Audit and Assurance: Stakeholder Analysis, Ethics, and Enron

This report delves into the critical aspects of auditing and assurance, emphasizing their importance in verifying the financial health of organizations. It includes a stakeholder analysis of Westpac Bank, examining various stakeholders such as the government, suppliers, shareholders, consumers, and employees, and their impact on the bank's operations and financial reporting. The report also reviews the Enron scandal from an auditor's perspective, highlighting the need for strict standards to avoid conflicts of interest and the importance of whistleblowing. Furthermore, it addresses the level of professionalism and due diligence required of auditors in planning and performing audits, emphasizing the significance of independence and ethical conduct in maintaining the integrity of financial statements. The report concludes by underscoring the role of auditing in ensuring transparency and accountability in financial reporting.

0
Running head: AUDIT AND ASSURANCE
AUDIT AND ASSURANCE
Name of the Student
Name of the University
Author’s Note

1AUDIT AND ASSURANCE
Executive Summary
The financial transactions are recorded and represented through the financial statements
in the annual report of any firm. In order to verify that the annual reports reflects the actual
financial health of a firm it is essential that those reports should be examined effectively through
proper auditing and assurance approach. Moreover, the purpose of audit is not only investigate
the appropriateness of the financial statements but also to track the loopholes that may be present
within the financial reports as this will misguide the investors regarding their investment upon he
shares of the firm and other stakeholders about the true financial state of a company. The paper
clearly emphasizes the importance of auditing and assurance. Stakeholder analysis is done upon
Westpac bank along with reviewing the main aspects of the Enron Scandal from auditor’s
perspective. The requirement of strict standards found to avoid conflicts within auditors as per
the threats of independence while whistleblowing is one of the primary necessity of the auditor’s
profession. The report invigorates into these aspects followed by addressing the auditors
concerning the level of professionalism and maintaining the due diligence while performing or
planning audit.

2AUDIT AND ASSURANCE
Table of Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................3
Key Stakeholder Analysis................................................................................................................4
Government.................................................................................................................................4
Supplier........................................................................................................................................5
Shareholders................................................................................................................................5
Consumer & Employees..............................................................................................................7
Independence & Whistleblowing....................................................................................................8
Enron Scandal................................................................................................................................11
Unhooking the books:................................................................................................................11
Better Standards.........................................................................................................................12
Behavior of Arthur Andersen....................................................................................................13
Audit Quality.................................................................................................................................14
Conclusion.....................................................................................................................................17
References......................................................................................................................................19

3AUDIT AND ASSURANCE
Introduction
The auditing system is a methodical platform that measures the effectiveness with which
the financial statements incorporate the true facts and figures regarding the financial performance
of any firm. The internal and external control of auditing facilitate the process of evaluation of
the financial statements as well as the accounting information that are being incorporated within
the annual reports that reflects the financial statements of the particular firm. Properly processed
information regarding accountability of the functions that takes place within an organization in
the form of operational, financial and investments activities are significantly monitored through
the audit and assurance. Hence, there is crucial importance of incorporating effective auditing
techniques that approaches to determine the actual financial condition of the organization that
execute their businesses by deploying products and services in the specific markets where it
operates. Moreover, the financial information and accounting facts and figures that are being
represented within the annual reports of the firm are considered significant by the investors,
speculators, stakeholder and other market players.
Due to this reason the annual reports should not represent any falsified information as it
may hamper the authenticity of the information by incorporating fraudulent practice of
accounting information which creates much more asymmetry through the exchange of wrong
information. This paper into the necessity of audit and assurance and how it helps to restrict
incorporation of falsified information within the annual reports of a firm that hinders the market
perception of the investors as well as other market player that influences the overall performance
of the firm in the long run.

4AUDIT AND ASSURANCE
Key Stakeholder Analysis
Westpac bank is one of Australia largest bank in terms of market capitalization along
with Commonwealth Bank of Australia. It is one of the ASX listed company that have
diversified stakeholders that are inclusive of employees, subsidiary organizations, customers,
media, suppliers, etc. The revenue earning of the company is 21.642 billion by the year 2015
while its net income is 8.012 billion and the amount of total assets are 879.5592 billion by the
year 2018. The total number of employee strength that Westpac bank possess are 35, 029 having
1322 branches and 3222 ATMs. The Westpac bank (WBC) was established in the year 1817 in
Sydney as the first bank in Australia with the name of Bank of New South Wales. The key
divisions of the bank includes BT group, Westpac Institutional bank, consumer bank, business
bank, Westpac New Zealand and the commercial bank. The following stakeholders are being
identified based on the scrutiny that were relevant with material misstatement:
Government
In 2016, the Westpac bank was mentioned in a lawsuit by the Australian securities and
the investment division due to their manipulation of the Australian benchmark interest rates. The
reserve borrowings in the year 2009 by Westpac bank owned security of $1.09 billion from the
federal reserve of United States of America. However, the bank possess a minor position in
North America and hence this was considered as an unusual move as the borrowings took place
at the height of the global financial crisis. Within short span of time government was being
communicated regarding the numerous issues that caused problem in the financial operation of
the firm. It was an alarming threat to the government as inaccuracy in the calculation of the taxes
was found, which was incorporated in the fiscal reports causing material misstatement.

