Auditing Principles Assignment: Royal Commission into Finance Sector

This essay analyzes the Australian Royal Commission's investigation into the banking and finance sector, exploring corporate governance, ethical breaches, and financial misconduct. The report delves into the background, impetus, and resistance surrounding the commission, examining interim findings, conflicts of interest, and the prevailing corporate culture. It further discusses the impacts of the commission, potential reforms, rewards, and punishments, while also considering global awareness and cross-cultural comparisons within the financial markets. The essay emphasizes the importance of accountability, transparency, and ethical practices within the industry, highlighting the need for improved corporate governance to prevent future scandals and maintain public trust. It also examines the role of regulatory bodies and the potential for lasting reforms to ensure the stability and integrity of the Australian financial system. The research is based on the course on auditing principles and contains an introduction, background, interim findings, rewards and punishments, and a conclusion with references.

Auditing Principles Assignment 1
Auditing Principles

Auditing Principles Assignment 2
Executive Summary
The purpose of this report is to analyze the role of the Royal Commission in conducting inquiries
against the misconducts, criminal proceedings, illegal activities, financial frauds or inaccurate or
corrupted reports for the financial data presentation, auditing reports, and accounting statements
into the banking and financial sector. The report discussed the backgrounds including the
purpose of the corporate governance practices, the objectivity of the Royal Commission, reasons
for calling of the Royal Commission as well as resistance against its calling into the banking and
financial industry. The interim report emphasized the corrupted corporate culture in the banking
and financial sector and the conflict of interests among the entities or parties as well as the likely
impacts and reforms of the Royal Commission, punishments/ rewards, and further procedures for
improvements.

Auditing Principles Assignment 3
Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Part A– Background, impetus, rationale, momentum and support and/or resistance...................................4
Part B– Interim findings, revelations, conflicts of interest and corporate culture........................................6
Part C: Rewards / punishments, recommendations, likely reforms and impact...........................................9
Part D: Global awareness, globalization, cross-cultural awareness and comparisons in global financial
markets......................................................................................................................................................12
Conclusion.................................................................................................................................................14
References.................................................................................................................................................16

Auditing Principles Assignment 4
Introduction
This research essay develops an understanding of corporate governance and ethics in the banking
and finance industry through four different parts. The first part highlights the background,
impetus, rationale, momentum, and support or resistance of the Royal Commission in the
Australian banking and finance industry. The second part puts discussions on the interim
findings, corporate culture, revelations, and conflicts of interests in the banks and financial
industries. The third part discusses the likely impacts of the Royal Commission and reforms,
rewards or punishments, and recommendations for the improvement (Miller, 2017). Finally, the
fourth part discusses the standards for the globalization of the banking and finance sector outside
of the country in the cross-cultural environment, global awareness, and comparisons in the
financial markets.
Main Discussions
Part A– Background, impetus, rationale, momentum and support and/or resistance
1.The corporate governance practices in the banking operations, financial services, and insurance
companies are aimed at ensuring the accountability and transparency of the financial
transactions, auditing reports, and accounting practices by avoiding the misconducts, financial
scandals, alleged bribery or frauds. The corporate governance standards are related to delivering
the stronger oversight of the management, better financial performance, maximize shareholders’
returns, fair customer service transactions, better control on decision-making, accurate financial
statements and reports, and sustainable CSR report by ensuring fewer failures, better and
controlled decisions, minimization of the risks, higher stability, and reliability and trust of the
banking services to the customers.

Auditing Principles Assignment 5
The corporate governance in the Australian Financial and Banking sector has not been succeeded
to the great extent because of lots of hearings of misconducts, unethical practices, financial fraud
scandals in the reports and financial statements, and other illegal activities are emerging in the
past few times.
2. The Australian Royal Commission was established by the Governor-General Sir Peter
Cosgrove by issuing the Commonwealth Letters Patent for appointing the Chief Commissioner
(Justice Kenneth Hayne) and other commission staffs. The purpose of this is to investigate the
misconducts,like criminal proceedings, frauds, bribery, inaccurate transactions, and the lack of
transparency and accountability in the internal auditing reports in the superannuation, banking,
and financial and insurance service industries.It is aimed at ensuring the appropriateness of the
reporting line for the head of the internal audit, clear accountability for the risk management and
internal controls, better protection for the internal auditors, data protection and privacy, and
standards governing the internal auditing(Royal Commission, 2018).
3.The main reason for calling of Royal Commission into the banking and financial sector of
Australia is to prepare the interim report that contained the substantial findings against the banks,
financial planners, and insurance corporations in Australia. Another reason for calling the Royal
Commission is to investigate the misconducts or criminal proceedings/ illegal activities, like
alleged bribery, financial frauds, and forged documents in the banks and financial sectors under
the supervision of the chief commissioner. The Royal Commission was called for inquiring
whether the banks, insurance companies, or FIs are following the ethics in the customer service
transactions, accountability and transparency in the transaction, accurate and timely auditing
report, and standards in the accounting practices are followed or not (Financial Review, 2018).

