Auditing and Assurance Report: Analysis of WHSP Financial Statements

This report provides a comprehensive analysis of auditing and assurance practices, specifically focusing on the financial statements of Washington H. Soul Pattinson (WHSP). It delves into the methodologies employed, including ASA 315, ASA 320, ASA 330, ASA 560, ASA 570, ASA 700, and ASA 701, to assess the risks of material misstatements, materiality in planning and performing audits, auditor's responses to assessed risks, subsequent events, going concern, forming opinions, and communicating key audit matters. The research examines the true and fair view presented in WHSP's financial statements, emphasizing the importance of accurate valuation methods and the impact of auditing standards on the reliability of financial reporting. The report highlights the auditor's responsibility in identifying and addressing misstatements, ensuring compliance with regulations, and forming an opinion on the financial statements based on sufficient audit evidence. The analysis covers the significance of subsequent events, going concern assessments, and the overall process of forming an opinion on financial reports, ensuring that they are free from material misstatements and provide a reliable, relevant, and understandable representation of the company's financial position. The report concludes with recommendations for auditors to ensure the accuracy and reliability of financial statements.

AUDITING AND
ASSURANCE

TABLE OF CONTENTS
REPORT CONVENTIONS.............................................................................................................1
Executive Summary.....................................................................................................................1
Problem Statements.....................................................................................................................1
RESEARCH.....................................................................................................................................2
Methodology................................................................................................................................2
Findings........................................................................................................................................8
APPLICATION...............................................................................................................................9
Implications of findings...............................................................................................................9
APPLICATION.............................................................................................................................12
Conclusions and Recommendations .........................................................................................12
REFERENCES..............................................................................................................................14

REPORT CONVENTIONS
Executive Summary
Audit refers to process for evaluating accounting entries in recorded in financial
statements of company. Assurance is process to analyse the methods used in assessing
accounting entries recorded in financial statements of companies. Auditing is undertaken for
assessing whether company has followed all the applicable accounting standards and procedures
for recording the events and transactions occurred during the financial year. Auditors of
company should use the relevant auditing standards while performing the audit of financial
statements of company (Al-Najjar, 2018). The independent auditor should perform the
procedures for assessing the reliability of transactions and events that are recorded by company
so that auditor can give unqualified opinion on financial statements of company.
The research is carried out for analysing the financial statements of Soul Pattinson and
analysing the true and fair view given by statements of company. From the above research it is
concluded that auditing standards are very important while evaluating the financial evens of
company. The biases in the auditing practices can impact the reliability of business. Auditor
should not give unqualified opinion on the statements having material misstatements as they can
influence the decision of the person interested in company (Bumgarner and Vasarhelyi, 2018).
The valuation methods used by company for valuing its assets at reporting date should be
accurate and as per the accounting standards at fair value.
Problem Statements
Washington H. Soul Pattinson (WHSP) is public company of Australia listed over
Australian Stock Exchange. It is investment house having investments in diverse portfolios.
Making portfolio of industries is covered under its principal activities that include pharmacy,
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natural resources, building materials, agriculture, equity investment, corporate advisory and
telecommunications. True and fair view of the financial statements means that statements do not
have any misstatements and financial performance as well as position is fairly represented in it
by company (Earley, 2015). True states that prepared statements are accurate and correct based
on facts. Statements are prepared as per applicable standards, reporting frameworks like
IFRS and does not have material misstatements that could mislead users. They could occur
because of error or omission of transactions and balances in financial statements.
Company is valuing its assets and liabilities on fair value method. For determining the fair values
of assets and liabilities estimates and judgements have been made by company. Company is
categorizing its assets and liabilities using three of methods given as per accounting standards.
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RESEARCH
Methodology
ASA 315 – Identifying & assessing Risks of material misstatements through understanding
Entity and its Environment.
The standard is applicable to audit of financial reports of financial year as Corporations Act
2001. Auditor has to assess and identify all the risks associated with material misstatements
which may be because of fraud or omission in financial statements and assertion level by
understanding entity and the environment, its internal control, by giving a base to design and
implement response to assessed risk of material misstatement.
Auditor has studied all the regulations and external factors which were applicable to the
company. Company is an investment company which is required to follow guidelines and rules
provided by the investment regulatory authority (Gomes, Eugenio and Branco, 2015). Operating
and governance structures of business should be known to the auditor so identify the mistakes
that could occur in the organisation. If the auditor is not aware about the structure of business
there are chances that faults or errors could not be found. It is important to have knowledge about
the regulation applicable to the investment company for properly identifying the areas of errors
or defaults (ASA 315. 2019).
Risk based approach is followed for identifying the factors which can affect the business
like its competitors, competent authorities and other factors. It helps the auditors to
independently obtain objective and relevant evidence related to the assertions related to process
for forming opinion related to process (Hay, 2015). They have to identify the evidence for testing
the organisation's compliance procedures related to legal requirements, process and regulations.
