Corporate Governance Impact on Audit: HI6026 Audit, Assurance Report

This report provides a comprehensive evaluation of the eight ASX corporate governance principles and their impact on audit, assurance, and compliance. It begins by identifying and describing each principle and its recommendations, emphasizing their role in enhancing transparency and communication between companies and stakeholders. The report then assesses the implications of adopting these principles on the audit process, including risk assessment, audit approach, audit strategy, and audit evidence. The analysis focuses on how the principles influence the internal audit function, financial reporting quality, and the overall effectiveness of corporate governance. The report also explores the specific impacts on risk assessment processes, audit approaches, and audit evidence, highlighting the importance of ethical conduct and responsible management within organizations. The report uses the case of ABC limited to exemplify the impact of corporate governance principles on audit strategy, audit approach and audit evidence. The report also discusses the importance of ethical conduct and responsible management within organizations.

Running head: AUDIT, ASSURANCES AND COMPLIANCE
Audit, assurances and compliances
Name of the Student:
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AUDIT, ASSURANCES AND COMPLIANCE
Executive summary:
In this paper, the critical evaluation of the ASX corporate governance principles and
recommendations by giving a detailed description of all the eight principles has been
demonstrated. The likely impact which such corporate governance principles and
recommendation would have on the company in terms of the presentation of the information is
also demonstrated in the paper. In addition to this, the influence of all the identified corporate
governance principles on the audit approach, risk management process, audit strategy, audit
evidence and audit strategy have also been illustrated in the report.

AUDIT, ASSURANCES AND COMPLIANCE
Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................2
Identification of the eight ASX corporate governance principles and recommendations:..............2
Evaluating the impact of full adoption of each of corporate governance principles and
recommendation:.............................................................................................................................2
Determining the impact of full adoption of the eight ASX corporate governance principles on:...2
Conclusion:......................................................................................................................................2

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Introduction:
The report is prepared to evaluate the impact of eight corporate governance principles of
ASX on the company. Such evaluation is done by demonstrating the likely effect of the full
adoption of each of the corporate governance principle and recommendation. In addition to this,
the explanation and identification of the eight corporate governance principles and
recommendation is outlined in the report. Later section of the report is evaluating the adoption of
corporate governance principles by analyzing its influence on the process of risk assessment,
audit approach, audit evidence and audit strategy. The impact of the corporate governance
principles and recommendations in terms of audit strategy, audit approach and audit evidence has
been done for the client company named ABC limited.
Discussion:
Identification of the eight ASX corporate governance principles and recommendations:
The corporate governance principles and recommendations are laid down for enhancing the
reporting framework of the entities listed on ASX as they assist in meeting the outcome of
governance. This is intended to enable the entity to provide the market with appropriate level of
information concerning its mechanism of governance and enhancing the transparency of
communication between the company and the users.
Listed entities are encouraged to give appropriate information on the arrangements of corporate
governance and explanation of the facts about the implementation of the methods for
communicating the governance matter. It enable the organization to make a detailed disclosure of

AUDIT, ASSURANCES AND COMPLIANCE
the material information and any factor that would have materially impact the performance of the
reporting entity. Moreover, the principles requires the entity to have an appropriate procedure of
managing and addressing the risks using the internal function. The good corporate governance
underpins the efficiency and integrity of the company and the absence of such governance would
weaken the potential of the company.
There are eight principles on which the recommendation and process of the corporate
governance is structured and they are listed as follows:
 Laying down the solid foundations for the oversight and management of the
organization- In accordance with this principle, the respective responsibilities and roles
of the management and the board of directors should be delineated by the listed entity. In
addition to this, the management and the board should regularly review the performance
of then organization. The responsibilities and rile should be set out for the chair of the
board and the effective contribution of the directors should be facilitated (Asic.gov.au
2019). In addition to this, the board of directors that helps in outlining the rules should
list the policy of the entity.
 Value addition and effectiveness of the board- This principle requires the listed entity
to have such board of directors that have adequate knowledge about the entity along with
then industry in which the organization is operating, skills and are fully committed to the
organization. It should also be ensured that the composition of the size of the board is
appropriate. Board should be able to add value to the entity by effectively discharging
their duties (deloitte.com 2019). For the proper governance of the listed entity, it is
essential to have an effective and high performing board. There should be an appropriate

