Auditing and Assurance: A Detailed Analysis of CSL Limited's Audit

This report provides an analysis of CSL Limited's audit and assurance practices, focusing on key audit matters as per ASA 701 and the Audit Committee's reporting requirements. It examines the auditor's independence declaration, independent auditor's report, and non-audit services provided. A comparative analysis of auditor remuneration from 2016 to 2017 highlights changes in payments for audit and non-audit services. The report also discusses audit procedures performed for key audit matters, the structure and functions of the Audit and Risk Management Committee, and the roles and responsibilities of auditors. Furthermore, it addresses material subsequent events and the differing responsibilities of directors, management, and auditors in relation to financial reporting. The report concludes with potential follow-up questions for the auditor at the company's Annual General Meeting, offering a comprehensive overview of CSL Limited's auditing environment.

AUDITING & ASSURANCE

Executive summary
The CBL Limited attempts to feature new audit functions as per the new reporting of Audit
committee, 2016. ASA 701 is concerned to communicate key audit matters as per the
independent auditor’s report. The responsibility of an auditor has more focused to
communicate the key audit committee explained in the report especially after 2016. The aim
of communicating the key matters is to increase the communication among the shareholders.

Contents
Executive summary....................................................................................................................1
Introduction................................................................................................................................3
Introduction of the company......................................................................................................3
Auditor’s Independence Declaration..........................................................................................4
Independent auditor’s report......................................................................................................4
Non-audit services provided by auditor.....................................................................................4
Analysis of the each Auditor remuneration as compared to the previous year..........................5
A comparative analysis of total remuneration of auditors as compared to the previous year. . .6
Audit Procedures Performed For Key Audit Matters................................................................7
Structure of Audit and risk management committee..................................................................8
Functions of Auditor..................................................................................................................8
Roles and Responsibilities of the Audit Committee..................................................................9
Material subsequent events by the CSL limited.........................................................................9
The Directors and Management’s responsibilities differ from the Auditor’s responsibilities in
relation to the financial report..................................................................................................10
Follow-up questions would you ask the Auditor at the company’s Annual General Meeting 10
Conclusion................................................................................................................................10
References................................................................................................................................12

Introduction
In the current changing business environment, organisations use fraudulent measures to
achieve more profit and attract more public to invest in their company. To overcome the
problem of fraud in business, auditors are appointed to check and review the financial
accounts of a company. The company, which is chosen to, analyses the effect of auditors and
non-audit services is CSL limited. CSL limited is a biotherapeuitics company, which deals in
manufacturing of medicines and other curing products such as vaccination products. The
report brings out the brief description of Auditor`s independence declaration, Independent
auditor’s report especially for shareholders. Moreover, the annual reports analysed the
remuneration of auditors for both audit as well as non-audit services. After the modification
in the duties of auditors, the responsibilities of auditors has been changed in Australia. The
report discusses the audit Procedures Performed for Key Audit Matters (Deumeset al., 2012).
Introduction of the company
CSL limited is a biotherapeutics entity who undertakes the manufacturing of allied products
and delivers biotherapies. CSL limited is a world specialty biotechnical organisation that
finds, develops, manufactures, and advertise the products to treat serious human health
problems. The company operate segments named CSL Behring, CSL intellectual property,
and Seqirus. All the segments perform different operation such as CSL Behring produces and
distributes plasma products and recombinants. Seqirus segment produces and delivers non-
plasma biotechnical products. Moreover, this segment also produces a wide range of
antivenoms, vaccination products, and pharmaceutical products in New Zealand and
Australia. The intellectual segments of CSL is involved in licensing the intellectual property
created by the organisation to the third unrelated party. The company operates its facility in
Germany, U.K., U.S., Switzerland, and Australia.

