HI6026 - Audit, Assurance: CSR Limited's ASX Compliance & Risk

This report provides a comprehensive analysis of CSR Limited's compliance with the ASX Corporate Governance Principles and an assessment of the company's key business and audit risks. It begins by evaluating CSR Limited's adherence to each of the eight ASX principles, highlighting the company's strategies for board composition, ethical conduct, reporting integrity, stakeholder communication, and risk management. The report then delves into CSR Limited's nature, market overview, regulatory environment, and business strategies, followed by an identification of relevant business risks, including currency risk, competitive forces, digital service risks, and environmental compliance. Finally, the report outlines the steps CSR Limited has taken to mitigate these risks, such as forming risk and audit committees, establishing credit approval policies, maintaining sufficient cash reserves, and adopting hedging strategies. The report concludes by recommending analytical procedures to further reduce audit risk.

Running head: AUDIT, ASSURANCE AND COMPLIANCE
Audit, Assurance and Compliance
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................2
ASX Corporate Governance Principles...........................................................................................3
Risk Assessment..............................................................................................................................8
Nature and Market Overview......................................................................................................8
Regulatory Authority and Strategy..............................................................................................9
Relevant Risks...........................................................................................................................10
Steps to Reduce Risks................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................13

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Executive Summary
This report takes an honest attempt to analyze the compliance of corporate governance
related principles of ASX (ASX CGC) in CSR Limited. At the same time, the report aims to
identify the major business as well as audit risk of CSR Limited along with the procedures to
mitigate these risks. CSR Limited is a major Australian company operates in the building
material industry of Australia. The first part of the report shows the compliance of CSR Limited
with the ASX CGC principles and the results shows the full compliance of CSR Limited with
these principles. The next part of the report shows the details of the regulatory environment,
industry overview and strategies of CSR Limited. After this part, the study involves in the
identification of the major risks in the company and the analysis shows the presence of some of
the major risks of business in CSR Limited. The last part of the report involves in the proposition
of some analytical procedures for the reduction of risks.
Introduction
Auditing is the process to examine the financial statements of the business entities in
order to find out any material missstements in them. While auditing the statements, the
responsibility of the auditors is to take into consideration the major risks of material
misstatements and to take necessary steps to reduce them. On the other hand, Australian Security
Exchange (ASX) has provided the companies with eight principles in order to implement
effective corporate governance mechanism (asx.com.au 2018). All the ASX listed companies are
needed to comply with these principles of ASX corporate governance (ASX CGC). The
objective of this report is to analyze the compliance of ASX CGC principles and risk assessment
process of one of the ASX listed companies. For this report, CSR Limited is chosen. CSR

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Limited is an Australian company involves in the production of building products and materials.
The main business objective of CSR Limited is to serve he customers of Australia and New
Zealand by maintaining a low cost manufacturing facility along with strong distribution network
(csr.com.au 2018).
ASX Corporate Governance Principles
In the year 2003, ASX introduced the Corporate Governance Council Principles and
Recommendations in order to make the companies put focus on the corporate governance
practices in the companies. The same aspect can be seen in CSR Limited as the company is also
needed to comply with the standards of ASX CGC. The following discussion shows the
implementation of ASX CGC principles by CSR Limited:
Principle 1: As per this principle, companies should establish and disclose roles and
responsibility of board and management and how the company measure and monitor their
performance (asx.com.au 2018).

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(Source: csr.com.au 2018)
The above discussion shows that CSR Limited has set the roles and responsibilities of
their board. In addition, the company uses balanced scorecard of annual key performance
indicators to monitor and measure their performance (csr.com.au 2018).
Principle 2: The companies should have boards of appropriate size, skills, commitment and
composition in order to discharge duties (asx.com.au 2018). As per 2017 Annual Report of CSR
Limited, the company has six members in board and the company has provided the required skill
sets for them (csr.com.au 2018).

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(Source: csr.com.au 2018)
Apart from this, CSR Limited also discloses the qualification, skills and experience of
their directors in order to promote corporate governance in the company (csr.com.au 2018).
Principle 3: Companies are required to act in the most ethical and responsible way. In CSR
Limited, the presence of an effective framework of policies related to values and code of ethics
can be seen. As per this code of ethics, it is required for the directors, executives and other
employees to ac in the ethical manner (asx.com.au 2018).
(Source: csr.com.au 2018)
The company has endorsed a code of business conduct and ethics that is available in the
website of the organization and all the employees of the company are needed to follow these
code of ethics. All the employees, directors and major contractors of CSR Limited are needed to
sign a certificate of compliance with the code of conducts (csr.com.au 2018).
Principle 4: Companies should have formal process for verifying and safeguarding the corporate
reporting integrity (asx.com.au 2018). It can be seen that CSR limited follows the needed
principles like Corporations Act 2001, Australian Accounting Standard, Australian Accounting
Standard Board (AASB), IASB and IFRS to maintain the integrity of corporate reporting. All

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these aspects ensure the true and fair representation of the accounting statements of CSR
Limited. Apart from this, the business unit financial managers are required to meet the
representatives of corporate finance team in order to gain understanding about all the financial
aspects of the company so that the integrity of financial reporting can be maintained (csr.com.au
2018).
Principle 5: Companies should make timely and balanced disclosure of all the necessary
information (Tricker and Tricker 2015). It needs to be mentioned that CSR Limited has
employed a long established framework in order to provide relevant and timely information to all
the stakeholders (csr.com.au 2018).
(Source: csr.com.au 2018)
Principle 6: Companies are required to respect the right of the shareholders by providing them
with all the required information (Young and Thyil 2014). In this context, it needs to be
mentioned that the continuous disclosure framework of CSR Limited ensures that timely delivery