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number of the composition of the independent and non-independent directors that would
be capable to challenge the management of the listed entity.
 Installing an ethical, lawful and responsible culture- It should be ensured by the listed
entity that they are continuously reinforcing and instilling a culture in the organization
that is ethical and acts in a responsible and lawful manner. The behavior standards in
relation to the senior executives, directors and employees in their code of conduct should
be articulated by the listed entity as per this principle.
 Making balanced and timely disclosure- All the matters of the company should be
disclosed in a timely and a balanced way such that the price or the value of the securities
would be impacted materially. This principle intends to ensure that the information is
presented at the right time for enhancing the decision-making. There should be a written
policy ensuring that investors would be provided with the material information and all the
information’s presented complies with the obligations as per the principle.
 Respecting the security holders right- This principle requires the listed entity to
provide the stockholders with adequate facilities and appropriate information so that they
can effectively exercise their rights of being the security holders.
 Managing and recognizing the risk- It requires the listed entity to have an effective
framework of risk management in place and the effectiveness of the risk framework
should be periodically reviewed by the management. There should be a charter for setting
out the roles and power of the person along with the existence of audit and risk
committee. In the event when the entity does not have such committee, it should be
clearly mentioned in their annual report (Goel 2019).

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 Fair and responsible remuneration- The remuneration of executives should be so
designed that it helps in retaining, attracting and motivating high quality senior
executives and the remunerations paid to the directors should be sufficient. There should
be an alignment between the risk appetite and the value of entity and security holders
value creation. For fairly remunerating the directors, there should be a rigorous, formal
and transparent process that would help in the development of remuneration policy with
the attractive remuneration packages.
 Safeguarding the corporate reports integrity- The integrity of the corporate reports
should be verified by the entity using appropriately designed processes. The integrity of
the listed entity should be maintained by adopting the appropriate and suited framework
which would make the information transparent and avoid from conducting or misleading
the users.
Evaluating the impact of full adoption of each of corporate governance principles and
recommendation:
The concept of Corporate Governance is a management philosophy which protects the
rights of stakeholders. The recommendations are addressed in an effective manner in their
Corporate Governance Statements if the entity adheres to the principles. There was a significant
variation in entities approach to disclosure.
The adoption of the governance principles assist the entities in making enhanced
disclosure of their information so that investors are provided with transparency. This helps them
in making investment decision and also enhancing the functional skills such as evaluating the
risks and managing legal factors. Implementation of the principles of corporate governance helps

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in enhancing the function of internal audit and ensuring that their independence is not
compromised (Malau 2019). In addition to this, the activity of management level is increasingly
seen as the critical part of governance.
The adoption of such governance principles along with the recommendation would help
the organizations in enhancing their quality of the financial reports (Maxwell 2019). Adoption of
the standard also contributes in identifying the capabilities and skills that helps in providing
assistance to the board in meeting the future and current challenges of the organization. The
disclosure of the organisation on the components of the diversity is encouraged due to the
adoption of the principles. In addition to this, any material exposure to environmental, social and
economic sustainability along with the measures taken to manage the risks is also disclosed in
the sustainability report (Mees and Smith 2019).
Under the specific listing rule as mentioned in the recommendation principle, the practice
of the corporate governance should be benchmarked against the rule so that they are able to
enjoy the flexibility to adopt the alternative practices of corporate governance. It is outlined that
the adoption of the principles would inculcate good attribute of corporate governance in terms of
financial acumen, development and strategy, information technology, digital innovation, retailing
and marketing, remuneration, people and industry experience.
Determining the impact of full adoption of the eight ASX corporate governance principles
on:
Risk assessment process- It is a process where accessing the consequences of the
occurrence of events. It is used to prioritize the risks in a ranking. The risk assessment chart is
based on the principle that a risk has two dimensions; one is probability and other is impact. The

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process of assessing risks is done by the development of the agenda of risk management and how
the risks are ascertained and addressed using suitable process (Lama and Anderson 2015). With
the adoption principles of corporate governance by the organization, the role of audit committee
has broadened as the great focus is placed on risk. Some of the areas of responsibility for the
audit committee is the process of risk management. The core concern of the board is associated
with the development of rapid technology as the audit committee fails to address such risks.
When reviewing and implementing the effectiveness of risk management framework of the
company, the guide to the principles bring together the global and local concepts. The objective
of reporting under the principle 7 is to inform the investors about the risk management
framework of reporting entity. The principle also requires the entity to create preserve value by
increasing their focus on the environmental, economic, and social and sustainability risk. In this
regard, the risk management framework of the company should be able to address such risks and
there should be the adequate disclosure of such risk and the process for managing them.
The adoption of the recommendation concerning the principles would help in evaluating
the difference between the factors that comprised of material risk. Each of the risks such as the
factors that expose the company to materially misstating the information’s, if there is the
existence of the material risk, the best disclosure practice should outline how such risks are
managed. The factors that constitutes the material risk should be well and consistently
interpreted in the section of the corporate governance practices.
The process which the organizers use are:
 Identify the process and situations that may cause harm particularly to the people.
 Determine how likely it is that hazard will occur and how the consequences would be

