Detailed Auditing and Assurance Report: FFA, TRC, and SBF Analysis

This report provides an in-depth analysis of an audit and assurance case involving FFA, TRC, and SBF. It examines the audit responsibility in maintaining corporate governance, identifies financial misconduct, and assesses material misstatements within the financial statements. The report highlights questionable revenue recognition, asset valuation issues, and breaches of corporate governance. It includes a decision-making process based on the AAA model and culminates in an audit report presented to the managing partner of SBF. The report evaluates the responsibilities of SBF, particularly in relation to its client FFA and its subsidiary TRC, including the failure to identify and address financial irregularities. The report also provides recommendations for improving audit quality, strengthening corporate governance, and addressing ethical breaches. The report concludes with an analysis of the role of key individuals like Skye Martine and their impact on the audit process and financial reporting.

Running head: AUDITING & ASSURANCE
Auditing & Assurance
Name of the student:
Name of the University
Author’s Note:

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Executive summary
The study sheds light on the Audit and audit assurance with the identification of audit
responsibility towards maintaining corporate governance into the audit report. The report
provides a possible action that can be taken by the FFA to reduce the material misstatement
into the financial statement. Further the study identifies a decision from the auditor following
AAA decision making process. Finally the study prepares an audit report depending on the
firms’ responsibility towards their client FFA and TRC where the accountant expresses an
opinion to the managing partner of the SBF.

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Table of Contents
Introduction................................................................................................................................3
Audit Responsibility on maintaining corporate governance......................................................3
Decision making depending on AAA Model.............................................................................6
Reporting to the Managing partner of SBF................................................................................7
Introduction............................................................................................................................7
Identification and evaluation of problem...............................................................................8
Opinion.................................................................................................................................10
Conclusion................................................................................................................................10
References................................................................................................................................12

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Introduction
The audit responsibility explains an opinion on whether the management has fairly
presented the information into the company’s financial statement. This has a responsibility of
identifying error and work into the interest of public and other stakeholder. Therefore, the
study identifies the Audit and audit assurance depending on responsibility of an external
auditor’s towards their client. The SBF’s responsibility towards maintain ethics into audit
process has been identified along with the identification of the SBF’s responsibility towards
FFA has been identified towards reducing the misconduct into the management and material
misstatement. Finally the report represents a development of the audit report to the SBF’s
managing partner through representing an opinion on the SBF’s responsibility towards client
companies.
Audit Responsibility on maintaining corporate governance
With the responsibility of reviewing the FFA’s corporate governance the audit firm
has recognized few misconduct into the client’s financial statement that are required to be
reviewed by the Samantha Gabriell. Depending on the Steve Barker’s report a financial
misconduct has been recognized into the asset value representation and into the cattle sales.
The cattle sales have shown questionable revenue recognition. As per the ASIC, the over
view of the impairment where the unnecessary cash flow, assumptions and material
misstatement between cash flow used and the assets tested are needed to be recognised
(Asic.gov.au, 2019).
To rectify the system, the Samantha Gabrielle has been given some suggestion to
check for. These are written below:

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1. Protecting shareholders’ interest has been the primary responsibility for an auditor.
Hence while FFA was breaching the corporate governance the auditor needed to
ensure that the board receives accurate and reliable information (Asx.com.au, 2019).
2. The crisis management has been a part of audit responsibility. The external auditor
undertakes that responsibility at an event of allegations of fraud and corruption. The
auditor can help in developing good corporate governance by delivering efficient
crisis management plan that to be used at the moment of crisis (Aasb.gov.au., 2019).
3. The audit person needed to evaluate the board preference. In this way the member’s
information could have been checked and rectified. In such a way the company’s
adoption of the corporate governance could have been checked.
4. Evaluating corporate governance from the prospective of revenue recognition could
have been possible if the misconduct into the cattle sales would have been recognized.
Hence the responsible person for checking the corporate governance needed to check
the financial statement such as income statement and cash flow. This could give an
idea over the company’s previous accounting process and material misstatement at the
previous audit report and current report as well.
5. The Samantha Gabrielle needed to promote the accountability by introducing the
measures and policies designed to comply the accountability in the work place.
6. The auditor needed to ensure that whether the audit quality has been followed into the
FFA’s reporting (ennox& Zhang, 2014).
7. The auditor needed to recognize the FFA’s revenue earning strategy where the public
interest needed to be evaluated into their financial statement.
8. The Samantha Gabriell needed to examine the previous years’ financial reprot
through which the misconduct could have been identified and the audit quality could
have been maintained and rectified.

