Coca-Cola Amatil Auditing: Australian Standards, Compliance & Opinion

This report provides a detailed analysis of the auditing activities of Coca-Cola Amatil, an ASX-listed company, focusing on compliance with Australian Auditing Standards such as ASA 701, ASA 315, ASA 200, and ASA 570. The report examines the auditor's independence, remuneration, and key audit matters, including the valuation of intangible assets and accounting for rebates and promotional expenses. It also discusses the structure and responsibilities of the audit committee, the auditor's unqualified opinion, and the differences in responsibilities between directors, management, and auditors. The report concludes with recommendations to enhance the effectiveness of material information developed by the company's auditors. Desklib offers a wealth of similar solved assignments and past papers for students.

RUNNING HEAD: Auditing of Coca-Cola Amatil in Australia
Auditing and Assurance in Australia
Coca-Cola Amatil

Auditing of Coca-Cola Amatil in Australia 1
Executive Summary
The below mentioned paper evaluates the details about the auditing activities of the company
Coca-Cola Amatil that is listed in ASX. The ASA 701 talks about the communication with
auditors for the key audit matters in the independent auditor’s report. The report deals with the
responsibility of the auditors to circulate the key audit matters in the report made by the auditors
for the stakeholders of the company. The report should be formed with transparency and should
be true and fair as well. Apart from this, the ASA 315 is also implemented in the report that
helps in identifying and evaluating the risk of material misstatement by knowing the company
and its environment. The latter part of the report also identifies the misstatement of materials
occurred due to fraud or error in the books of accounts of the company. Other auditing standards
that are also applied in the report are ASA 200 and ASA 570. Lastly, recommendations are also
given to increase the effectiveness of the material information developed by the auditors of the
company.

Auditing of Coca-Cola Amatil in Australia 2
Content
s
Introduction......................................................................................................................................4
Introduction of Company.................................................................................................................4
Compliance of Independence Requirements by Auditor.................................................................5
Nature of non-audit services provided.............................................................................................5
Analysis of the Auditor's remuneration as compared to the previous year.....................................6
Audit Procedures for Key Audit Matters.........................................................................................7
Structure, Responsibilities and Functions of Audit Committee......................................................8
Audit Opinion expressed.................................................................................................................8
The difference in Director’s and Management’s responsibilities with Auditor’s responsibilities. .9
Treatment of Material Subsequent Events.......................................................................................9
Presence of Other Material information........................................................................................10
Follow-ups taken from Auditor.....................................................................................................11
Recommendations and Conclusion................................................................................................11
References......................................................................................................................................12

Auditing of Coca-Cola Amatil in Australia 3
Introduction
Interacting with the key audit matters helps in attaining additional information for the
stakeholders of the company. With the communication of such information the user can easily
understand diverse information about the activities of the organization. The ASA 701 refers to
the responsibility of the auditors to express key audit matters in the auditor's report. Further,
ASA 315 states that identification and assessment of the misstatement of information with
considerate of the entity and the environment. This aspect deals with the accountability of the
auditor to analyse the risks related to the information and applying internal controls of the entity.
This accounting standard also talks about the identification of the material misstatement by
understanding the company and its environment. This deals with the understanding and
accountability of the material misstatement (Kulkarni 2017).
Further ASA 570 talks about the going concern concept of the company. It is considered the duty
of the auditors to understand various legalities related to the going concern of the company and
state its implications on the report of auditors. Lastly, ASA 200 deals with the independence of
the auditors to conduct the financial audit without facing any pressure. This standard evaluates
the scope, objective and responsibilities of the auditor along with the nature of audit executed by
them. Below mentioned report evaluates the financial reports of the company Coca-Cola
Amatil(Auditing and Assurance Standards Board 2015). It analyses the various aspects of
auditing of the company and recommendations given to them for improving effectiveness. More
details about the report are discussed below:
Introduction of Company
Coca-Cola Amatil (CCA) is one of the biggest producers of non-alcoholic drinks present in the
Asia Pacific region. The company of five major Coca-Cola bottlers present in some of the
biggest nations worldwide like, Samoa, New Zealand, Fiji, Australia, Papua New Guinea and
Indonesia. The company Coca-Cola is listed on ASX and its headquartered in New South Wales,
Australia. Some of the products served by Coca-Cola Amatil are iced tea, spring water, fruit
juices, energy drinks, flavoured milk, coffee etc. The company earned revenue of AS$5.12

