Critical Analysis and Evaluation of Key Audit Matters in Audit Reports

This report critically analyzes key audit matters within independent auditor's reports, focusing on the impact of ASA 701 and the lessons learned from the global financial crisis, specifically referencing the Lehman Brothers collapse. The report examines the significance of the auditor's role in communicating crucial information to stakeholders, the importance of going concern assessments, and the reduction of information asymmetry through transparent financial reporting. It delves into the application of dissemination and information asymmetry theories and evaluates the considerations that auditors take into account when determining the importance of a matter. The analysis also highlights the significance of corporate governance practices and the impact of these matters on financial statement users. The report emphasizes the need for comprehensive audit reports that provide relevant information, promote transparency, and support informed decision-making. The report also discusses the role of internal audit and its performance in the context of Reserve Bank of Australia, including the activities of special audits and recommendations for improvements in management processes.

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Audit
Name:
Course
Professor’s name
University name
City, State
Date of submission

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Table of Contents
Introduction......................................................................................................................................3
Major Audit Matters........................................................................................................................4
Report of the independent auditor and main audit matters..............................................................5
Dissemination theory and information asymmetry theory..............................................................5
Explanation of why the auditor considered the matter to be of major importance in the audit.......6
Additional Works.............................................................................................................................8
Recommendations............................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

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Introduction
The concern with the disclosure of increasingly useful accounting information, trustworthy and
transparent, has increased with the current adoption of governance practices by several
companies. The Institute of Independent Auditors of Australia defines in its corporate
governance manual that the audit is one of the factors that contribute to good governance
practices.
The importance of independent auditing lies mainly in the disclosure of its report, as it is the
main form of communication between auditors and users of information (Glover, Taylor and
Wu, 2016). As the independent auditor's report is one of the main instruments for decision-
making, there was a need for a more information, which led to the creation of a new reporting
model.
One of the most significant changes was the addition of the section on Main Audit Issues.
According to ASA 570, The auditors should report a company as a going concern. The auditors
are supposed to conduct a risk assessment procedure to acertain that the organization is a going
concern before communicating in the report Bédard, Coram, Espahbodi and Mock (2016). This
is the same principal as ias 570 which stipulates that an auditor should report whether the
organization is a going concern. Due to the standardization with the international norms, the
concern with the governance, the increasing needs of users and the information contained
therein, the independent auditor's report has been the subject of several research in recent years.
Whether through your analysis, the level of understanding of your standards, from their study
after legal innovations or the innovations of the new report. Krahel, (2015) in his dissertation,

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carried out a qualitative analysis through content analysis of the audit reports from 2010 to 2012
of the companies listed in the B3, and a quantitative analysis of the influence of corporate
governance on performance and market value of the same companies. The results showed that
most of the companies are audited by Big Four for conveying greater credibility to the market,
so few had opinions with reservations and abstaining from opinion. In relation to the value
market and performance, found that not always good governance practices equivalent to a higher
value and a better performance.
Souza e Silva (2013) analyzed the content of the reports for the year 2011 of the Australian
companies listed in the new market, pointed out the main similarities and differences between
them, and found that conflicting opinions and information had degree of homogeneity. Tristan et
al. (2015), reviewed the 2011 reports to 2013, also of the Novo Mercado companies, verifying
how they were expressed in terms of the financial statements. Thus, they observed that the
companies have great reliability in their reports and have concluded that the work of the
independent auditor is of paramount importance for transparency and credibility in the
segment of the new market.
In the midst of this context, this study analyzed the New Reports of the Auditors Independent of
Australian companies listed with the objective of identifying, categorizing and analyzing the
Main Audit Matters contained therein. With this, the following problem was elaborated to direct
the Research Development:

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Major Audit Matters
According to ASA 710, the mandatory reporting of Major Issues Audit is only for reports of
companies listed on stock exchanges. This Auditing standard contains differences from from ISA
701, which have been made to maintain audit quality. It provides explanatory material nad
application in regards to key audit matters being reported.
With In this case, we chose B3, where we found a special listing segment containing companies
that have committed to adopt corporate Thus, this work delimited the analysis of company
reports listed on the stock exchange.
Report of the independent auditor and main audit matters
Audit is a term used by several areas for the purpose of expressing the opinion, based on
concrete facts, of an expert on a certain subject. In accounting, it is the branch that is dedicated to
testing the efficiency and effectiveness of the entity's equity, with the purpose of issuing the
opinion an auditor with technical and professional specific
Dissemination theory and information asymmetry theory
In the case of Major Audit Matters, disclosure is judgment of the independent auditors as a way
of companies, in order to reduce the existing informational asymmetry. According to William,
Glover and Prawitt (2016). the lack of information among the subjects involved in negotiations,
also considering the dishonesty and costs contained, can be detrimental both to stakeholders, and
for the efficient functioning of the market.
In view of this, IFRS were mainly designed to reduce this information asymmetry and to satisfy