5AUDIT AND ASSURANCE
Supplier
The retails banking segment gets affected by the suppliers condition due to any monetary
loss. This creates hurdles for the company while incorporating its off dues. The objective of the
company is to maintain its accounting results in long term basis followed by providence of
advantage to the suppliers by realizing their debts and hence maintaining the overall
sustainability of the business. Valuing the non-current assets and liabilities of the long term that
are matter of concern for the suppliers help in avoiding the material misstatements.
Shareholders
Apart from this financial controversies Westpac bank also confronted with an
operational anomaly regarding their investment in the Cola Mining industry of New Zealand.
This was aroused by the climate changing organizations in the country of New Zealand for its
deceitful step towards funding in the mining industry of Bathurst. It helped it to gain access in
the resources of the mine coal on the Dennis ton Plateau. The company does not took under
consideration the release of 218 million tons of carbon dioxide that will hamper the eco system
brining unusual climate change. These aspects were not taken under consideration by the
Westpac bank’s financial statements and incorporated as a CSR activity whereas criticism was
faced by the company for involving in such funding activities for the sole motive of acquisition
of profit. Moreover, the social impact of the company by the global sustainability leader namely
Down Jones Sustainability Index for 2004 to 2007 where it was reflected that the company
backed logging operation in the Solomon island that use to destroy the rainforests (Schmidt et
al., 2016). Due to this reason the Australian Greens called for the Bankasia. Hence, the
stakeholders of the bank comprises of not only those who impacts the Westpac bank but also

6AUDIT AND ASSURANCE
those who gets impacted due to the banks’ performance as well as decision making. The
diagrammatic figure for Westpac bank can be incorporated as follows:
Annual general meeting are being conducted in order to communicate with each and
every shareholders twice in a year. Investors possess keen interest in understanding the facts and
figures of the firm related to its capital allocation and interest rates related measures that are
undertaken within that period in order to avoid low returns and misstatements. Besides corporate
banking the company also have key stakeholders in the segments of finance and insurance,
investment, global wealth management, private equity, credit cards and mortgage market. Along
with the operation of the firm it seeks to engage all of its stakeholders into the process of
financial, operational and investment activities and incorporate each and every financial
information with proper accountability and being abide by the policies of international auditing
standards.

7AUDIT AND ASSURANCE
Consumer & Employees
The consumers and the employees of the company are also important stakeholders of
Westpac bank. Based on the degree of importance and the level of interest among the
stakeholders the preferences varies as follows:
The structural approach renders a categorization of the periodic identification and
prioritization through the usage of appropriately accounted financial information. To clarify the
ownership and managing the shareholders accordingly effective regulatory protocols are being
implemented by the Westpac Bank that encourages the shareholders’ involvement with the
organization in the long run (Pratt and Peters, 2017). Effective configuration for the long term
strategic decisions becomes easier to implement due to the auditing standard and the company’s

8AUDIT AND ASSURANCE
tendency to remain abided with it. Telephonic calls, emails, responding customer queries through
personal meetings as well as through messages or letter as required, etc. are executed by the
company to maintain transparency and strength the interrelationship of the consumer and
employees with the organization. The queries of the consumers as well as of the employees are
resolved based on their feedback and responded back to them in the next working day. Decision
making is done willingly by all of the staffs and there is no discrimination allowed on this
respect. Whistle blow process is followed as the consumers and employees decisions are
dependent upon the fiscal reports of the company. This supports the process of building strong
relationship with the clients and ensures success of any organization and create organizational
value for the long term. WBC also focuses on the same by maintaining a flexibility towards their
relationship with the stakeholders by ensuring engagement of the shareholders through
transparent of the financial information and accounting feasibility (Martínez-Ferrero and García-
Sánchez, 2018).
Independence & Whistleblowing
The aspect of independence of the auditors rejuvenates the fact that audits as well as the
decision of the auditors should be implemented independently when audits are being conducted
in order to avoid any form of infringement of fraudulent practices. On the other hand, the person
who exposes any kind of information that seem to be illegal or unethical from the perspective
organizational effectiveness is termed as whistleblowing. In general the organization should
prefer to keep the information public regarding their business performance. However, it is been
found that organization’s reveals those information to the public that protects their performance
as per expectation of the public. This process gets revealed through implementation of proper
auditing technique or through the influence of the whistleblower. The whistleblowers are