Auditing of Coca-Cola Amatil in Australia 4
billion in the previous year and has more than 15,000 employees in total (Coca-Cola Amatil
2015).
Compliance of Independence Requirements by Auditor
According to the Auditing and Assurance Standards Board (2015) ASA 200 is applied to all the
financial reports as per the Corporations Act 2001. This aspect deals with the accountability of
the auditor to develop true and fair reports according to the Australia Accounting Standards.
Audits help in increasing the confidence of the stakeholders in the financial documents and the
activities of the organization. It gives an understanding that according to the opinion of the
auditor, the financial reports have been formed using financial reporting frameworks. The
auditors of Coca-Cola Amatil (2017) have circulated the information with the directors about the
future goals and objectives of the company along with audit procedures, findings evaluating
deficiencies present in the internal control system.
The auditors of the company have followed the Divisions 3,4 and 5 of part 2M.4 that talks about
the independence of the auditors and Section 307C of the Corporations Act 2001 along with,
APES 110 Code of Ethics of Professional Accountants, Auditing Standard ASQC 1 that talks
about the quality control of the company that execute the audit and review report and analyse
other financial information. The auditors of the company have also followed Standard ASA 220
that talks about the management of quality while conducting an audit of company’s financial
reports and evaluation of other historical financial information as well. It should also be noted
that the auditors of the company have also expressed their view on remuneration report created
by the directors of the company according to the Section 300A of Corporations Act 2001. The
auditor has circulated his opinion in the audit reports of Coca-Cola Amatil. The information that
is independent of any personal opinion and is resourceful for the stakeholders of the company
(Coca-Cola Amatil 2017).
Nature of non-audit services
Ernst & Young (Australia) takes tax compliance related services for the company Coca-Cola
Amatil for which they received $0.045 Million for assurance services or is about to receive
$0.587 for tax-related services.

Auditing of Coca-Cola Amatil in Australia 5
Analysis of the Auditor's remuneration as compared to the previous year
Particulars 2017(in $ Million) 2016(in $ Million) Proportionate
Change
The amount received by
Ernst and Young
(Australia) and its
members for reviewing
financial reports and
auditing on half yearly
basis
3.47 2.63 31.93%
Others 0.63 0.34 85.29%
From the above-mentioned analysis, it can be clearly seen that the remuneration paid to the
auditors for their services has been increased from last year by 31.93%. Also, the non-audit
services have also increased by 85.29% in the current year. The directors of the company Coca-
Cola are satisfied with the working of the auditors and the way they complied with the provisions
of the independence standards of auditors and non-audit services as well. The company
understands that the independence of the auditors is not an aspect that can be compromised
(Karaibrahimoglu, and Cangarli 2016).

Auditing of Coca-Cola Amatil in Australia 6
Audit Procedures for Key Audit Matters
Key audit matters are developed by the Auditing and Assurance Standards Board that is the most
significant part of the audit and is professional judgement of the auditors as well. ASA 701
determines that it is important for the auditor to include the key audit matter in the report of the
company so as to enhance the transparency in the company and the effectiveness of the audit as
well. The Key Audit Matters of the company Coca-Cola Amatil in the year 2017 was the
unlimited life of the intangible assets that was comprised with the investment agreement with the
bottlers amounting $929.3 million and goodwill to $147.5 million (Coca-Cola Amatil 2018).
Other assets of the company for that matter amounted $1093.1 Million, this amount also denoted
18% of the total resources of the group. According to the note 9 of financial statements, the
assessment of deficiency of the intangible assets and revenue generating units include the
estimation and supposition of future prospects along with cash flow of the company. The audit
procedures of the company include test of controls that relates to the execution of the procedures
and these procedures are directed towards evaluating the efficiency of design and implementing
internal controls as well. The auditors also determined the cash generating units that were used in
the impairment model. The auditors of the company also looked at the appropriateness of assets
and liabilities that were also involved in carrying value of CGU. They also tested the accuracy of
cash flow model (Stikeleather 2016).
The second key audit matter involves the accounting for the rebate and promotional expenses. In
such instances, the revenue for the sales is analysed with the rewards and risks of the ownership
that is being passed on to the consumers and the cash is measured. The understanding and
acceptance of the rebate and allowances include accrual at the end of the year that involves
prudent judgement and estimations as well. The applied audit procedures include the comparison
of data from different sources so as to determine the correctness of the information that is
reported. For the purpose of applying the analytical procedures, the auditors have selected a
performance of rebate and promotional allowances that includes the level of expected claims by
evaluating the past records, trends of claims and evaluating the adequateness of accruals
(Deloitte 2017).