Auditor’s Independence Declaration
The company has a clear declaration of auditor`s independence declaration as per the
requirement of section 307C of the Corporation Act, 2001. Until now to the knowledge and
belief of directors, there are no contraventions by auditor for their independence or any other
applicable code of conduct based on professionals. Although, as of now no payment has been
made to E&Y as an indemnified cost during this fiscal year (CSL limited 2016).
Moreover, the CSL limited has agreed to indemnify the auditors to the extent to which it is
permitted by the law. E&Y as a part of external auditors in terms of engagement agreement
against the claims with the third party for a particular amount that has raised from the audit.
Indemnification refers to an agreement between one party where the monetary costs can be
reimbursed incurred by any second party (CSL limited 2017).
Independent auditor’s report (shareholders)
A group of external auditor attends every annual general meeting because they are available
to provide a solution to shareholders regarding audit procedures. Shareholders are allowed to
ask the relevant questions regarding the preparation and relevance to each item in the
financial statement and how far it can contribute to profit making from the report from the
auditors (Cannon and Bedard, 2016).
Non-audit services provided
Bowlin, Hobson, and Piercey, 2015)
Clikeman, 2018)Roy and Saha, 2018)Byrnes et al., 2018)decision-making. Non-audit
services include advocate for CSL or jointly sharing the risk and the rewards. Ernst & Young
and its non-audit services
CSL limited 2017

Analysis of the each Auditor remuneration as compared to the previous year
Bruce Brook
Christine
O`Reilly
Marie
McDonald
CSL limited 2016 & 2017
Marie McDonald (The consultative committee of Accountancy bodies-Ireland, 2011).
A comparative analysis of total remuneration of auditors as compared to the previous year
Review of
Annual reports
$US (2016) $US (2017) difference % change
E&Y Australia 1284435 1142462 141973 11.05%
More related
practises
2931094 3060778 129684 4.42%
Total audit
remuneration
4215529 4203240 12289 2.91%
Non-audit
services
630372 405258 64.28%
Total
remuneration
for all the
services
4845901 5238870 392969 8.1%
(Source: CSL limited 2016 & 2017)

After analysing annual reports of two years 2016 and 2017, the remuneration of auditors do
not cost little to the company. Apart from production and operation cost, auditor`s cost also
influences the price of the product. In above comparison table, In Australia E&Y, the
company started paying more as compared to the previous year. The percentage increase in
paying remuneration reached 11.05 percent. However, the total audit remuneration paid to the
auditors have not shown much change 2.91 percent. The company has shown changes in the
payment of non-audit services, it increased from $US 630372 to $US 1035630. Percentage
increase in payment raised 64.28 percent. The total change in the payment of remuneration to
the auditors remain moderate 8 percent (CSL limited, 2017).
Audit Procedures Performed For Key Audit Matters
Key audit matters are not subjectively bound to Corporation Act, 2001. However, after 2016,
it has made most crucial in the audit procedure of financial reports. ASA 701 regulates that it
is important for auditors to link their independence auditor’s report to key audit matter
(Financial Reporting Council, 2015). These audit procedures is to boost greater transparency
and efficiency to execute the audit. The key audit matters relates to account for rebate and
other promotional expenses. The acknowledgment and evaluation of allowances can also
comprise of cash and accrual basis at the end of fiscal year. The motive of engaging the audit
procedure in audit matters is not to modify the financial statements of CSL limited
(Christopher, McGeachy, and McGeachy, 2017).
Various key audit matters could identify that help to evaluate the performance of auditor and
fairness of financial accounts that are shared by the organisation. The matter of measuring the
amount of goodwill is the key audit matters in evaluating the auditor’s activities (Byrnes et
al., 2018).

Structure of Audit and risk management committee
The composition of Audit and Risk Management committee has both executive as well as
non-executive members of the company. The committee has three to five directors but all of
them are non-executive directors named as Mr Bruce Brook, Ms Christine O`Reilly, and Ms
Marie McDonald. All of committee members are non-executive directors and all of them
have great financial expertise (Public company Accounting Oversight Board, 2018). The
committee has reported to the board of directors that the management of CSL`s material
business risks is effective in the year ended 30 June, 2016. The signing partners in the list of
external auditors are rotated in every five years (Bowlin, Hobson, and Piercey, 2015).
Moreover, the internal auditors of the company was PWC (Pricewaterhousecoopers) during
2016 fiscal year (CSL US Inc, 2005).
An auditor is required to deliver an independence declaration in a fiscal year. As per the
requirements of CSL of the Corporation Act, this year the board and the committee approved
Mr Carmody to perform as a signing partner for E&Y (Enrst & Young) for the year 2015-
2016. Further, due to some personal issues among the members the company; it directly
affected the transition plan for replacing the signing partner and approved Mr Rodney Piltz
for the year 2016-17 (Bailey, Collins, and Abbott, 2017).
Functions of Auditor
Important function of the Audit committee is to monitor the performance of internal CSL`s
auditor operations. The audit committee checks whether the company is reflecting a fair and
true view of financial position and check how far the balance data and performance of CSL is
relevant (Chan, 2015).
Both external and internal auditors is committed to ensure that financial reporting are
accomplished and integrated with managing risk and meeting compliance requirements.

