Financial Audit, Assurance and Compliance: Genworth Insurance Report

This report provides a detailed analysis of audit assurance, compliance, and risk management practices at Genworth Mortgage Insurance Corporation. It begins with an overview of corporate governance principles, particularly those advocated by the Australian Securities Exchange (ASX), and explains their importance for companies. The report then examines how Genworth applies these principles, detailing its adherence to ASX guidelines through its board structure, ethical standards, disclosure policies, and risk management framework. A significant portion of the report focuses on the evaluation of risk factors and the components of Genworth's risk management framework, including risk culture, governance, risk appetite, and the three lines of defense. Furthermore, the report includes an analysis of Genworth's financial performance using common-size income statements and balance sheets for 2016 and 2017, along with the computation and interpretation of key financial ratios, such as the current and quick ratios, to assess the company's liquidity and financial health. The analysis highlights trends in gross written income, cash, and investment, offering insights for auditors and stakeholders. Finally, the report concludes with a summary of the findings and a list of references.

Running head: AUDIT ASSURANCE AND COMPLIANCE
Name of the Student
Name of the University
Author note

1AUDIT ASSURANCE AND COMPLIANCE
Executive summary:
The following report intends to invade into the inspection of the actual governance
principles which every Australian company must follow, as these regulations have been
strongly advocated by ASX, for smooth functioning of the companies. In addition to this, the
report talks about the ways through which the various kinds of risks are assessed and arrested.
The report in its limited format has strived to provide a holistic view of these two aspects of
Genworth insurance limited of Australia.

2AUDIT ASSURANCE AND COMPLIANCE
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Why governance of any company is important?....................................................................3
List of various governance principles:...................................................................................3
How Genworth applies these principles?...............................................................................5
Evaluation of risk factor:........................................................................................................6
Components of the framework:..............................................................................................7
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

3AUDIT ASSURANCE AND COMPLIANCE
Introduction:
Since the very outset of business, there have been two things which have been closely
associated with it, one risk and the other management. These two have been long connected
with business and would continue to be so in the future too. As a result of which, these two
factors demand a greater deal of attention from various components of any business
organisation. Risk is closely associated with each and every activity which emanates from
business. In fact the very environment of which the business is the part of, is dynamic in
nature, which keeps on changing, which causes a huge amount of risk for any company.
Similarly, every business organisation needs a proper path to tread on. This road is paved
with the help of different laws, rules and regulations, created and implemented by the
management of any organisation. Through this report, a thorough analysis of the risk
management procedures and the ground implementation of the governance rules by
Genworth Mortgage Insurance Corporation.
Discussion:
Why governance of any company is important?
A company or business organisation is formed with the primary objective of earning
profits through the production and sale of goods and services. Profit making occupies the
inherent part of any business. It involves bringing together of diverse group of people as a
result of which, a common law should be present to govern the company and its employees.
A common law must be present which would assist in preventing and mitigating the conflict
of interests which might arise in the course of the operations of the company.
List of various governance principles:
There are a variety of laws which are advocated by Australian Securities Exchange,
with the aim of assisting in the management of the company and its group of people. These

4AUDIT ASSURANCE AND COMPLIANCE
governance laws and rules are very important for any company’s smooth working. Every
Australian company, big or small or operating in a different kind of industry all together, is
expected to abide by these principles. The principles laid down by ASX are as follows:
Principles Meaning
Principle 1 Proper identification and recognition of the
roles of the board members.
Principle 2 Presence of adequate size, aptitude and
obligation of the board, for proper
implementation of responsibilities.
Principle 3 Application and implementation of decision
making by following ethical standards and
principles.
Principle 4 All organisation must have a proper and
impartial structure, which would help in
protecting the interests of the financial
reports of the company.
Principle 5 It is very important to always promote a
punctual and proper disclosure of the
important information about the company.
Principle 6 A fool proof and solid communication
system should be activated by company in
order to maintain a cordial relationship with
the shareholders.
Principle 7 Each company should have a risk
management system in place to address the