Auditing of Coca-Cola Amatil in Australia 7
Structure, Responsibilities and Functions of Audit Committee
According to the Coca-Cola Amatil (2015), the company has an audit and risk committee that
supervises the risk management and internal control with thoroughly overseeing the financial
risks. It is important for the financial reporting to maintain balance, transparency along with
integrity with the organization and its policies. The financial reporting includes two aspects that
are the internal and external audit. The role of internal audit is to evaluate the efficiency of the
internal control and risk assessment process. Further external audit aims to make sure that the
process of the independent audit is followed along with recommendations to perform
independent audit. The function of the audit is to supervise the compliance of laws, policies and
procedures of the company(Auditing and Assurance Standards Board 2013).
It is considered as the responsibility of the auditor to exercise proper diligence in evaluating and
analysing the financial statements of Coca-Cola Amatil and to provide recommendations for the
favourableness of the accounting policies and adequately maintaining procedures as well. It is
the duty of the auditor to look after the risk management internal control system of the company.
The auditor of company oversee the risk management with internal control system of the
company and oversee various laws, standards and policies of the company. The association of
the ARC consists of three Non-executive Directors, who are independent directors. These
include independent Chairman that is not chairman of the Board and the Chairman of the
Sustainability Committee as well. The Board appoints all the members including the Chairman
(Auditing and Assurance Standards Board 2015).
Audit Opinion expressed
The evaluators communicated their view as an unqualified opinion. It is an expression as
communicated by the auditor reviewers with respect to the reasonableness and fitting portrayal
of budgetary proclamations. They have likewise expressed that the organization has agreed to the
accounting standards. They have evaluated the budgetary reports of the organization and its
backups including its consolidated balance sheet as at 31st December 2017 alongside an
announcement of changes in value and money streams for the year finishing. In this way, as they
would like to think, the organization has arranged its money related proclamations as per the
Companies Act 2001 (Eccles, and Serafeim 2015). The books of records uncover a genuine and

Auditing of Coca-Cola Amatil in Australia 8
reasonable viewpoint of the fiscal position and effective activities of the organization as of 31st
December 2017. It has additionally confirmed to the Australian Accounting Standards and
Corporate Regulations 2001. Adequate review confirms has been gotten which has given a
premise to the conclusion (Antao, et. al., 2016).
The difference in Director’s and Management’s responsibilities with
Auditor’s responsibilities
According to APES 110 Code of Ethics for Proficient Professional Accountants, it has been
expressed that the inspectors ought to embrace the rule of honesty that forces the commitment, to
be completely forthright, and clear in all the expert connections. It additionally suggests that they
ought to be reasonable and honest alongside embracing objectivity in the entirety of their
dealings. They likewise have the duty to embrace the standards of the expert witness and due
care, secrecy and expert conduct while managing the expert commitments (Albu, Albu, and
Alexander 2014).
The obligations of directors and administrators relate to responsibility and announcing. The
administration has the duty to stick to the Corporate Administration Standards and Proposals of
ASX. Its fundamental reason for existing is to speak to and serve the premiums of speculators by
guaranteeing that suitable human and monetary assets are set to help the organization in
achieving its goals (Florou, Kosi, and Pope 2017).
Treatment of Material Subsequent Events
According to ASA 570, the inspectors are responsible for expressing the different parts of a
going concern and ought to uncover its suggestions in the evaluator's report. ASA 315 states that
the evaluators ought to recognize and survey the danger of material misquotes by fathoming the
earth of an element (Backof, Bamber, and Carpenter 2013).
The financial risk management of the organization is executed by the treasury arrangement
which is endorsed by the board. The organization is stood up to by different kinds of risks like
commodity prices, foreign currency and interest rate. The other money-related dangers identified
with remote cash exchange, credit and liquidity (Libby 2017).

