HI6026 Audit Assurance: Enhanced Auditor Reporting - AGL Limited

This report provides a detailed analysis of how enhanced auditor reporting is being embraced in Australia, focusing on AGL Limited as a case study. It examines the auditor's compliance with independence requirements, the provision of non-audit services, and an analysis of the auditor's remuneration. The report identifies key audit matters, such as unbilled revenue and distribution costs, and the audit procedures performed to address them. It also discusses the composition and responsibilities of the audit committee, the type of audit opinion expressed, and a comparison of directors' and management's responsibilities with those of the auditor. The report concludes by noting the absence of material subsequent events and provides an overview of the audit process and findings related to AGL Limited's financial reporting.

Topic: How is Enhanced Auditor Reporting being embraced in
Australia?

Executive summary
The following words is completely related to the observation of auditing practice presented by an
organisation selected to be the AGL Limited. There has been quite expensive evaluation of work
done in the following work related to every specific information that an organisation must
consider to expand their success rate in future period of time. The following work has analysed
the ways by which auditing information as well as documents that are required by any company
is clearly provided by a g l Limited or not. Specific consideration of work regarding the
remuneration sheet as well as the amount spent against the top tier management group of the
organisation is provided evident source.

Table of Contents
Introduction 2
Analysis 2
Providing an analysis of the Auditor’s remuneration and explanations of the remuneration. 3
What type of Audit Opinion was expressed? 6
Conclusion 9

Introduction
The study shall mainly take the consideration of carrying out a detailed analysis of the annual
reports of a company. For the convenience of the study, The AGL Limited Group has been
chosen. It is an Australia based organization which is related to the energy and power services
Industry. It procures and supplies power, electricity and Gas and supplies them for residential
and another different kind of commercial use. Documents such as the Auditor’s Independence
Declaration, Non-Audit services performed by the Auditor, Auditors’ remuneration and the
Independent auditor’s report has been studied and different kind of information has been
gathered from them. The auditor’s compliance with the Independence needs have been checked,
then the provision of various non-audit services have been taken into account. Things such as
detailed study about auditor's remuneration, Key audit matters, details about the Audit
Committee, various kinds of audit opinions, Director’s responsibilities with that of Auditor’s
responsibilities, details about materials events and testing of material information. The study has
shall take an end with the different questions that could have been asked to the auditors and then
at the last, with an ending note of Concluding remarks.
Analysis
Auditor’s compliance with Independence requirements
It can be said that the Auditor has complied with all of the Independence requirements. It has
been clearly mentioned in the Auditor's Independence declaration that the auditing has been
conducted and the reporting has been done in compliance to the section 307C of the
Corporations Act 2001 (www.cpa australia.com, 2018).

Figure 1: Auditor compliance with independence requirements
(Source: Auasb.gov.au. 2018)
The auditor in the declaration ha clearly stated that all the compliances have been made with
Corporations Act and the applicable codes and professional conduct in relation to the audit has
also been attained. Thus it can be clearly said that the Audit has been done as per the Australian
Accounting standards and further, it has been stated that they were independent and away from
the influences of the AGL Group. They had functioned as per the auditor’s independence
requirements of the Corporations Act, 2001 and also as per the needs of the Accounting
Professionals and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (www.auasb.gov.au, 2018). Thus it can be concluded that all the things were done
in compliance with accounting standards as well as other legal things prevailing in the land of
Australia.
With no provision for non-audit services, providing the description of the overall nature of
such services
The board follows a kind of formal approach in the provision of non-audit services to the
company. It can be said that the external auditor cannot provide such nature of services which
can threaten the independence and defy the overall assurance and compliance role. Semi-annual
reports on the cases related to auditing and related services are provided to the Board with the
overall help and aid of the Audit and Risk Management Committee (Beck, Dumay and Frost,
2017.). No non-audit services have been provided by the external auditor the whole of the