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the needs of investors with the right information. In the view of William, Glover and Prawitt
(2016), with the adoption of international accounting for the relevance of accounting
information, seeking
between relevance and objectivity, there was a change of attitude, giving greater weight to
subjectivity, which is even more evident with IFRS 15. IFRS follows principles and qualitative
characteristics in the search to present the best possible information reliable and relevant to
stakeholders He, Pittman,Rui and Wu ( 2017). Therefore, it is understood that the requirements
of a interpretative and critical reasoning arising from the use of judgment for proper application
international accounting standards, reflect the objectives of IFRS and provide information to
users.
In theory, current international standards have increased the degree of judgment and decision-
making about the accounting facts that involve the process of recognition, measurement and
disclosure of accounting information, consequently resulting in greater quality and utility.
However, Boolaky and Soobaroyen, (2017) affirm that the success of the accountants in the
process of measuring and recognition of information, depends on the level of knowledge of the
subject, or
to establish or define clear and objective criteria. They also point out that adoption of the IFRS
standard is more complex than the old standards, requiring more judgment and decision making
Reference to the place where the subject is disclosed in the financial statements.

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Explanation of why the auditor considered the matter to be of major importance in the
audit
A45. The descriptions may also refer to the main considerations that led the auditor, in the
circumstances of the audit, to determine that the matter is of major importance, for example:
• economic conditions that affected the auditor's ability to obtain audit evidence, for example,
markets with no liquidity for some financial instruments;
• new or emerging accounting policies, involving, for example, subjects specific to the entity or
its of the accountant, or auditor in the case of audit reports.
is a legal entity with right private enterprise, anonymous, open economy, organized in the form
oof a single bank, and has as its object the practice of all banking operations assets, liabilities and
ancillary services, the provision of banking intermediation and financial suppression under its
multiple forms and theany activities provided to institutions that are part of the Financial System
The Internal Audit
The Internal Audit activity of Reserve Bank of Australia is subject to the regulation the National
Monetary Council (CMN) and the Federal Executive Branch. The audit Bank is part of the
Internal Control System of Reserve Bank of Australia and has Self regulation that governs its
operation.
The Internal Audit has its constitution set forth in the Bank's by laws, is directly linked to the
Board of Directors (CA), which, complying with the its role of supervision, defines the

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responsibilities of the Unit. The Unit's management is the responsibility of the Management
Committee, with by the Auditor General and five Executive Managers. The organization of
Internal Audit is focused on the fulfillment of its responsibilities and performance of the tasks
assigned to it. The organizational structure is composed of the Headquarters - formed by the
Administration and Division Management - and by the Audit abroad.The internal audit
department is responsible for the coordination of Special Audits. The managements in the
international operation of the Company.
Audit Performance The performance of the Internal Audit considers the nature and complexity of
the organizational environment in which the Bank is inserted and covers in Conglomerate
preservatives and their interrelationships.
All the developed works count on the aid of own tool, developed in the web environment
(Intranet), which supports the audit process in all its phases.
In 2018, the performance of the Internal Audit provided the coverage of the Conglomerate
Reserve Bank of Australiain its fullness and complexity, supported by the vision of critical
processes with the vital functions of the Organization Sultana, N., Singh, H. and Van der Zahn,
J.L.M., (2015). This approach is based on the global and integrated perception of the processes
that make up and sustainability of the business and of the respective risks to which the
Conglomerate is exposed.
Audits have been anchored in this approach, the programming of which strategy to evaluate the
Company's cycles of up to three years. Work has been programmed to exceed the calendar year,
in order to allow better manage the seasonality of available resources