Auditing Principles Assignment 6
4.The setting of the Royal Commission was initially opposed because of the early resistance
from the Australian Banking Association (ABA) and some of its staff members. ABA’s Chief
Executive, Anna Bligh Said that the Royal Commission could push up the interest rates in
Australia(Miller, 2017).The officials and bosses of NAB and ANZ said that calling for Royal
Commission in Australia is a serious distraction as the Chief Executive of NAB, Andrew
Thoburn says that the Royal Commission into the banking and financial industry is not necessary
because it can affect the financial decisions and can create political conflicts among the banks
and financial services and customers. ANZ’s Chief Executive, Shayne Elliott stated that the
setting of the Royal Commission can ruin Australia’s standing and the financial positioning
among the overseas investors. The federal government also ruled-out the calling for the Royal
Commission into the Australian banking and financial service industry by stating that it may
question on the capabilities of the Australian Security and Investment Commissions (ASIC) was
already is a potential regulatory authority into the Australian banking and financial sectors.
Part B– Interim findings, revelations, conflicts of interest and corporate culture
1.From the key findings of the Interim report of the Royal Commission, it is identified that there
are several examples in the Australian Financial and banking industry in which the professionals,
service providers, bankers or insurers were found victim for the breach of the ethical standards,
corporate governance, and corporate conducts. For example, NAB and Westpac fined $10,200
and $20,400 for the product disclosure statement, CBA fined $ 10,000 for over continuous
disclosure obligations, and CBA charging fees for no service and confessed to charging fees to
the dead people, Westpac’s home loan documents expose the risks, like slump in the share
prices, mortgage frauds by the banks and financial lenders are such examples that emphasized
the breach of the ethical standards and code of conducts. NAB staffs involved in the bribery ring

Auditing Principles Assignment 7
emerge showing the falsified paperwork by the working staffs, forged documents, Medicare
cards, and fake pay slips (ASIC, 2018).
2.The interim report shows that the conflict of interests are apparent in the car loans, home loans,
and credit cardsin which one reasonable person or entity, e.g. the Royal Commission thinks that
the professional judgment is likely to be compromised. The apparent conflict of interests appear
between the lenders (bankers, FIs, and insurance companies) and borrowers (customers) on the
matter of interest on the loan grants or maximize the returns of the consumers for their savings.
Some potential conflicts of interests exist in the mortgage broking business between the banks
and the customers over the commission payments made by the banks to the mortgage brokers.
The high interest rates commission will create more chances of the conflicts of interests between
the lenders and the borrowers (The Guardian, 2017).
3. The corporate culture and remuneration influence the behaviors of the parties those involved
in the banking and financial sector. The strong corporate culture guides the governmental
organizations, CBA, or regulators, like ASIC, ARPA, and Royal Commission to provide a
corporate governance structure, ethical code of conducts, and regulatory guidelines along with
the auditing standards for holding control and supervision on the banking and financial service
operations. The regulatory corporate culture directs the authorized members and regulators to
involve actively for reducing/minimizing the misconducts (bribery, financial frauds,
misrepresentation of the reports, data errors, or wrong entry in the customer transactions or
financial statements), criminal proceedings or illegal behaviors. The corporate culture of ethics
showsthe right direction for playing the roles and responsibilities ethically in ensuring the
accountability and fairness in all transactions, auditing reports, and statements for enhancing
trust and good relationship with the shareholders/ investors and customers (Conifer, 2016).

