directors are responsible
for the activities which are performed in the annual report (BHP Billiton Company. 2016).
PROVISION OF NON-AUDIT SERVICES
There are several audit services given by auditors to company. These non-audit
services are given to clients in addition to the audit services. However, auditors take
additional compensation for their non-audit services given to clients. These audit services are
given under the corporation act 2001 and only these services could be offered by clients to its
stakeholders. It is analyzed that if in any case, if these non-audit services offered by auditors
hamper the independence of the auditors then it should be deeply analysed by the directors
and would be disclosed in the annual report of company. In the financial statement of
company, it is showcased that the auditors offered tax compliance and setting up
harmonization in its domestic and international reporting to company and for the
consideration it has taken consideration worth $ 23 million from the company. Furthermore,
other non-audit services provided by KPMG to BHP Billiton are legal compliance program
for increasing the effectiveness of the financial statements, complying with the accounting
standards without hampering the prepared accounts (BHP Billiton Company. 2017) The main
consideration point is that every listed company needs to disclose in its annual report
whatever amount of consideration is given to auditors. Some non-audit services were
provided by the external auditors and their objectivity is they are free and safe through
restrictions on provision of these services. If there is the approval of Risk and Audit
committee (RAC)then such type of other than non-audit service are given by the auditors
otherwise the services are not undertaken at all (BHP Billiton Company. 2016). It is analyzed
that the
, KPMG apart from providing the audit services, there are several other non-below given
image shows the members of the audit committee who are also assisting company in the
internal audit functions (BHP Billiton Company. 2016).
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(BHP Billiton Company. 2016).
AUDITER REMUNERATION
The audit remuneration is the amount given to auditors for the audit services
performed by auditors. However, audit services as well. In addition to this, apart from the
auditors of company, there are audit committee too who are also offering their gracious
advice on the audit services. They are also paid audit remuneration by the BHP Billiton
Company (Mainardi, 2011). This below given table shows the total audit remuneration given
to auditors for the audit services offered by them to company (BHP Billiton Company. 2016).
This table helps in analysing the audit payment made to auditors for the audit services by
them to company (BHP Billiton Company. (2017).
Amount of audit remuneration
received by the KPMG for their
audit services
JUNE 2017
($) in
million
JUNE 2016
($)in
million
% change
Fees payable to the group of
auditors for the audit and
assurance services
15867 15842 .30%
Fees payable to group of auditors
for the non-audit services 0.631 1.091 150%
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The audit remunerations have been given to auditors for their audit and non-audit services.
However, the main issue arise due to the changes in exchange rate as the contract entered at
different exchange rate (BHP Billiton Company. 2016).
(BHP Billiton Company. 2016).
The audit and non-audit services offered by auditors are bifurcated and the above image
reflects the total fees paid to auditors in 2017 and 2016.
KEY AUDIT MATTERS
There are several certain key audit matters which are undertaken by auditors in the
best interest of the stakeholder of BHP Billiton Company. The below given showcase the
audit matters and other required details which reflects the audit procedures and classification
of the audit on the particular audit key matters. KPMG has not given any separate
independent opinion on the audit procedure performed at the time of auditing the financial
statement of company (BHP Billiton Company. 2016). These issues are significantly
highlighted by the auditors while auditing the financial statement and passing judgement on
the qualification and non-qualified report (Bell, Causholli, and Knechel, 2015).
KEY AUDIT MATTER AUDIT PROCEDURE
PERFORMED
CLASSIFICATION OF
AUDIT PROCEDURE
1. Assessment and audit control The auditors have given their Assertion test is used to
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for the consolidating of the
financial statements
judgement on the basis of the
consolidating of the financial
statement of the other units is
done. They have taken proper
management representation
letter from directors and
management while auditing
the consolidated financial
statement. If any cases, BHP
Billiton made changes in its
accounting statements due to
the compliance with the
accounting standards and
other laws then the same
have been justified by the
directors in their MRL report
(BHP Billiton Company.
2016).
classify the assets.
Audit procedure is based on
the audit test undertaken by
the KMPG in its audit
functions (BHP Billiton
Company. 2016).
2. Undertaken strategic alliance
with other business units
Evaluation of the strategic
alliance with the other
business units is done by
assessing the required details.
Proper assessment is made
on the cash inflow and
outflow of cash from the
busienss. It has made proper
monitoring the financial
statement and recorded
accounts in the books of
Substantive test and
confirmation from the
relative external parties have
also been taken for the audit
evaluation.
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accounts of company.
3. Impairment and valuation of
the assets and liabilities
Evaluation is made to assess
whether the company has
complied with the applicable
laws and accounting
standards given AASB 136
while implementing the
impairment test. Auditors
have evaluated whether the
certain assumption and
variable have been sets as per
the right based factors
(Hammer, 2015).
Analytical Procedures
Substantive test of details
(Choong, and Leung, (2015).