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Additional Works
In addition to the initial work planned for 2017, 36 new works, of which 13 were completed
during the year and is estimate for completion in 2018. The motivation for these new works
resulting from the constant mutation of internal and external environments and the linked, giving
rise to supervenient actions that require action. by the Internal Audit, with the purpose of
generating information decision-making levels of the organization and process managers, to
mitigate risks.
Special Audits
It includes activities that aim to assess the causes of occurrences irregularities identified within
the scope of the diICSplinary control process, and contribute to better risk management and
control. Thus,in addition to addressing improvements in business processes, Audits (EA) are
intended to delimit the participation of those involved in the irregularities, impute responsibility,
quantify losses and feed back the Internal Audit planning process.
Recommendations
 The audit report should focus on the most crucial details that are likely to affect the
stakeholders like the shareholders.
 The audit report should give a timeline on when the the highlighted issues are going to be
rectified.
 The report should also mention the cause of the issues mentioned.
Since 2016, the Internal Audit has been carrying out, annually, scheduled audit, with the
objective of identifying the main causes of irregularities and recommend to managers the

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development of actions that c ontribute to reduce recurrences, with consequent improvement of
management processes to mitigate operational risk.
Annual Report of Activities of the Internal Audit
By the external audit firm are certified by the company itself, without prior evaluation by the
Internal Audit, conformed and foreseen in contract Other Jobs they comprise the activities
related to the planning of Internal Audit.
The Internal Audit carried out, in 2018, work to evaluate the effectiveness of the Reserve Bank
of Australia Internal Control System (ICS), conformance and planning Yearly. The work was
structured based on the COSO reference model, considering the following components: Control
environment; Identification, Evaluation and Risk Rationale; Control Activities; Information and
Communication; and Monitoring. The work highlights points of attention, which result in of
audit recommendations, for actions by processes.
In this work, it was verified that the ICS of Reserve Bank of Australia is effective and adequate,
considering the size, nature, complexity of the business and the management of risks Velte, P.,
(2018).Contributes to achieving the strategic objectives of the Organization, mitigate risks that
enhance results and support the governance and decision making.
Conclusion
The Auditor Report is the most important part of the Audit performed. It represents the
main stage of the Auditor's work, which is the communication of the results. A Report that is
poorly presented and that allows the Audited response or allows the management of the company
to make a bad evaluation of all work done, means the demoralization of the Audit value and,

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finally, the demoralization of the professional himself. We have already seen situations where
the auditor was knowledgeable of the techniques and procedures of the area where he was
working, and yet, in presenting the report, he was able to detract from all his technical attributes,
leading to failure in an excellent fieldwork. We are not here to teach you how to make reports.
We seek, through established concepts and our own experience, to bring to the audit
professionals, subsidies, which, in our opinion, are comprehensive and can be framed and
observed in the preparation of audit reports, regardless of the company.
It is through the report that the auditor will show what has been examined. It is at that
moment that the management of the company and those involved in the execution of the tasks
will be informed about what can be improved. It is therefore essential that all audit work is
planned and structured in advance, with logical and efficient conclusions Kachelmeier, Schmidt
and Valentine (2017). This responsibility only and exclusively with the auditor, who should be
careful to say the right things at the right time. Often, however, the Auditor misses reports,
presenting the facts in a disorderly manner and presenting suggestions incompatible with the
expected solutions. If the auditor can make your report easily understood by anyone who reads,
you can certainly make sure that your "product" is accepted and that the top management of the
company will know how to value and appreciate your work

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References
Bédard, J., Coram, P., Espahbodi, R. and Mock, T.J., 2016. Does recent academic research
support changes to audit reporting standards?. Accounting Horizons, 30(2), pp.255-275.
Boolaky, P.K. and Soobaroyen, T., 2017. Adoption of International Standards on Auditing
(ISA): Do institutional factors matter?. International Journal of Auditing, 21(1), pp.59-81.
Glover, S.M., Taylor, M.H. and Wu, Y.J., 2016. Current practices and challenges in auditing fair
value measurements and complex estimates: Implications for auditing standards and the
academy. Auditing: A Journal of Practice & Theory, 36(1), pp.63-84.
He, X., Pittman, J.A., Rui, O.M. and Wu, D., 2017. Do social ties between external auditors and
audit committee members affect audit quality?. The Accounting Review, 92(5), pp.61-87.
Kachelmeier, S.J., Schmidt, J.J. and Valentine, K., 2017. The disclaimer effect of disclosing
critical audit matters in the auditor’s report. Working paper.