Auditing Principles Assignment 8
On the other side, the poor corporate culture could lead to the unethical practices and increasing
risks and misconducts into the banking and financial operations.
The remuneration also affects their behaviors to encourage them for supporting the prudential
risk management and long-term financial security for the banks and investors as well as the
secure financial transactions and accurate auditing reports by the banks and financial institutions.
The regulatory framework directs them for focusing on the robust control on the decision-
making, regular reviews of the outcomes, stakeholder engagement and transparency, and clarity
in the financial outcomes.
4. The corporate culture affects the banks, FIs, insurers, and superannuation service providers.
For example, the strong corporate culture supports the positive behaviors, ethical decisions, code
of conducts, ethical practices, and fair and accountable reports and financial reports, and fix
rewards for these. In opposite to this, the corrupted culture supports the fraudulent practices,
misconducts, corruptions, and scandals because of the failure of the corporate governance and
regulatory environment(HWL-EBS Worth, 2018). For example, the deregulation of the financial
industry has exposed the shocking corruption with the increasing fraudulent practices. Another
example, the Federal Court imposed the pecuniary penalty of 10 million AUD on ANZ and NAB
in their corrupted attempt to manipulate the bank bill swap rate. The Commonwealth Bank of
Australia involved in the scandal of ‘Fees for No Service’, ARPA board of members in the
alleged Bribery, CBA accused of the breach of the money laundering laws, Westpac Subsidiary
paying penalties of 493,000 AUD for the breach of the consumer protections, NAB wealth
management to pay the compensation of $25 million, and ANZ pays $30 m to reimburse the
customers are such examples of the corrupted activities or financial scandals in the Australian
banking and financial corporate history.

Auditing Principles Assignment 9
The corrupted culture could be prevented through the improvement in the corporate culture, like
the ethical code of conducts, strong corporate governance structures, and regulatory compliance
mechanism for holding control and supervision on the insurance, banking, financial, and
superannuation services. The corporate culture should encourage the active involvement of the
conduct regulators and prudential regulators and more powers and self-regulation authority to the
Royal Commission to conduct inquiries and punish the victims for their corrupted activities,
fraudulent behaviors, misconducts or illegal activities by imposing the penalties or the court
cases for the legal hearings (ASIC, 2018).
Part C: Rewards / punishments, recommendations, likely reforms and impact
1.The impact of the Royal Commission will promote and support the ethical conducts, corporate
governance, and decision-making by ensuring the stakeholders satisfaction, like financial
security to the investors/shareholders and good returns on their investments/shares. The Royal
Commission can also intervene in the legal proceedings of the banking and financial matters by
giving the financial advice to the relevant professionals, like bankers, regulators, and financial
service providers to ensure that the stakeholders’ interests, needs, and expectations are met. The
Royal Commission could also encourage the regulators, like ASIC and ARPA to actively
involved with their activities responsibilities to secure the interests and expectations of the
stakeholders (University of Wollongong Australia, 2016). The Royal Commission can challenge
the banks, FIs, and the relevant professions to operate the ventures by protecting the
stakeholders’ needs, expectations, and interests, like preventing frauds, wrong transactions, and
security to the investors’ funds as well as the loans at the lowest possible interest rates for
securing their profits. Additionally, there should be fewer risk or threats with the reduced access

Auditing Principles Assignment 10
to the misconducts in the banking and financial service operations and in the customer service
transactions.
2. The rewards and punishments are two different terms in the financial and banking service
sector. The rewards are given to the FIs, banks, insurers, and other relevant professionals (like
the members of ASIC, ARPA) for the good corporate conduct, CSR performance, and ethics in
the financial transactions, and shareholders’ satisfaction. e.g. secured transactions, good returns
to the shareholders, customers’ interest and financial security, and positive customer feedbacks.
In opposite, the punishment is given for the corporate failures of the banks and board of
directors, CEO, and senior managers in controlling the business aspects, and involving in the
misconducts, fraudulent practices, corrupted activities or financial scandals, and failure to secure
the stakeholders’ interests and expectations.
ASIC (the Australian Security and Investment Commission) plays an important role of the
conduct regulator in the financial markets or banks for promoting and ensuring the fair,
transparent, and secure financial system for avoiding the misconducts or fraudulent practices in
the auditing, accounting, and financial services (The ASIC, 2018). On the other hand, ARPA (the
Australian Prudential Regulation Authority) plays an important role of the prudential regulator in
the financial system for promoting and supporting the prudent management of the banking and
financial operations, protecting the interests of the insurance policyholders, depositors/ investors,
superannuation fund members, and other professionals by promoting financial security and
stability.
A sophisticated system of the financial security is proposed that will support the likely
regulations, like self-regulation of the Royal Commission by giving more powers to take self-
decisions and actions against the banks, FIs, insurance companies who carry the misconduct or