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9. The auditor has a responsibility of identifying the changeover in the financial
information which could help in maintaining the public interest.
The FFA has breached the revenue recognition policy under the corporate governance
act. This has been recognized that the FFA did not represented the actual information for a
long period of time as Skye Martine did not want to disclose the actual financial information
related to the revenue recognition through cattle sales. As per this, principle ofthe company
should have established sound risk management framework and a periodical review system
where the company could recognize the material misstatement easily on a periodical
evaluation of the financial information (Kerzner& Kerzner, 2017). Further the company
could have taken action on the ethical breach through the representation of the financial
statement maintaining the public interest (Asx.com.au, 2019). Further the company’s
safeguard has been stated bellow:
1. FFA needs to recognize and disclose the functions which are reserved to the board
and same has been delighted to the senior executive.
2. Company needs to disclose the evaluation of the process which includes the discloser
that states on the company’s performance evaluation and the performance evaluation
of the senior executives.
3. The company should provide information depending on the esurience of the
publically availability of the information.
4. The company needs to makes a periodic review of the operation and the financial
statement so that the misconduct can be recognized (Bischak et al., 2014).
5. The company needs to develop a strategic plan for enhancing the corporate
governance into the organization (McCahery Sautner& Starks, 2016).
6. The major percent of the directors needed to be independent.

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7. A whistle blower needed to be appointed to maintain the corporate principle. That
person could help through providing information on the misconduct into the
organization (Papandrea, 2014).
8. The FAA needed to identify the public interest where the shareholders’ interest
needed to be re-recognized and redeveloped the corporate strategy (Craig, R.,
Amernic & Tourish, 2014).
9. The company’s contributory negligence needed to be reduced with developing a
timely operational audit management process (Ben-Shahar& Porat, 2016).
Decision making depending on AAA Model
American accounting association Model Decision making process
Determining the Fact The facts are contributory negligence,
questionable revenue recognition method
followed by FFA, material misstatement in the
financial statement of TRC, The inventory has
been misstated and some has been done for the
net assets.
Defining the ethical issue The ethical issue has been identified in material
misstatement which includes TRC inventory
misstatement, Asset misstatement, method for
recognising revenues on its sale of cattle, lower
audit quality.
Identify major principle, rules and value Representation true value, marinating public
interest, maintains management ethics,
Conduction of the periodical review system into
the operations of the organization.
Specify the alternative Introducing a risk and review framework in to the

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internal and external operational audit.
Comparing values and alternatives Through the review team the framework would
provide a scope of identifying the mistake.
Assessing the consequences A periodical review system has been developed
by the company which would reduce the
possibility material misstatement.
Making an own decision The information which has been shared by her is
wrong while auditing. Therefore, for the further
purpose the company is recommended to develop
an internal audit system which compresses with
the periodical review system. Furthermore, the
Sky martin should be removed from the board as
the unethical event has been taken place when
she was present.
Table 1 Decision making
The senior auditor namely Sky martin knew the original fact where the material
misconduct has been done into the cattle sale through the wrong representation of the revenue
recognition value into the financial statement of the FFA since last 10 year. Hence with the
support of breaching the audit responsibility and the corporate governance the person named
Sky martin, needs to be removed from the audit community of the company and furthermore
the person needed to be removed from the board. Furthermore the audit quality needs to be
improved where the fair value actually reflects the company’s position into the market
(Magnan, Menini & Parbonetti, 2015).