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 Decide the steps taken to stop the hazards from occurring or to control the risks.
The goal of the risk assessment will vary but reporting of the entity under such specific
principle would help organizations prepare in combatting risks. Firstly, it provides an analysis of
possible threats, preventing injuries or illness. It creates awareness about the hazards and risk, it
should determine the budget to remediate risks. Furthermore, it is expected by the companies to
provide stakeholders with the effective management regarding the non-financial material
business risk and business risk. Enhancement of recommendation of the risk is substantially done
to reflect the other development and lessons of global financial crisis. All the listed entities are
encouraged to enhance the recommendation on risk carefully. The process and facts used by the
entity to improve and evaluate the internal control process and risk management framework
should be disclosed according to the recommendation of the principle (deloitte.com 2019).
Audit approach- An auditor uses this strategy in the time of conducting an audit of the
organization. This approaches vary in different types on organizations, and it is mainly
dependent in many factors such as operations, sales etc. Governance can be improved through a
good auditing process and as a result the directors will set a high standard auditing with the help
of good governance. Through an approach of effective governance, the outcome which is related
to the performance should have better quality of accounting. One of the issues, which is
concerned is that the external auditors evaluate the performance of internal auditors and conclude
while the progress is made through examination (Christensen et al. 2015). The three lines of
defence model helps in governing risk and the assurance activities in the large scale companies
and helps in refining the mandate of internal audit function

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The auditors are still an insecurity in relating the corporate governance mechanism with
auditing. The audit committee is made in association with the board members. It mainly focuses
on the internal audit functions (Shimeld et al. 2017). The principles requires the entity to make
disclosure of the structure of the internal function of audit and in the absence of the internal
function of audit, the process and facts used for evaluating and continuously improving the
internal control process and risk management framework should be disclosed. The third line of
defence throw some light on the occurrence of independent assurance of the internal audit.
Management while structuring then internal audit function should take into account the activities
performed by the internal audit function along with the skills and resources required to make the
key control effective by providing effective assurance (deloitte.com 2019).
Audit process is dependent upon the principles such as financial reporting and integrity
safeguarding that will recommend related to the audit committee. Another principle is to
recognize and manages risk, that requires entities to disclose such facts with respect to the
internal audit function. It states that the listed organizations should have three non-executive
directors in an audit committee, where most of them are independent. An accounting and
financial expertise is required, who should have a sound knowledge about the organization and
can effectively execute the command of the committees (Ey.com 2019).
Audit strategy- Regarding the audit strategy, it is essential for the listed entity to make
an adequate disclosure of ascertaining whether the company has an internal audit function and if
here exist such function, the structure and the process should be revealed to the users (Goel
2019). The existence of such internal audit function and the size of entity is strongly correlated.
It should be ensured by the internal audit work that the firms is acting with integrity and would
take adequate measures for the potential risks faced. In addition to this, it is also required by the

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entity to provide the disclosure of greater degree regarding the responsibilities of the audit. In the
absence of such audit function, any improvement in the risk management system should be
addressed by employing the alternative processes. One new area in the audit universe would be
the governance of internal audit function and with such approach, there will be clearly defined
objectives that would help in delivering the desired results. The embedment of the governance in
the internal audit function is governed by three factors such as existing audit type, complexity of
the structure of organization and structure and size of internal audit function (asx.com.au 2019).
This implies that the internal audit functions are developing their own supporting tools and
leading functions and providing some good benchmark against the observation of audit.
It was ascertained by referring to some research areas that the entities which do not have
internal control functions does not comply with the recommendation principles and they also
failed to explain the reasons attributable to why such functions was not implemented (Yarram
2015). The adoption of the principles changes the strategy used for conducting the audit as the
scoring system should be used for conducting the regular audit of the division.
The two categories in which the audit strategy can be divided include strategy process
audits and strategy risk audits.
Strategic risk audits are conducted by adopting some of the approaches such as
decentralized strategic alignment, strategic risk project auditing, COSO ERM approach and risk
based auditing. In addition to this, the strategy process of audit involves some approaches such
as