In accordance with the UK Companies Act 2006 under section 3 of the annual report has
been properly prepared and audited and In accordance with the section 300 A of Australian
Corporation Act 2001, the audit is performed with Australian Auditing Standard. The
auditor's opinion is that the proper accounting records have not been kept by the company
some returns have not been properly received from the branches. The financial statement and
the remuneration of the company are not in agreement and not in accordance with the reports
and returns and some disclosures which are related to director's remuneration are also not
made (BHP Billiton Company. 2016).
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AUDIT COMMITTEE & AUDIT CHARTER
The audit committee and audit charter have been prepared to evaluate the right value
of assets recorded in company’s account. The audit committee is managed by four auditors
who undertake all the audit and non-audit services to clients (Murphy, and Hogan, 2016).
STRUCTURE
The audit committee structure is determined on the basis of corporation act and listing rules
and regulation. However, 2 members of the audit committee are independent auditors who
are also engaged in assessing the true and fair view of the recorded assets and liabilities in the
books of accounts. There is below given details of the auditors and other members of the
audit committee (Sirois, Bédard, and Bera, 2018).
 Lindsay Maxsted is the chain of the audit committee and also a member for the whoel period.
 Malcolm Broom head is also another executive audit member who is hired as member of the
audit committee (BHP Billiton Company. 2016).
 Anita Frew and Wayne Murdy both are the auditors who audit the financial statement of BHP
Billiton and also engaged in showing the right value of books of accounts (BHP Billiton
Company. 2016).
(BHP Billiton Company., 2016).
FUNCTIONS
 Audi committee is engaged in hiring auditors, checking their eligibility. These members are
responsible in determining who will be the auditors of company.
 They undertake all the internal and external auditors also take care that they are not facing
issue while auditing the financing statement of company (BHP Billiton Company. (2017).
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 These auditors engaged in maintaining the transparency in the busienss (Badolato, Donelson,
and Ege, 2014).
RESPONSIBILITIES
 The responsibilities of the auditors is determined on the basis of audit services offered by
auditors to company.
 The audit committee is engaged in determining the Director's responsibility is to give the true
and fair view of the financial statement which are related to financial reporting
framework ,execute internal control and free from material misstatement due to fraud and
error. The auditor's responsibility is to obtain the reasonable surety of the financial statement
with its right recorded value due to fraud and error. When material misstatement is not
detected then some irregularities may be happen like forgery, misrepresentation, omission
(Tepalagul, and Lin, 2015).
 Auditors will have to check whether the dividend of shares is distributed out of the profit
available .Under Australian law, when there is libiliteis and dividend recorded more than its
declared value.
 Auditors should take proper management representation letter form the management of
company so that they could state that every details shared by company has been used while
determining the right value of its assets (BHP Billiton Company. 2016).
 Auditors will analysis the financial statements and legal accounting standards compliance
program of company while evaluating the books of accounts.
AUDIT OPINION
The auditors of the BHP Billiton company has given non-qualified clean audit report
and stated that company has complied with the all the accounting standards and
laws.Auditors have stated that board has established some committees which helps in
monitoring ,controlling the performance or activities .Committees can use the resources
freely to discharge their responsibilities. In the opinion of the auditors, there is reasonable
ground to believe that the company is able to pay its debts in effective manner (Mohseni,
(2014). Auditor have also taken proper management representation letter from directors and
management while auditing the consolidated financial statement.The audit opinion given by
the auditors showcase that company has complied with the applicable laws. The audit report
also assists in sustainability of company.
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DIFFERENCE BETWEEN THE RESPONSIBILITIES OF MANAGEMENT AND
AUDITOR
The responsibilities of the management are related to preparing the financial statement as per
the applicable laws and regulations. It is the duty of the management to maintain the
transparency in financial statements. The main role of the auditors is to maintain the
transparency in the prepared financial statement and assure the transparency in the prepared
financial statements. The auditors check the vulnerability and viability of the prepared
financial statements (Porter, Hatherly, and Simon, 2008). The management has to act in the
best interest of organization and auditors have to act for the stakeholders.
MATERIAL SUBSEQUENT EVENTS
There are several material subsequent events such as increased profitability, loss of busienss
and auditors functions. It is analyzed that when comparing the profit or earning with the last
year there is huge difference in profit. There is complete loss of US$ 6.4 billion, and it
includes abnormal loss of US$7.6 billion after tax but this year there is profit of US$5.9
billion and it also add loss of US$842 million after tax. The net operating cash flow of US$
16.8 billion shows that the commodities prices are higher and the further cost efficiency of
cash. The capital gearing ratio is 20.6% with the comparison of financial year 2016 it was
30.3% (Štangová, 2017). This has shown the material subsequent events have shown that
company has complied with the accounting standards and listing rules.
CONCLUSION
The crux of this report is that BHP Billiton Company has to disclose all the
information which is related to their financial performance. The auditors of company have
assisted in increasing the transparency and recording right value of the assets. With the
proper accounting records and auditors report given by auditors, it is easy to say that
company has complied with the applicable laws and regulations. The sustainability of
company is good and company is able to pay off its debts to its stakeholders.
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