Auditing Principles Assignment 11
fraudulent practices by imposing the financial penalty. The Royal Commission can also sue for
the legal proceedings or court hearings against the financial scandals or frauds, misconducts, or
corruption, unethical practices, or failure of corporate governance structure by the CEO, board
directors, leadership or senior management level (The Institute of Internal Auditors Australia,
2017).
3. theRoyal Commission is recommended to determine the National auditing standards for the
standard accounting and auditing practices and conduct the inquiries against the malware
practices, misconducts, breaches, financial frauds, child abuses, or alleged bribery. The public
submission and conducts should be reported on time (no later beyond 5 pm at on 26 October) the
public submission page for the hearing by the Royal Commission during round six. The
customer satisfaction and shareholders’ maximum return should be at the priority of the banks
and financial institutions for operating the business successfully. The banks and FIs should file
their report of the financial statement, CSR report, auditing report, and risk assessment report
before the due date set by the CBA. The Royal Commission should ensure that there is clear
accountability of the transactions and better control on the financial decision-making, protection
to the internal auditors (The Guardian, 2018). The Royal Commission should also engage in
conflict of interests for resolving the disputes among the borrowers and lenders. Along with this,
there should be an effective regulatory compliance and risk management procedure for
monitoring the risks, conflicts or disputes in the banking and financial businesses.
4.The Royal Commission will affect the auditing practices, accounting standards, financial
service outcomes, and shareholders’ returns of the banks, FIs, and insurance companies by
encouraging them for following the regulatory provisions, corporate standards, ethics and
accountability of the auditing reports and decision-making. The regulatory reforms, like self-

Auditing Principles Assignment 12
regulation, will strengthen and empower the Royal Commission in Australia to hold control and
regulation on the overall auditing and accountancy practices, like conducting the inquiries
against the misconduct and unethical practices, checking the financial frauds, and settlement of
the conflict of interests and disputes through the self-regulation mechanism, controls of the
Commissioner on the decision-making and accountability of the financial statements and
reports(Sweeney and Yaxley, 2017)..
The regulatory reforms will also empower the Commissioner to conduct an inquiry without the
intervention of the CBA, ASIC, and ARPA through the self-monitoring and take self-decisions
to ensure the financial security and transparent consumer service transactions. As the result of
the reforms, the Royal Commission will give the financial advice to the CBA, ANZ, NAB,
ASIC, and ARPA regarding the statutory procedure and legislative mechanism for the legal
hearings of the conflict cases, misconducts, criminal proceedings or illegal activities. The
reforms and impacts of the Royal Commission will be the true cause of the current state of the
finance and banking sectors because the reforms will empower to take decisions and action by
the Commission on the conflicts/disputes, falsified reports, misconducts or criminal activities,
fraud scandals for fixing awards and punishment through the self-control (ASIC, 2017).
Part D: Global awareness, globalization, cross-cultural awareness and comparisons in
global financial markets
As we know that the banking, accounting, and finance sectors are global professions for which
the corporate governance structures, ethical guidelines, and professional standards vary from one
country to another country while operating in the global setting because of different regulatory
environment, legislation reforms, taxation policies, fiscal and monetary policies, government
intervention and spending pattern, distinct statutory procedures and legislation, corporate