financial year. A rotation policy has also been agreed upon for the senior Auditor Of the
Auditing agency, that is Deloitte. The non-audit services that were provided to the company were
mainly of a free nature. It is done and comes with the overall remuneration of auditing that is
paid to the committee by the Directors and the whole of the company.
Providing an analysis of the Auditor’s remuneration and explanations of the
remuneration.
$ in
thousand
s
$ in
thousands
$ in
thousands
$ in thousands
2018 2017 Change in
Salary
% Change in
Salary
Audit and review of financial
reports
1462 1393 69 4.953338119
Other regulatory audit services 173 172 1 0.581395349
Other assurance services 148 288 -140 -48.61111111
Other services nil 241 -241 -100
Total 1783 2094 -143.0763776
The auditor of AGL Energy Limited is Deloitte Touche Tohmatsu. The auditing organization is a
paid off with a lump sum amount of money for their auditing service provided to the AGL
Limited Company. The total audit and risk management committee of the company is paid off
with $53000 as Chair feet and $26500 as member fee. They provide with different kind financial,
auditing and non-auditing services. The payments are made based on all the auditing and other

related services given by them to the company. The remuneration for external audit and review
of financial reports have increased in the year 2018 as compared to that of the previous year. The
amount for other audit regulatory services has also increased. However, the number of other
assurance services and other services have drastically fallen (directory.libsyn.com, 2018). This
may due to the change in the rates set for auditing by Deloitte. The company has paid off based
on the new rates set by Deloitte. The overall remuneration, however, has fallen by more than
143%. This may be also related to fall in the economic condition of AGL LImited.
In relation to the key audit matters, the audit procedures that were performed to provide
assurance over each matter (Summarise and paraphrase each key audit matter. Correctly
classify each audit procedure listed as tests of controls, substantive tests of detail, a substantive
test of balances or analytical procedures.)
The key audit matters reported by the auditor in the report are as follows:
1. Unbilled revenue: There is has been uncertainty over the unbilled electricity consumption
of customer in the year 2017 that amounts to 938 million due to variance in meter
readings dates (Reid and Wettenhall, 2015).
2. Unbilled distribution cost: the auditor has also identified the matter related to unbilled
distribution cost for network supply result due to improper estimations.
On this contrary, the auditors provided a substantive procedure for mitigation of these matters
and investigate clearly on the matter to solve the following. The methods followed by the
firmware as follows:
1. Billings of meter readings and historical data relating to it was checked for confirmation
of the unbilled revenue (Sarens, 2015).
2. The physical setting of matter amounts was done in order ensures no misstatement was
involved.
3. Cost per units as determined in accordance with companies and well as industrial rates to
mitigate such situations.
Presence of an Audit committee, non-executive directors on the audit committee, the Audit
Committee Charter.

Figure 2: Composition of the different committees and boards of the organization
(Source: Annual Reports AGL Limited, 2018)
The audit committee of the company, comprises of a number of specified knowledgeable
members. The main structure of the Audit committee can be mainly divided into parts, The
external auditors and the internal auditors. Mr John Stanhope acts as the chairman as well as the
executive director (the main person) of the whole of the Auditing Committee. He takes all the
decision after being guided by the main Chairperson of the Group/Organization.
The Audit Committee is mainly responsible for undertaking the auditing of the whole company
and its accounts. The committee is also liable for strategic risk profile scrutiny and warning the
company ahead of any issues or problems. The office of the audit committee is managed by the
chairman that is Mr Stanhope. Under him, there are various of the important officials (Non-
Executive directors) such as Jacqueline Hey, Les Hosking and Belinda Hutchinson. All these
people in a joint and collaborative manner manage and run the Auditing Committee. Under them,
several of the auditors work for the company (Hoffmann et al. 2014). They also help and guide
the external auditors in any kind of need or if any such kind of situation arises. The committee
works in unison and scrutinized s the whole accounting of the company and vouchers and
verifies them. Different kind of important steps are also taken by the committee I need to
different kind of situation and emergencies arising out in the company.
What type of Audit Opinion was expressed?
A kind of positive opinion was expressed in the whole scene of auditing. The whole of the
auditors has expressed their feeling that the auditing was righteously done and all the standards