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Reporting to the Managing partner of SBF
Introduction
The report consists the fact of identification of the issues that are raised in the client
company namely FFA. The report provides idea on the misconduct of the financial
management and the material misstatement where the financial statements have been
manipulated by the subsidiary company TRC. The report includes the breach of corporate
governance by the FFA and their subsidiary company. This includes the material
misstatement where the SBF’s responsibilities have been judged. Further the report provides
idea on the changes over of the financial information which has been done by the TRC and
the reason of failing to due care by the SBF has been analysed. This also explains duty of the
SBF towards the McCarran Pastoral. Further, this includes the identification of the breach of
accounting principle by the FAA.
Identification and evaluation of problem
This segment of the report explains the changes required into the FFA’s accounting
audit system and required in the internal and external audit system. This has been recognised
that FAA has not followed the AASB 15 for the revenue recognition (McCarthy& McCarthy,
2014). Hence the company has overvalued their revenue. This helped TRC to represent a
strong balance sheet into the market. However the further material misconduct has been
recognised into the inventory and asset management sector of the TRC. While identifying the
issue the below stated explanation has been formulated based on the audit responsibility
towards the TRC, FFA and the McCarran Pastoral:
This has been recognized that the audit firm has not followed their responsibility
towards TRC as SBF could have rectified their corporate governance through the
development of an internal and external audit system(Cpaaustralia.com.au, 2019). As a result
of which the TRC’s corporate governance has realised a down turn while identifies the

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material misconduct into the assets and the inventory. SBF failed to incorporate corporate
governance into their financial report. This has been recognized that as stated by the Sky
martin theaudit process into the FFA has been the same for a longer period which includes
the TRC’s misconduct into the inventory management and as well into the asset management,
Further the corporate governance has not been evaluated and nurtured by the SBF firm. The
audit firm could have developed a risk and review team for the periodical review system
however the system has not been included (Albakri et al., 2014). The SBF fails to take due
care as the firm did not report the misconduct with mentioning the indication of offences. The
auditor failed to perform the external auditing as the firm did not identify the material
misstatement since 10 year. With the identification of the misstatement the company could
have been given advice to strengthen their corporate governance (ttredge, Fuerherm, 2014).
Rather the company loses their position with realising a high loss on acquisition.
However, the FFA has not been recognised as guilty towards the material
misstatement. The company has been following the misstatement into the financial statements
as this information has not been shared with thecompany’s directorneither the SBF has asked
for a review into the company’s corporate governance (Armstrong et al.,2015). However, the
senior auditor of the SBF knew this factor since 10 years although no rectification has been
made by the auditor. Hence the company had no idea over the misconduct into the financial
report (Ege, 2014). However the reduced audit quality or the loophole into the audit
responsibility has been recognised in managing the audit responsibility of TRC. With the
lack of involvement with the corporate governance the company realises loss as this oppose
in implementing effective internal audit strategy. The contributory negligence has been
recognized towards forming a review risk management frame for the safeguard by the
auditor. Hence the parent company namely FFA sues the SBF for neglecting the audit

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responsibility and maintains lower audit quality while representing financial reporting
(Tepalagul, Lin, 2015).
Yes the company owes a duty for the McCarran Pastoral. Through the procurement of
the real and accurate information the auditor has a responsibility of representing true and fair
value of the company’s performance and financial position, the audit firm’s responsibility of
representing FTC’s true position towards the McCarran Pastoral has been recognised.
Keeping the public interest and shareholder’s interest as the main concern the auditor has a
responsibility of marinating ethics into the financial report presentation. Influenced from the
views of (Plambeck& Taylor, 2015), this has been recognised that when a company buys
share of the TRC, the auditor also needs to represent a responsibility of providing actual
company’s financial positions towards their share holder or investor. Therefore, the audit firm
SBF owes a responsibility over the representation of the financial information. However audit
firm’s mistake towards the identification and representation of changeover of the financial
information has been recognized. There the overvalued of the net assets and inventory needed
to be represented to the investors (Feng, McVay& Skaife, 2014).
Opinion
The opinion has been given based on the requirement of the amendment of the
revenue recognition policy and principle in the FFA, alongside formulation of the effective
corporate governance into the FAA would help in enhancing the profitability for the
company. Furthermore, the material misstatement into the TRC’s financial statement needs to
be checked and rectified by the auditor. This includes the rectification of the overvalued
inventory and net assets value in the financial statement (Hung, 2016).

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Conclusion
The study has provided idea on the identification of the breach of ASKS principles
and recommendation where the Samantha Gabrielle’s responsibility towards maintaining
audit responsibility has been identified. While identifying the Audit responsibility the study
provides advice to the person. The study also provides idea on action needed to be taken by
the FFA to rectify their corporate misconduct and material misstatement. The report identifies
a reporting criteria depending upon the code of ethics where the decision making has become
easy through the identification of the error into the corporate governance. Finally, the report
concludes with the fact of identification of the SBF’s responsibility towards TRC and FFA
which helped the accountant to make a report to the managing partner of the SBF.