Auditing Principles Assignment 13
governance structures and regulatory compliance mechanisms for the banks and FIs in the
overseas market conditions (ASIC, 2016).
In the global financial markets, the Australian banks and financial services operate in the global
markets with its local subsidiaries in different countries; it becomes difficult for Royal
Commission to take account of the misconducts for the overseas operations of the Australian
banks because of deregulation of the Royal Commission on the foreign operations. There are
different regulations, code of conducts, and legislation for the banks and FIs in the global
financial markets because of In Australia, CAB, NAB, ANZ, ASIC and APRA are regulatory
bodies for the regulations and issue the ethical guidelines, regulation procedures, and compliance
mechanism for the audits under the governance of the Commonwealth Bank of Australia. The
Governor-General of the CBA appoints the Royal Commission to conduct inquiry for
misconducts into the banking, financial, superannuation, and insurance service industries.But,
alike from the UK, the USA, ASIC fails to control the misconduct and criminal procedures of the
theft, data hacking, and financial scandals in the banks because of ineffective corporate
governance mechanisms and not strong control on the conducts into the banks and FIs in
Australia (Conifer, 2016). T
he Royal Commission faces issues related to the ethics and CSR in the baking and financial
operations because of the cultural diversity, changing customers’ expectations, and preferences,
the intervention of the governmental organizations and regulators for the auditing standards and
accountancy practices as well as the financial data representation in different countries.
The role of the Royal Commission should be empowered and strengthened by the Governor-
General of the Commonwealth Bank of Australia by widening the areas of conducts and
regulator in the bank and financial service operations. It should be given more powers to inquire

Auditing Principles Assignment 14
the financial misconducts, alleged bribery, corruption in reports, inaccuracy in the financial
statements, inappropriate behaviors in the transactions, criminal proceedings, or other
misconducts. The punishment should be awarded in the form of the court cases for the criminal
proceedings of the bankers or financial institutions with the shareholders, investors or customers.
The Royal Commission should follow the international standards for the inquiry commission
against the Australian multinational banks in the financial marketsfor providing the ethical
guidelines to follow the international corporate governance standards, code of ethics, and
legislation for avoiding the misconducts, like financial scandals, customer frauds, identity theft,
wrong customer transactions or inaccurate financial statement and auditing reports. For example,
it should provide a legal structure for the banks and FIs in the global financial markets for
presenting the CSR report by following the CSR standards as well as the ethical code of conducts
for the auditors, accountants, and financial consultants to behave ethically(The Commonwealth
of Australia (2018). The ASIC should empower the Royal Commission to strengthen the
principles of the conducts and however punish the offenders for the misconducts through the
inquiries on the auditing reports on the regular basis. There should be a sophisticated system for
the financial security, data protection and privacy, transparency and accountability of the
financial service transactions for the overseas investment for increasing the corporate reputation
and trust with the stakeholders in the international markets. The bankers and FIs should put the
clients’ interests and maximum shareholders’ return by following the ethical conducts in the
global financial markets.
Conclusion
Conclusively, it is analyzed that the Royal Commission provides the corporate governance
structures and ethical guidelines for the ethical conduct of the banking and financial service

Auditing Principles Assignment 15
operations in Australia. It sets the auditing principles and conducts the inquiries into the auditing
reports and financial statements of the banks and financial institutions against the bribery,
corruptions, frauds, and misconducts. Different parts analyzed the background and constitution
of the Australian Royal Commission, its key roles and responsibilities, background, interim
findings, reforms and likely impacts, reporting system, and standards for the cross-cultural or
global business operations of the Australian banks and financial institutions.

Auditing Principles Assignment 16
References
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October 2018).
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https://asic.gov.au/about-asic/what-we-do/our-role/other-regulators-and-organisations/the-apra-
asic-relationship/.(Accessed: 13 October 2018).
The Commonwealth of Australia (2018)Interim Report: Royal Banking into misconduct in the
Banking, Superannuation, and Financial Service Industry.[Online]. Available at:
https://financialservices.royalcommission.gov.au/Documents/interim-report/interim-report-
volume-3.pdf.(Accessed: 13 October 2018).
Conifer, D. (2016) NAB, ANZ bosses say calls for Royal Commission in Banking a Serious
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Financial Review (2018) Banking Royal Commission Interim Report: How Hayne could change
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https://hwlebsworth.com.au/royal-commission-into-misconduct-in-the-banking-superannuation-
and-financial-services-industry-interim-report/. (Accessed: 13 October 2018).

Auditing Principles Assignment 17
Miller, P. (2017) Good Corporate Governance is Good for Bank’s Bottom Line. [Online].
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commission.pdf?sfvrsn=2. (Accessed: 13 October 2018).

Auditing Principles Assignment 18
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