9AUDIT AND ASSURANCE
therefore very important in order to execute business activities being abided by the protocols of
business ethics (Louwers et al., 2015). Hence the whistle blowers needs protection from the
authorities since they are taking risk regarding revealing sensitive information about the
misconduct of the business process that is being done by a company.
The whistleblowing act 1998 was thus formed in order to serve for the public interest and
disclose information for protecting the individuals that are involved in whistleblowing. They risk
their jobs and reveals information about the wrong performance disclosure of the companies both
in the operational, financial as well as managerial activities. Their protection is thus of highest
priority for the government who investigates the case. The clues that are being provided by the
whistleblowers gets thoroughly verified and until then the role of the government is to keep their
identity secret and provide sufficient protection so that the whistleblowers do not hesitate for
revealing the prioritized information regarding misinformation that are revealed by the
organizations through their annual reports and the true information are being kept secret. These
information that are kept secret by the organization is to maintain the level of interest of the
investors, suppliers, etc. and other stakeholders up to the stipulated level that the organization’s
wants to keep (Knechel and Salterio, 2016).
As per the regulation APES 110 Code of Ethics for Professional Accountants issued by
“Accounting Professional and Ethical Standards Board (APESB)” the section 210.11.1 of the
APES 110 code, it is been incorporated that the auditor who is presently designated shall seek
permission from the client to have communication with the previous auditors. However, if it is
found that the response is negative from the client then the auditor is wilted. Misconduct should
be informed to the government where protection for freedom of workers as well as right of
speech should be given priority.

10AUDIT AND ASSURANCE
Section 100.1 of APES 110 incorporates that breaching may be of the following means
like:
 Act, regulation or guidelines
 Gross mishandling
 Gross fund excess
 Precise hazard to well-being or to communal security
 Exploitation of Authority
The whistleblowing process of two different types among which the whistleblower
reports about involvement of other person in illegal activities that hampers the organizational
performance and encourages malpractice of the organization under the table. While the second
form of whistleblowing comes into upfront when an external person outside the organization
reports about the conduct of any other person within the organization that encourages
misconduct or unethical practice of organizational activities. These whistleblowers may include
former employees or responsible employees that are loyal to the organizational betterment and
risks themselves in order to ensure it (Knechel, 2016). They prefer to ensure that the organization
is running through the codes of business ethics as per the APES 110 code of conduct for making
the professional accountant support the stakeholder’s of an organization and serve the public
interest. The employers my sack those employees if they found them to reveal their illegal means
of business and hence the identity of the whistleblowers are kept confidential. Therefore, proper
state and federal protection is of vivid importance in case of the whistleblowers.

11AUDIT AND ASSURANCE
Enron Scandal
Enron was involved in the business of an electric goods and services. It use to serve the
public with its electrical commodities providing supportive assistance regarding electrical
problems too.
Unhooking the books:
The capital market needs representation of the correct counting information since the
investors, shareholders as well as other stakeholders of the company hugely depends on the
financial facts and figures that are being represented in the annual reports of a corporate.
However, it was been found that the company showcases its revenue very high in its annual
report for which the investors kept faith on the fact that the company will grow overtime. The
revenue generation is an effective instrument to attract investors and maintain them with the
company for which the value of market share for the company do not fall. This was an illegal
strategic endeavor by the superior management personnel of the company for which they
negotiated with the auditing agency Arthur Anderson and maintained their annual reports is
specific financial years from 1995 to 2000 by incorporating falsified financial statements that
manipulated the results in exchange of incentives (Kend and Basioudis, 2018). The past investors
who found that the revenue level of the company is rising remain interested towards investing in
the company. However, the actual scenario was that the company did not reflected their true
revenue earnings in their financial reports in those fiscal years and along with that bribed the
auditing agency Arthur Anderson in approving their financial reports. The expectation of the
investors remain intact as they saw that the revenue earnings of the company is rising and hence
it will rising in the coming years too which gave the company an opportunity to keep the
investors loyal to the company and maintains its market value at high level. This does not reduce