and the policies have been followed up. The whole of the auditing has been done in compliance
with the Australian Accounting Standards and terms of the Companies Act 2004 (Ball et al.
2015). It was also expressed by the auditors that they had made the reports and conducted the
auditing on an independent basis. However, some of the items such as Unbilled revenue of $938
million, Unbilled distribution costs of $412 million. There were also other things which declared
in the reports prepared by the auditors related to the different things that were not declared by all
of the auditors on a per-hand basis.
The comparison of Directors’ and Management’s responsibilities with that of the Auditor’s
responsibilities in accord to the financial report
The Directors and Management's responsibilities are to see through that the company is properly
run and all the operations are properly taken care off (Mayne, 2017). They have the sole
responsibility of running the company and taking care of each of its affairs starting from
accounting, auditing (internal), to arranging for remunerations of the various staffs as well as
auditing committees, taking decisions for the company and making any kind of declarations and
provisions for the company (McKee, 2015). They mainly held a meeting where major decisions
regarding the company are taken forth by them. On the other hand, Auditors, mainly the external
auditors get remunerations from the company. They have the sole responsibility to review and
check for the accounts bookkeeping done by the company and find faults in it and report it
(Adams, 2017). They have the full responsibility to conduct the audit and report any kind of
omissions or material misstatements done by the specific organization. The internal auditors
have the responsibility to access the materials and warn the company about any material
misstatements, errors or manipulation that has been done by the accountants before it gets
scrutinized by the External Auditors (Chiu and Vasarhelyi, 2018). They also hold positions in the
company and attends a different kind of board meetings and take up an active part in the
Executive and non-executive duties in the company.
Presence of any material subsequent events
In the above sections, it has been seen that the auditor in the auditor report has reviewed a fair
decision over the financial reports created by the firm in the current years. It can be said that as a
Fair view over the financial review has been given by the auditor it cannot be said that there was
any, materiality or misstatement involved in the financials of AGI limited. Although for purpose

of making communication of matter in which the auditor suspected that can are mortality was
reported under the audit matter report (Podger, 2018). This showed that there are some key audit
matters investigated by the auditor to be suspected to have materiality but in such cases, the
following were solved by the organization. It can be said that thus there was only some matter
concerning the auditor remaining to which there were no such major accounts in which
materiality was suspected hence it can be said that there not event leading to materiality involved
within the financial reports of the firm (Hoffmann et al. 2014).
As an interested third party stakeholder, making an assessment of the effectiveness of the
material information reported by the Auditor in the conclusion.
The material information provided by the organization can be said to be much effective and
detailed. It has been able to describe all the situations and the things that have been done in the
overall accounts of the organization. The changes in accounting policies and practices in some
places have also been clear and in detail reported in the declaration put forth by the business
organization (Vanclay, 2015). It can be noted that many of the things have been clearly
mentioned and specified by the board of the auditors. However, things related to the roles of the
auditors and details related to the provisions have not been made in detail. It has to be kept in
mind that most of the times, the different of the business organization makes some changes or
manipulations in their amount and heads of the different provisions. Thus, it can be said that the
auditing committee should have cross checked and analysed the details related to the different
kind of provisions that have been made and considered in the annual reports of the company.
Considering whether there was any material information which could be missing, under-
reported and/or not fully explained or disclosed in an effective way for the intended users
It can be said that there was very negligible kind of material misstatements to be found in the
whole of the work. It can be said that fewer instances of material information being missing as
such and under-reported can be seen. However, there were some wrong reporting related to the
unbilled revenue, unbilled distribution costs and there was also information misleading and
missing related to the financial instruments held onto and possessed by the business organization.
All these things were clear and in detail reported by the auditor of the organization (Griffiths,
2016). The material information related to the overall role of the difference of the members of

the auditing committee could have been provided in a much detailed manner. It can be said that
the members and their designations have been pointed out in the annual reports, but, their
individual roles and responsibilities have not been clearly defined as per the need. These things
could have easily been done.
Different follow-up questions that could be asked to the Auditor at the company’s Annual
General Meeting
Questions relating to the overall efficiency of the auditors could be asked. The individual role
played each of the authors at the auditing committee could have easily been interrogated. It can
be seen that the auditors have done the auditing but specifically, they have not mentioned how
and in which manner they have conducted the same. Questions related to the cross-checking of
the accounts could have been made (Lenz and Hahn, 2015). Further what kind of more
provisions have to be made and mentioned in the annual reports of the organization also needed
to be asked by the auditors. Questions related to the declaration of the authenticity of each of the
books made and maintained by the company could also have been made from them. How the
bills of the revenue from the gas could be settled should have been asked of them. Further, the
unbilled and not written down distribution costs and their overfall aftermaths could also have
been asked by the boards of the auditors of the company (Chiang, 2016). By asking all these
questions, the actual state of affairs of the company could have been perceived.
Conclusion
The details related to the annual report has been considered and related to different parts of the
study. It can be concluded that some material information has been missed out in the annual
report and its different sections made by the company. It has to be ensured that such kind of
missing information should be provided in order to give proper information to the different
stakeholders of the company.

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