The main function of auditor committee is to check all the material aspects and
implementations of the policies that are adopted by the board (AICPA, 2017).
An auditor keeps a check whether the financial statements do comply with IFRS Accounting
standards as per the requirement in the Corporation Act, 2001 (Li et al., 2015).
Roles and Responsibilities of the Audit Committee
The role of internal auditor is to provide an independent and objective assurance to the
executive management in context to effectiveness of CSL`s risk management processes
(Sutherland, 2017).
CSL`s internal auditor are requested to perform investigating reviews on some suspected
fraudulent activities such as bribery, coercion or whistle blower. The risk and management
committee has the liability to keep a check on the financial statements because it is
established to maintain an adequate risk management regarding the internal compliance and
control system to enable them to prepare the reliable financial report and at the same maintain
the final accounts (Srivenkataramana, 2018).
Material subsequent events by the CSL limited
In 2014, the company has announced that it agreed to acquire Novartis global influenza
business that will combine and collaborate with bioCSL`s existing vaccine business. These
two business can become a global player if they collaborate. The fair value of net assets
overtook is anticipated to greater than the considered paid. It is anticipated that acquisition
will rise the value of assets and the liabilities (Cannon and Bedard, 2016). During 2015, CSL
conducted an internal collaboration of organisations of two bioCSL organisations. The group
has adopted certain amendments and standards as per the GAAPs (Generally Accepted
accounting principles). New standards, rules, principles, and amendments of Australian
accounting standards will be applied to coming subsequent years (Market Matters, 2018).

The Directors and Management’s responsibilities differ from the Auditor’s responsibilities in
relation to the financial report
Director is responsible for making financial statements and materials in the balance sheet is
the assertion of the management. Moreover, the auditor communicate to the board whether
there exist any substantial doubt relating to entity`s ability to recognise it as going concern.
The auditor considers the undertaking of management plans while using the concept of going
concern entity basis. This accounting concept is appropriate, implication of auditor report,
and the adequacy of financial statement to disclose them in front of public (Paracini, Malsch,
and Tremblay, 2014).
The independent auditor has the liability to examine the management`s work “financial
statements” and finally expressing the opinions. The responsibility of the auditor is limited to
put a check and investigate whether the reporting of the results is accomplished with the
GAAPs (Generally accepted auditing standards). In any case, of fault on the management,
any material error and omission would be discovered if audit is performed effectively. If
there is always a sure event that the auditor`s selected evidence can fail to undercover and
uncover any material error. Then there is a need to defence the reports prepared with due care
as per the GAAPs (Generally accepted auditing standards) (Christensen et al., 2016).
Follow-up questions would you ask the Auditor at the company’s Annual General Meeting
The various follow-up questions that is to be asked by auditors at Annual General Meeting of
CSL limited (Sharma and Shekhar, 2017). What is the basis on which opinions regarding the
fair view of the financial statements in the company? Another question can be related to the
degree of assertions, which they have estimated while evaluating the books of accounts of the
company (AASB 110, 2015).

Conclusion
After going through such a practical implication of changes made in the responsibilities of
auditors in 2016, it can be concluded that the CSL limited has been continuously trying to
improve its audit and non-audit services by raising the contribution of profit to pay
remuneration to the auditors. The company has both internal and external audit and risk
management committee, internal as PWC and external auditor as E&Y. The company has not
paid any indemnified cost to reimburse any cost of the auditors. By going through the
comparative analysis of remuneration of both the years, it is evaluated that the company
started paying a good sum to its auditors for non-audit services that do not hamper their
independence under Corporation Act, 2001.

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