HI6026 - Enhanced Auditor Reporting in Australia: Estia Health Ltd

This report provides an analysis of the audit and compliance practices of Estia Health Limited, focusing on the company's annual report and financial statements. It examines the compliance with auditor independence requirements, non-audit activities performed by Ernst & Young, and the evaluation of auditor remuneration. The report identifies major audit subjects, such as product liability provision and asset valuation, and describes the role and responsibilities of the audit committee. It further analyzes the audit opinion, differences between management and auditor responsibilities, material-based conducts, and the efficiency of material information disclosure. The analysis considers adherence to Australian auditing compliance standards and relevant sections of the Corporations Act 2001. Concluding with key findings and areas for further inquiry, this document is available on Desklib, where students can find a wealth of past papers and solved assignments.

Running head: AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
Audit and Compliance of Estia Health Limited
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1AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
Executive Summary
Within a fiercely competitive business surrounding, certain approaches are implemented by the
audit committee in order to make certain the quality of the audit report is enhanced Estia
Health Limited. This is considered in carrying out analysis in the recent report and the annual
report of the company is evaluated for gathering several financial statements auditing factors.
The paper explained that the non-audit services offered by Estia Health Limited financial
statements includes assurance services those are carbon based, sustainability along with
assurance services. Moreover, the audit committee of the company is associated with analyzing
certain processes that entertains the integrity of financial reporting and analysis of influential
dynamics for attaining better commercial incomes. The paper summarized that Ernst & Young
acts as the audit group for the company that has considered various material factors along with
certain important information abiding by the auditing compliance standards followed in
Australia.

2AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
Table of Contents
1. Introduction.....................................................................................................................3
2. Compliance with Auditors Independence Requirements...............................................3
3. Non-Audit Activities.........................................................................................................4
4. Evaluation of Auditor Remuneration...............................................................................5
5. Major Audit Subject.........................................................................................................5
7. Description of Audit Committee......................................................................................7
8. Analysis of Audit Opinion.................................................................................................7
9. Management, Directors and Management Responsibility Difference............................8
10. Conducts those are Material Based...............................................................................8
11. Analysis of Material Information Efficiency...................................................................9
12. Disclosed and Under-Reported Material Information................................................10
13. Question based on Follow-Up.....................................................................................10
14. Conclusion....................................................................................................................11
References.........................................................................................................................13

3AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
1. Introduction
Barniv and Myring (2015) elaborated auditing to act as an investigation along with
analysis of the yearly report of the organization that also makes sure of the accuracywith the
fairness of certain predetermined recorded transactions. Due to such fact, the auditors are
deemed to have responsibility in improving the reporting quality of the auditors reports by
means ofsignifying all the vital information related with the company’s financial statements and
related material aspects. Such kind of data is needed to be provided by the stakeholders of the
organization in a clarified along with easy language. Within a fiercely completive scenario,
certain approaches are implemented by the audit committee in order to make certain the
quality of the audit report is enhanced (Bepari and Mollik 2015). In account with such
explanation, EstiaHealth Limited is considered in the recent report and the annual report of the
company is evaluated for gathering several financial statements auditing factors. EstiaHealth
Limited is positioned as an Australian healthcare company that is involved in the business
operation of leased and owned residential added care homes within the nation. It is also
gathered that Ernst & Young is the audit partner of the organization for the year 2018.
2. Compliance with Auditors Independence Requirements
The financial statements of Estia Health Limited explained that in the year 2018, the
members associated with the audit process were related with the company’s business activities
(Brawley et al. 2015). In addition, very less number of Ernst & Young audits committee
member’sahs an important function in serving as the audit group of the company. “Section

4AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
342A of the Corporations Act 2001” declaration is also observed to be considered by the audit
authority. In addition, Ernst & Young has abided by every need explained in “Section 307C of
the Corporations Act 2001” which takes into consideration certain important factors.
One of such factor considers that no contraventions are deemed to be present related
with independence needs of the auditors in alignment with the audit practice (Bryce, Ali and
Mather 2015). Another factor that is considered is that every professional activity relied on
applicable codes are carried out in alignment with the audit processes followed in Estia Health
Limited.
3. Non-Audit Activities
The financial statements of Estia Health Limited in the year 2018 explained that Ernst &
Young has provided two different types of non-audit services to the organization. This includes
carbon assurance services, sustainability and some assurance and audit based services. For the
non-audit services Ernst & Young is deemed to attain $76,128 and $ 8,000 amount considerably
for Estia Health Limited. This has also resulted in attaining more than 10% of the overall
remuneration report of the auditor. However, necessary compliance is also entertained from
behalf of the organization along with auditor while providing along with obtaining non-audit
services (Vidot et al. 2016). “The risk and audit committee” has provided a written advice relied
on which directors of Estia Health Limited are satisfied and the general independence standard
is also implemented in consideration to the “Corporations Act 2001”.
The services those are recognized are offered by not encompassing independent
requirements of auditors because of the mentioned accounting standard in alignment with the

5AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
service nature, materiality of accounts and developed processes in order to evaluate
independence of auditors. In addition, Estia Health Limited’s board of directors has ensured
that the company will maintain non-audit services. This is therefore gathered thatauditors
independence cannot be interrogated through considering all the factors (Xu, How and
Verhoeven 2017).
4. Evaluation of Auditor Remuneration
The non-audit services offered by Estia Health Limited financial statements includes
assurance services those are carbon based, sustainability along with assurance services. It is
also gathered that the payments related with audit service is related with analyzing the
financial statements of the organization. It is evident from analysis of Estia Health Limited
annual report that the company has decreased all its payments for reviewing its annual reports
and audit conducted by Ernst & Young by 13`5% in the year 2018 in contrast to the prior year
(Stagg et al. 2018). However, an increase is indicated in the carbon-based services as well as
sustainability by 11.5% in the year 2018. More considerable drop has been observed within the
assurance services of Estia Health Limited’s remuneration by 12.5 % in the year 2018.
5. Major Audit Subject
The important audit concerns those are taken into account are explained through
auditing the financial reports of Estia Health Limited. Based on the company’s annual report for
the current year, two major audit matters have been explained for minimization and
categorization of product liability provision and asset valuation. However, necessary

6AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
compliance is also entertained from behalf of the organization along with auditor while
providing along with obtaining non-audit services. “The risk and audit committee” has provided
a written advice relied on which directors of Estia Health Limited are satisfied and the general
independence standard is also implemented in consideration to the “Corporations Act 2001”.
Estia Heath Limited has recognized certain provision of $189 million at the end of the
year 2018. This provision is related with foreseeable as well as disclosed future claims related
with the health care s. This has also made sure that with consideration to the external
experts’advice by USA and Australian based management. Such provision requires necessary
judgment for sentiment of the amount with future profitability claims. Moreover, there are
certain estimations associated with foreign exchange rate movement and the discount rates are
deemed to have considerable impact on provision being a vital mater of audit. For dealing with
this issue, Ernst and Young have analyzed sample testing for certain consideration with
evaluating claims related with health care s in the database of management’s liability.
Ernst and Young has analyzed the processes of Estia Health Limited’s management for
dealing with certain audit matter in entertaining the cash generating units that need
impairment evaluation. In such condition, the auditor have achieved an explained viewpoint on
business segment relied on yearly financial performance, external situations of the industry
along with consistency reporting within the process of impairment testing. Moreover, the
auditor has also considered conducting a detailed analysis of methodology related with
impairment mode and estimations relied on vital factors. Moreover, sample testing was used in
order to analyzethe mathematical accuracy related with the models of cash flow. Ernst and

7AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
Young haveanalyzed the efficiency of necessary disclosures in the financial reports of the
organization.
7. Description of Audit Committee
The financial statements of Estia Health Limited in the year 2018 represented that the
company’s board of directors has developed an effective risk and audit committee (Malone,
Tarca and Wee 2016). The responsibility of the audit committee is centered on evaluating
certain policies as well as maintaining suitable internal control for safeguarding the company’s
assets and liabilities and by maintaining integrity of the financial reporting. EstiaHealthLimited’s
non-executive directors include vital members those take decisions on business audit process.
For such reasons, the audit committee is associated with analyzing certain processes that
entertains the integrity of financial reporting and analysis of influential dynamics for attaining
better commercial incomes. This also considers structure analysis related with the audit risk
management (Ricketts, Riley and Shortridge 2018). In addition, very less evidence is present
that is observed in the audit committee charter for the current year.
8. Analysis of Audit Opinion
The independent audit report for Estia Health Limited also indicated that the
organization has prepared its remuneration report in accordance with the “Section 300A of the
2001 Corporation Act” (Popatia 2017). The auditor of the company has also provided a view
that the organization has developed and explained all important aspects within its annual
reports by complying with regulations within the “Australian Accounting Standards Board

8AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
(AASB)”, “International Accounting Standards Board (IASB)” and “International Financial
Reporting Standards (IFRS)”. Considering the same, it can also be revealed that the yearly
financial reports as well as important notes associated with Estia Health Limited Company’s
accounts aligned with the fieldwork in evaluating their efficiency (Sedki, Smith and Strickland
2014).
9. Management, Directors and Management Responsibility Difference
In the year 2018, the financial statements of EstiaHealth Limited explained that there
exist some variances existing within the responsibilities of the directors, the management and
auditors in representing and explaining the financial statements. The directors and the
management of the company are deemed to be accountable for preparing the financial
statements through complying with the regulations and accounting standards in Australia
(Kurmis et al. 2015). Moreover, the directors needs to evaluate the capability of the
organization attain understanding of the concerns related with accounting. Conversely, the
auditors conduct different responsibilities in contrast to that of the directors and management.
The auditors are considered to be accountable in providing better assurance related with
developing financial statements that that does not include material misstatements. This can
take place die to fraud, error as well as concerns which requireauditor’s opinion (Groomer and
Murthy 2018). The major responsibilities of the company’s auditor “Ernst & Young” includes
collecting audit evidences, analyzing financial statements representation and development,
obtaining internal control understanding and observing uncertainties taking place from certain
material misstatements.

9AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
10. Conducts those are Material Based
It is considered to be vital to analyze that Estia Health Limited’s annual report for the
year 2018 has certainmaterial based events. With these, one of such event is associated with
surplus sale of land which was announced by the business organization in newoath Wales
(Estiahealth.com.au. 2018). Based on such selling conditions, the business organization needs
to recognize that in Estia Health Limited’s income statement more than 25 million of income tax
needs to be existing at the year end of the year 2019. Dividend declaration is observed to be
one more important material based event in the organization. The organization has announced
a dividend of approximately 13.5 cents per share which leads to an increase dividend along with
related payment on 4th August, 2018. The amount of dividend is deemed to be provided by Estia
Health Limited (Christensen, Lee, Walker and Zeng 2015).
11. Analysis of Material Information Efficiency
From the perception of the third part stakeholder it has been evidenced that the audit
individuals belonging to Ernst & Young have analyzed the material information associated with
Estia Health Limited in a suitable and better manner. In this condition, the auditor has abided
by the important regulations as well as principles explained within the “Corporations Act 2001,
Australian Auditing Standards along with APES 110” (Chen, Gavious and Lev 2017). Moreover, it
has also been gathered that Ernst & Young considered disclosing two major audit matters
associated with Estia Health Limited along with that necessary steps needs to be taken in order
to decrease the same. By means of taking into consideration all such factors it can also be

10AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
deemed that Ernst & Young “The auditors” is increasingly effectively in addressing all the vital
material information which is considered in case of Estia Heath Limited (Cheng 2016).
12. Disclosed and Under-Reported Material Information
From analyzing the facts collected from Estia Health Limited financial reports for the
year 2018, it is explained that Ernst & Young acts as the audit group for the company that has
considered various materialfactors along with certain important information (Carr et al. 2016).
This can result in the uncertainties related with material misstatement indicated in the
company’s annual report. The auditor has also included explanation of all the necessary
information disclosure which confronts all the material aspects associated with Estia Health
Limited. In consideration to same, it is explained that the auditor has reduced material
information along with offering materiality factors within partial reporting (Chen, Gavious and
Lev 2017).
13. Question based on Follow-Up
Auditing process based questions can ablemakes within the general meeting to the
concerned auditor of the company who is accountable for evaluating the annual report of Estia
Health Limited(Burnett, Gordon, Jorgensen and Linthicum 2015). Certain important follow-up
question that can be asked to Ernst & Young that is the auditor of the organization is indicated
below:
 Does the organization have some subsidiaries or conducts that will not be audited for
recognizing uncertainties associated with operational and financial activities?

11AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
 What is the planned audit responsibility?
 Who is the external auditor of the organization?
 Does the organization have some subsidiary or conducts that cannot be audited which
signify uncertainties associated with operational and financial activities?
 Can you identify any significant complexities in the year 2018 within audit process?
 Did the audit consider getting involved within discussion regarding accounting and
auditing issues associated with previous years audit report?
 What are the risk analysis processes employed by the auditors of the company?
 Is there any concern found from the previous year’s auditor report that requires being
addressed?
 Is there any improvement chance for Estia Health Limited in reducing time spent by
auditor in conducting audit process?
 Does the management deal with issues related with control of vital business processes?
14. Conclusion
EstiaHealth Limited was considered in the recent report and the annual report of the
company is evaluated for gathering several financial statements auditing factors. It was
gathered from the paper that the financial statements of Estia Health Limited in the year 2018
explained that Ernst & Young has provided two different types of non-audit services to the
organization. This includes carbon assurance services, sustainability and some assurance and
audit based services. It was also concluded that the major responsibilities of the company’s
auditor “Ernst & Young” includes collecting audit evidences, analyzing financial statements

12AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
representation and development, obtaining internal control understanding and observing
uncertainties taking place from certain material misstatements.

13AUDIT AND COMPLIANCE OF ESTIA HEALTH LIMITED
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