5AUDIT ASSURANCE AND COMPLIANCE
risk issues faced by the company.
Principle 8 The company should ensure that there is a
clear remuneration policy for its employees
and members.
How Genworth applies these principles?
Genworth, being one of the leading insurance company in Australia, ensures that each
and every principle of ASX is followed:
 Principle 1: Genworth has established five committees which would look into the
implementation of governance policies and risk management procedures. The board’s
primary responsibility is incessant monitoring and reviewing of all the business
strategies. It is the Chairmen’s responsibility to ensure that the board fulfils its
responsibilities.
 Principle 2: The board has three non-executive directors, five independent non-
executive directors and one is an executive director who is the CEO and the Managing
Director of the company. It is the CEO who leads the team and ensures that a cordial
relationship exists between the board and management.
 Principle 3: Genworth has a high regard for its ethical standards and the company
promotes the policy of ‘Integrity First’. It is done by prescribing the required level of
ethical behaviour expected from each member of the Genworth family.
 Principle 4: The Company strongly follows the policy of diversity and inclusion in
order to leverage the importance of the diverse group of people operating in the
company (Genworth, 2018). When they feel valued, they would follow the standards
of ethics. This would help in safeguarding the financial transactions, statements of the
company.

6AUDIT ASSURANCE AND COMPLIANCE
 Principle 5: Genworth is committed in providing timely and proper disclosure all
important material and financial information to its group of stakeholders. This is done
in order to promote a sense of importance and transparency among the stakeholders
for Genworth.
 Principle 6: Genworth ensures that shareholders are provided the option to receive
and send any kind of communications from the company. It has a disclosure policy to
honour the obligation of being fair with the handling of the shareholder’s interest. The
disclosure committee is responsible for looking into the disclosure controls,
procedures and methods.
 Principle 7: Genworth’s risk committee is responsible for seeing the implementation
of the company’s risk management framework. Moreover, the audit committee assists
by providing an objective review of the risk management procedures.
 Principle 8: Genworth’s remuneration policies have been made in accordance with
APRA Prudential Standards and ASX demands. Remuneration for directors are dealt
by the board itself.
Evaluation of risk factor:
Genworth’s risk and capital management framework consists of an aggregate of
people, policies, and procedures for the identification, measurement, monitoring and the
necessary controlling of all the components of material risks (Forbes welcome, 2018). As a
result of which a robust risk framework has been developed to address the risk issues. This
risk framework is primarily responsible for over-seeing this framework’s implantation.
Components of the framework:
Genworth‘s senior management along with the board of directors of the company
provide relative weightage to the risks faced by the company. As a result of which, the
company has rightly decided to address the risk and reduce their impact upon the workings of

7AUDIT ASSURANCE AND COMPLIANCE
the company (Genworth, 2018). The risk management group have therefore identified certain
important components of the risks faced by the company. Application of these components
would go a long way in mitigating the risks faced by the company.
 Risk Culture: It facilitates the way Genworth operates. The risk culture statement
assist in implementing a transparent and detailed analysis of the risks involved.
 Governance: The board as well as the senior management continuously look into the
risks faced by the company as well as its current financial condition. The board
strongly advocates clear definition of the roles and responsibilities of each member
for swift addressal of the risks faced by the company
 Risk appetite: The risk appetite of Genworth is appropriately reflected in the risk
appetite statement prepared by the risk management team. The risk appetite statement
project the standards upon which the risks are assessed and managed.
 Three lines of defence: Genworth strives for ownership, accountability and
responsibility of the company and consider them as the three major lines of defence in
pursuit of addressing the risk issues of the company.
 Risk policies and processes: The different kinds of risks and their mitigation process
are applied to ensure that all the risks are recognised timely and assessed and are
efficiently dealt with by applying proper controls (Mwangi and Murigu, 2015). Risk
policies and processes assist in devising the necessary action plans to address the
risks.
Common size income statement of Genworth for the year 2016 and 2017:

8AUDIT ASSURANCE AND COMPLIANCE
Analysis:
Gross written income is one of the most significant sources of income for any
insurance company. The company has seen a dip in this income of $ 12, 947 million. This
could have far reaching consequences for the company as the total comprehensive income for
the Genworth has also considerable decreased. The auditor must bring this issue in the notice
of the senior management of genworth at the earliest. It is because of this reason, there have a
series of impact on a string items such as insurance profit, profit of the company and the net
interest of the company. Genworth has been pretty straight forward in its preparation of
financial statements and has reportedly the matters in a straight forward manner. It has not
resorted to window dressing in this regard.
Common size balance sheet for the year ended 31st march 2016 and 2017:

9AUDIT ASSURANCE AND COMPLIANCE
Computation of balance sheet ratios:
Analysis:
The company’s balance sheet has also reflected the impact of the decrease in the gross
written income of 2017. The decrease has also led to a substantial decrease in the cash and
accrued investment income of the company. The cash has decreased by $14,618 million in
2017 from its erstwhile in 2016. The company has also tried to decrease this impact by
increasing its debtors or trade receivables, in order to ensure better short term liquidity. The
company has also increased its investment in fixed assets such as plant and machinery by $

10AUDIT ASSURANCE AND COMPLIANCE
466 million. This is a welcoming thing. The auditor must be careful while looking into the
balance sheet of the company as the chances of concealment of material information of
important nature could take place.
The current ratio of the company is also at 0.39 shows, it has decreased from 2016, which
means that the company might have a problem in paying off its obligations in the short run.
An ideal current ratio for any company should be within 1 to 1.2, this ratio never satisfies this
criteria, which is a serious issue and must be addressed (Candor-holdings.com, 2018). The
quick ratio is an apt indicator of a company’s short term liquidity. It says that the company
has enough assets which can be converted into liquid cash at a very short notice. If it
increases, then it is a welcoming note for the company. In case of Genworth, it has dipped
by .02, which is not a minuscule issue for one of Australia’s prominent insurance companies.
The company has also improved by .1 and a higher one indicates a greater dependence on
debt funds, which is not welcoming for the company.
Conclusion:
This report has been made in order to provide a robust and comprehensive view of the
implementation of governance principles and analysis of various kinds of risks faced by an
insurance company like Genworth (Limited, 2018). The report provides a bird’s eye view of
the entire process followed by Genworth in its implementation of the rules of governance as
advocated by the Australian Securities Exchange. Along with this, the culture of risk
administration followed in Genworth has also been inspected and analysed.

11AUDIT ASSURANCE AND COMPLIANCE
References:
Candor-holdings.com. (2018). [online] Available at:
http://www.candor-holdings.com/equities/wp-content/uploads/sites/2/2016/02/
types_of_financial_ratios_19mar_2012.pdf [Accessed 29 Apr. 2018].
Cardona, O.D., 2013. The need for rethinking the concepts of vulnerability and risk from a
holistic perspective: a necessary review and criticism for effective risk management. In
Mapping vulnerability (pp. 56-70). Routledge.
Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios:
A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Forbes.com. (2018). Forbes Welcome. [online] Available at:
https://www.forbes.com/sites/mikepatton/2014/11/30/everyone-needs-risk-management/
#aba32e0729f1 [Accessed 29 Apr. 2018].
Investor.genworth.com.au. (2018). Genworth - Investor Centre. [online] Available at:
http://investor.genworth.com.au/Investor-Centre/?page=reports-and-presentations [Accessed
29 Apr. 2018].
Limited, G. (2018). Genworth Mortgage Insurance Australia Limited: Private Company
Information - Bloomberg. [online] Bloomberg.com. Available at:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=262493228
[Accessed 29 Apr. 2018].
Member.afraccess.com. (2018). [online] Available at: http://member.afraccess.com/media?
id=CMN://2A1067777&filename=20180228/GMA_01956212.pdf [Accessed 29 Apr. 2018].
Mwangi, M. and Murigu, J.W., 2015. The determinants of financial performance in general
insurance companies in Kenya. European Scientific Journal, ESJ, 11(1).

12AUDIT ASSURANCE AND COMPLIANCE
Sweeting, P., 2017. Financial enterprise risk management. Cambridge University Press.