Auditing of Coca-Cola Amatil in Australia 9
Foreign currency risks relate to the changes in the money streams because of advances in the
rates of remote currency. The risk management strategy enables the organization to support the
exchanges identified with the gauge cost of merchandise sold later on the capital consumptions
are supported upon the acknowledgement of the company's responsibility. The interest rate risks
related to presenting the organization to loan fee chance related with enthusiasm bearing
monetary resources, for example, money, credits, term stores and bank overdrafts (Sharma, and
Iselin 2012). The strategy received for its alleviation is reasonable administration of these
exposures. The normal development of the supporting portfolio is somewhere in the range of one
and five years. It goes into financing cost swap and choice and cross-money swap assertions for
dealing with these dangers. Product costs risks are the risk that emerges from instability in the
costs of items identifying with crude materials used in the business. The organization has gone
into choices, swaps and prospects contracts keeping in mind the end goal to fence the commodity
price risk at acquiring lower costs and greater solidness in the results of commodity costs
(Louwers, et. al., 2015).
With a specific end goal to relieve the liquidity chance, the organization has embraced the
liquidity arrangement which goes for the base level of offices in connection to net obligation. To
deal with the translation risks it relates to changing over the financial statements of the foreign
exchanges of the organization. The instability in the foreign trade rates can affect the net
resources, benefit and salary of the gathering. The organization does not fence the interpretation
hazard and when considered vital, it is supported intermittently. The credit risks of the
organization are relieved through receiving an arrangement for building up credit limits for the
substances it is managing and may require insurance securities for the same (Schmidt 2012).
Presence of Other Material information
The organization can't uncover the material data in regards to its intent to merge one of its units
or get some other organization. In the event that it does as such, it would result in spillage of the
price-sensitive data and insider trading. Moreover, it doesn't uncover the purpose of giving a
specific sum as compensation to the key administrative faculty. It likewise does not uncover the
inalienable hazard gone up against by the organization.

Auditing of Coca-Cola Amatil in Australia 10
It is the hazard presented by a blunder or exclusion in the money related proclamations as a
result of the components other than the disappointments to control them. It speaks to the situation
of the most pessimistic scenario as every one of the controls has been flopped in such manner
(Goh, Krishnan, and Li 2013).
Follow-ups taken from Auditor
The subsequent inquiries to be asked by the inspectors at the Annual General Meeting of the
organization would be what is the premise behind shaping an opinion in regards to the genuine
and reasonable perspective of the records of the organization? Another inquiry can be what level
of attestations they have expected while looking at the books of records of the organization?
For this, the inspectors ought to get the Management Representative letter which is to be marked
by the senior administration and signifies the precision of the monetary proclamations which the
organization has submitted to the evaluators for breaking down.
Recommendations and Conclusion
Thus, in the limelight of above mentioned events, the fact should be noted that with an aim to
find out the adequacy of material data by the auditors, the stakeholders ought to look after the
effectiveness of ASA 101 Presentation of Financial Statements of the organization. The money
related reports ought to give the data about the benefits, risk, value, salary and costs, changes in
value and money streams of the organization. The examiners should survey the money related
proclamations of the organization and its consistency with the Inspecting and Bookkeeping
Models and Partnerships Act 2001.

Auditing of Coca-Cola Amatil in Australia 11
References
Albu, C.N., Albu, N. and Alexander, D., 2014. When global accounting standards meet the local
context—Insights from an emerging economy. Critical Perspectives on Accounting, 25(6),
pp.489-510.
Antao, L., Insolia, G.E. and Kolls, H.B., Coca-Cola Co, 2016. Systems and methods for
providing electronic transaction auditing and accountability. U.S. Patent 9,460,440.
Auditing and Assurance Standards Board (2015) Auditing Standard ASA 200 Overall
Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with
Australian Auditing Standards [online] Available from:
https://www.auasb.gov.au/admin/file/content102/c3/ASA_200_Compiled_2015.pdf [Accessed
16th September , 2018].
Auditing and Assurance Standards Board (2015) Auditing Standard ASA 701 Communicating
Key Audit Matters in the Independent Auditor’s Report [online] Available from:
https://www.auasb.gov.au/admin/file/content102/c3/ASA_701_2015.pdf [Accessed 16th
September , 2018].
Auditing and Assurance Standards Board (2013) Auditing Standard ASA 315 Identifying and
Assessing the Risks of Material Misstatement through Understanding the Entity and Its
Environment[online] Available from:
https://www.auasb.gov.au/admin/file/content102/c3/Nov13_Compiled_Auditing_Standard_ASA
_315.pdf [Accessed 16th September , 2018].
Backof, A.G., Bamber, E.M. and Carpenter, T.D., 2013. More precise versus less precise
accounting standards: The effect of auditor judgment frameworks in constraining aggressive
reporting. University of Georgia.
Coca Cola Amatil (2015) Audit and Risk Committee Charter[online] Available from:
https://www.ccamatil.com/-/media/cca/corporate/files/our-company/corporate-governance/cg-
01-audit--risk-committee-charter8-december-2015.ashx?la=en [Accessed 16th September , 2018].