Australian Auditing and Assurance: Philips Financial Report Analysis

This report provides an analysis of auditing and assurance practices in Australia, focusing on the financial report of Philips for the year ended December 31, 2017, which was audited by Ernst & Young Accountants LLP. The audit was conducted in accordance with Dutch laws and standards, which are similar to those in Australia, and also complies with ASA 101 Preamble to the Australian Auditing Standards. The auditor also assessed the internal control over financial statements based on the COSO framework and PCAOB standards, issuing an unqualified audit opinion on February 20, 2018. The report highlights the auditor's compliance with ASA 200 and ASA 250, ensuring that the financial statements adhere to GAAP and that internal controls are effective in maintaining accurate financial records and preventing unauthorized asset disposition.

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and assurance in Australia
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Discussion of the issue
The financial report of Philips for the year closed on 31st December 2016 has been
audited by Ernst & Young Accountants LLP. They issued the report on financial statement
for the year ended 2017 as per the Dutch Laws that includes Dutch standards on auditing.
However, the Dutch laws and standards are similar to the standards that are existent in
Australia. The auditor also issued the report regarding the consolidated financial statement
for the year closed in 2017 in accordance with the Standards of ASA 101 Preamble to the
Australian Auditing Standards and they are likely to get filed with US SEC (Securities and
Exchange Commission) on 20th February 2018 (Philips, 2018).
The financial report of Phillips has been audited for the internal control over the
financial statements as on 31st December 2017. The audit is carried out on the basis of the
criteria recognized under the internal control regarding the integrated framework that is
released by Committee of Sponsoring Organizations of the Treadway Commission under
COSO criteria. The company in while operating in Australia complies with ASA 200, which
implies to Objectives and General Principles Governing an Audit of a Financial Report.
Further, the audit is carried out on all the material aspects taking into consideration the
efficient internal control on the financial statements as on 31st December 2017 on the basis of
ASA 250, which relates to Consideration of Laws and Regulations in an Audit of a Financial
Report. The auditor also audited the reports in accordance with PCAOB (Standards of public
company accounting oversight board) (Simnett & Huggins, 2014). The auditor audited the
consolidated balance sheet, changes in equity, statement of income, comprehensive income
and cash flow statement for 2 years ended on 31st December 2017. They also audited the
notes associated with the financial statements. Ernst & Young issued the unqualified audit
opinion dated on 20th February 2018. The audit was conducted in compliance with the
PCAOB standards, which is similar to ASA 320 that relates to Materiality in Planning and

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Performing an Audit and Materiality and Audit Adjustments. As per the requirement of the
standard the auditor was required to perform and plan the audit for obtaining the reasonable
assurance regarding whether the efficient internal control over the financial statements are
maintained in all the material aspects. Audit for the company included gaining the
understanding over internal control over the financial reporting for evaluating the risk that
exists in material weakness, evaluating and testing the operating and design effectiveness
regarding the internal control depending on the assessed risk. The auditor performed the
procedures considered as necessary under the circumstances with respect to the Australian
Standards. As per the auditor they provided reasonable basis for providing the opinion
(Eshleman & Guo, 2014). As per the auditor’s report the entity’s financial statements are
prepared in accordance with the GAAP (generally accepted accounting principles). Further,
the internal control of the company regarding the financial reporting included the procedures
and policies those were – (i) pertained to maintenance of the records those were presented
with reasonable detail, fairly and accurately reflects the disposition and transaction of the
company’s assets (ii) provided the reasonable assurance regarding the fact that the
transactions were recorded to permit the preparation of financial statement in compliance
with GAAP and the expenses and receipts of the entity are made in compliance with the
director’s and management’s authorization (Staples, 2015) and (iii) provided the reasonable
assurance with regard to timely detection or prevention of the unauthorized acquisition,
disposition or use of the entity’s assets those may have material impact on financial statement
of the entity.

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Reference
Eshleman, J.D. & Guo, P., (2014). Do Big 4 auditors provide higher audit quality after
controlling for the endogenous choice of auditor?. Auditing: A Journal of Practice &
Theory, 33(4), pp.197-219.
Philips. (2018). Philips - Australia. [online] Retrieved 5 October 2018, from
https://www.philips.com.au/
Simnett, R., & Huggins, A. (2014). Enhancing the auditor's report: to what extent is there
support for the IAASB's proposed changes?. Accounting Horizons, 28(4), 719-747.
Staples, C. L. (2015). Generally Accepted Accounting Principles (GAAP). In Encyclopedia
of Public Administration and Public Policy-5 Volume Set (pp. 1-5). Routledge.