ASA 320 – Materiality in Planning and Performing Audit
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It is the responsibility of auditor to apply materiality concepts to plan and perform audit of
financial assets. ASA 450 is used for explaining the application of materiality for evaluating
effects of misstatements on audit. Disclosure are to be made by company related to the
transaction or events that are significant and material to business. Materiality of transactions is
given by the amount and effect involved on the financial statements of the company. Non-
disclosing the material event can influence the decisions of users of financial statements. It will
question the true and fair approach of financial reporting. Company has disclosed the fair value
method used by it over different assets. It is important for company to disclose the valuation
methods so that they can identify which method is used for recognising the particular assets or
liabilities (Hay, 2015). Experts use different method for analysing the data there is possibility
that may face variance which can influence the decisions (ASA 320. 2019). Clearly disclosing it
will help to identify the causes of difference. The information stated was material as it is related
to the assets and equity investments and company is investment company.
ASA 330 Auditor's Responses to Assessed Risks
Standard states that the auditor has the responsibility of addressing all the risks and
misstatement identified during an audit. A company cannot perform all the processes effectively
and accurately. There will be misstatement and errors in the processes which are to be identified
during the audit and the responsibility of auditor is not restricted to identify but also to inform
the company to rectify the mistakes. If the errors are not rectified than the auditor has the
responsibility to address the areas which have not met the compliance requirement. If the
controls are reporting effectively the flaws and defects of organisations it should be reviewed by
auditor (Moffitt, Rozario and Vasarhelyi, 2018). The misstatement in the report can highly affect
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the business of company therefore it is important for auditors to assess the risk of material
misstatement related to different class of transactions.
It is important to identify the reason behind each transaction that can affect the position
and image of company. For identifying the material misstatements test of controls are performed
for obtaining sufficient audit evidence. The assessment of risk is important as it includes at
assertion level whether the controls are working effectively and the controls can be relied on by
the auditor. For checking the reliability of controls auditors should perform its own audit
procedures for obtaining the audit evidence relating to effectiveness of controls. It includes
application of controls ate relevant times, consistency in application and the means and person
applying the controls. Evidences that are obtained during interim period than the auditor is
required to obtain evidence about the changes related to controls after interim period.
ASA 560 – Subsequent events
The standards give about the responsibility of auditors about the subsequent events during audit
of financial report. Subsequent events mean events occurring after date of financial report. The
reporting framework provides specifically for referring to these as they can significantly
influence the decision of investors and position of the company. Two events are there first which
give evidence about conditions existing at the balance sheet date and second that give evidence
about the conditions arising after balance sheet date. Evidence about the events happening
between financial reporting date and auditor's report date requiring the adjustments or disclosures
in financial report are to be identified.
The procedure is only required for identifying and covering events occurring between
the date of balance sheet and date of auditor's report. Identifying whether management has
established procedures for subsequent events. Enquiring management or governing authorities of
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the company about the subsequent events that might have incurred in the company. The
subsequent events have impact over the business of company therefore it is important for
company to report them in financial reports and auditors in their audit report. After the audit
report date, it is not obligatory for auditors to perform audit procedure for financial report. After
the date of audit report before the issuance of financial report any fact comes in knowledge of the
auditor than it may require amendment in auditor's report (Ojala and et.al., 2016). Where if the
management has amended financial report than the auditors are required to perform procedures
related to the circumstances relating to amendments. Under Corporation Act, 2001 management
and governing authorities cannot restrict any amendment in financial report as result auditors are
not required to issue new or amended audit report.
ASA 570 – Going Concern
Going concern means the business is established for running for unfortunate period. Auditor has
to obtain sufficient audit evidence for ensuring that company is preparing financial statement on
the basis of going concern. The responsibility to ensure going concern uncertainty is existing
even if there is no explicit requirement for making specific assessment by the financial reporting
framework (ASA 700. 2019). Limitation of the auditor to identify material misstatement can be
greater for events and conditions and can cause the company to cease or continue as going
concern.
ASA 700 – Forming opinion & Opinion on Financial Report
It deals with responsibility of auditor to form opinion over the financial report. It covers the
content and form in which the report is issued by the auditor. ASA 701 deal with responsibility
of auditor of communicating key audit matter in audit report. ASA 705 & ASA 706 deals with
the effect on content and form of auditor report when it contains modified opinion or emphasis of
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matter paragraph or other matter paragraph. Auditor has the responsibility of forming an opinion
on the evaluation and assessment of the financial report of the company. It has to ensure that
reports are consistent with the auditing standards laid by the authorities for providing the
credibility to the financial report in the global market (Pham and et.al., 2017). The auditor has to
ensure that the standards and the financial procedure are followed accurately and properly by the
companies. The difference in reporting standards used in audit report will make the statements
incomparable to others.
Auditor is required to form opinion on the financial statements of the company that as per
the application of different auditing procedures related to the transactions are appropriately
applied or not by the company. The auditor has to form an opinion after obtaining the reasonable
assurance related to financial report whether they are free from all the significant material
misstatements, fraud and error. The conclusion is drawn after accounting for whether sufficient
audit evidence has been obtained in accordance to ASA 330, whether the uncorrected statements
are material in aggregate or individually. The opinion is to be made after considering that the
business has evaluated required by para 12-15 of ASA 700. The report has to disclose the
accounting policies that are applied and selected for complying with reporting frameworks.
Auditor has to consider the accounting estimates and the disclosures which are require to be
made by the company are reasonable.
The auditor should ensure that the information that are presented in financial reports are
reliable, relevant, understandable and comparable. Any material misstatement that can affect the
opinion of users of financial statements is to be identified by the company and reported in the
financial and annual report of the company (Yee and et.al., 2017). If after obtaining the sufficient
evidence about the material statement, management or governing authorities of company should
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be informed about it. If no action is taken on the said event auditor cannot give clear opinion
about the financial statements of company. Along with auditing standards the reporting
frameworks should also be complied for giving fair representation of the annual reports of the
company. The opinion can be modified for the fair representation frameworks.
ASA 701 – Communicating key audit matter in Independent Auditor report
Key audit matters refer to the matters that are significant and required special attention of
auditor while performance of audit. It is responsibility of auditor to consider the areas that are
material and affect the decision and position of the business. It has to report on areas having high
risk related to material mi statement or the risks that are identified as per ASA 315. significant
judgement of auditor that related to areas in financial reports involving management judgement
and accounting estimates having high uncertainty of estimation. The effect of events on financial
statement of company that occurred during year.
Auditor has to identify matters to determine that they are of most significance in
financial report for current period therefore are included in key audit matters. Key audit matters
are to be reported by auditor using subheading under appropriate subheadings in separate section
under heading of 'Key Audit Matters'. These matters are to be reported based on the auditing of
the company financial transaction for the year. The matter is reported in the auditor report for
giving true and fair view of the financial position of the company. Auditor is required to give
description about each key matter why the matter is considered significant in audit and how the
matter is addressed by auditor. How the key audit matter can influence or impact business is also
required to be given by the company. If it is determined by the auditor there are no significant
key audit matter based on facts and circumstances than the statement relating to this should be
included in the report under Key audit matter in separate section. The key audit matters are
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required to be confirmed with those charged with governance and management of company. It
drags the attention of users of financial statement about the matters that have considered
significant by the auditors.
ASA 705 – Modifications to Opinion in Independent auditor's report.
Modification to audit opinion is required when it is concluded by the auditor that on the
basis of gathered evidence from auditing that financial statements are not free of material
misstatement. Or where the auditor has failed to obtain sufficient audit evidence for drawing
conclusion related to the financial statement do not contain any material misstatement. If an
auditor does not give modified even after he is not able to obtain sufficient audit evidence than
the auditor can be penalised and reliability of the financial statement is questioned. Therefore, it
is essential that auditor follow ethical practised while reporting and forming an opinion on the
financial reports of company (ASA 705. 2019.).
When an auditor expresses qualified opinion on financial report of company because of
material misstatement than he is required to state the fact in report of the auditor. The effects of
the material misstatements are required to be reported in the auditor's report. Where the adverse
opinion is given when auditor after obtaining sufficient evidence has concluded that
misstatement in aggregate or individually are material as well as pervasive to financial report.
Disclaimer of opinion is given when the auditor fails to obtain audit evidence to base an opinion
and auditor has drawn that possible effect on financial misstatement regarding undetected
misstatement can be both pervasive as well as material. Disclaimer of opinion is given in very
rare circumstances including multiple uncertainties, auditor concludes even after obtaining the
sufficient audit evidence for each uncertainty appropriate opinion cannot be framed over
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financial reports because of interaction of uncertainties & their cumulative effect over financial
report.
Where the auditor has the restrictions from management after accepting the audit
engagement of company. It will limit scope of audit and therefore the auditor has to give
qualified opinion or the disclaimer of opinion if management does not remove the restrictions on
scope of audit. As per para 11 of 705 auditor is required to request to governing authorities to
remove limitation or to give suggestion about obtaining sufficient audit evidence through
alternative procedures. When the sufficient audit evidence is not obtained by the auditor than he
is required to determine implications of the same and give opinion accordingly about the
financial reports.
Auditor has the obligation to frame opinion on the basis of evidences obtained from
financial reports of company. The opinion of auditor is of significant important as all the users of
the financial statements rely based on the report of auditor. If the auditor does not qualify the
audit report even after becoming aware of material misstatement than it can affect the interested
people of financial statements. The reliability of the financial statements is judged by the opinion
framed by the Independent auditor.
APES 110 - Code of Ethics for Professional Accountants
Objective of the code is to explain the responsibility of auditor and the professional to act
in public interest & and to comply with fundamentals principles laid under code. There are
threats that are related to compliance of fundamental principles, safeguards and conceptual
frameworks. Integrity principles lays obligation on auditors to be honest and straightforward in
their business and professional relationships. Main objective behind integrity is to imply fair
dealing & truthfulness in the work. The code specifies that members do not associate themselves
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