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of required information to their shareholders. Due to this, the shareholders of CSR Limited
become able to gain access to the required financial information at the time of investment
decision-making (csr.com.au 2018).
Principle 7: Companies are required to establish effective risk management framework in order
to mitigate the risks (Kim and Lu 2013). CSR Limited has adopted effective policies and
procedures in order to monitor their business risks. Three major factors in the risk management
framework of CSR Limited are Risk & Audit Committee, Workplace Health, Safety &
Environment Committee and Senior Management Team (csr.com.au 2018).
(Source: csr.com.au 2018)

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Principle 8: The companies are required to pay fair rumination to their directors in order to
attract and retain them for the overall benefit of the organizations (Gitman, Juchau and Flanagan
2015). At the same time, companies are required to align the interest of the company with the
shareholders interest. It needs to be mentioned that CSR Limited has a well-crafted remuneration
framework for their directors in order to attract and retain them. As per this framework, the
remuneration structure of CSR Limited consists of two parts; they are fixed remuneration and
short and long term initiatives (csr.com.au 2018).
(Source: csr.com.au 2018)
Risk Assessment
Nature and Market Overview
CSR Limited is a major Australian business entity operates in the building material
industry of Australia. The main business operation of CSR Limited is the production of heat
insulation materials for business. In addition, the company also produces different building
materials like fiber cement sheeting, aerated concrete products, bricks and other products for
building (csr.com.au 2018). Construction material industry is a major industry of Australia
having $356 billion as revenue and 0.4% recent growth can be seen in this industry. The total

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number of employment in this industry is 990,000 having 328,500 businesses. It needs to be
mentioned that divergent of demands has affected the overall performance of this industry.
However, it can be seen that the profit margin of this industry is wide that aids in the greater
profitability of the companies operating in this industry (abs.gov.au 201).
Regulatory Authority and Strategy
CSR Limited has to comply with some of the major regulation while conducting their
business operations. For doing business, some of the major regulations that CSR Limited has to
comply with are Fair Trading Law, Australian Consumer Law and the regulations of Australian
Competition and Consumer Commission. In addition, CSR Limited also complies with the
regulation of Australian Security and Investment Commission (ASIC). For the purpose of
financial reporting, CSR Limited complies with the regulations of Corporations Act 2001,
Australian Accenting Standards, Australian Accounting Standard Board (AASB), International
Accounting Standard Board (IASB) and International Financial Reporting Standards
(austrade.gov.au 2018).
In the business operations of CSR Limited, the presence of five major business strategies
can be seen. The first strategy is to strengthen and invest in the business and people. The second
strategy is to deliver smarter, faster and easier building solutions. The third strategy is to
influence design and adapt changing way of business. The fourth strategy is to bring
improvement in comfort, quality and efficiency of buildings. The fifth strategy is to create a
positive effect on the customers about CSR Limited (csr.com.au 2018).

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Relevant Risks
In the 2017 Annual Report, CSR Limited has mentioned about some of the major
business risks that the company faces while conducting the business operation. CSR Limited
faces currency risk due to the fluctuation in global US dollar price and currency (csr.com.au
2018). The effect of some of the major competitive forces like domestic and international
suppliers and new technology can be seen on CSR Limited that creates the risk of the
replacement existing building methods (csr.com.au 2018). In CSR Limited, risk can be seen in
digital services used by the construction companies as the lack of digital presence can affect the
company’s revenue (csr.com.au 2018). The next risk is related to energy and climate change and
for this, the company has to comply with government regulations in order to reduce the effects of
their business operations on the environment (csr.com.au 2018). Non-compliance with these
emulations can create material effect in the business of CSR Limited. Apart from all these, CSR
Limited is exposed to three major financial risk; they are credit risk, liquidity risk and market
risk. Credit risk occurs in case the customers of financial instruments fail in their contractual
obligations (csr.com.au 2018). In CSR Limited, liquidity risk arises in case the company does not
have sufficient funds for meeting the financial obligation when they are due. CSR Limited faces
market risk when the company is exposed to the commodity prices of aluminum that arise from
the sales of contract basis (csr.com.au 2018). These are the major risks in CSR Limited.
Steps to Reduce Risks
After the identification of major business and audit risks, it is required to develop
procedures for the mitigation of those risks. It can be observed that CSR Limited has formed risk
committee and audit committee for the mitigation of these risks. The risk and audit committee
reviews the financial reporting system, internal control and risk management system for the

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development of risk management strategies. For the mitigation of credit risk, CSR Limited has
established a policy for credit approval under which the company analyzes the new customers for
examining their credit worthiness (csr.com.au 2018). For the reduction of credit risk related to
derivatives, the company has established counterparty credit risk policy. After that, for the
mitigation of liquidity risk, CSR Limited uses to maintain sufficient cash and bank balances and
reserve borrowings facilities while continuously monitoring the forecast and actual cash flows
(csr.com.au 2018). For the reduction in market risk, CSR Limited has adopted the hedging
strategy. After that, for the reduction of the audit risk, the company is required to apply
analytical procedures (auasb.gov.au 2018). Thus, the strategy of CSR Limited is to apply the
process of Account Balance Comparison method that will allow the company to compare the
trial balance amounts with adjusted trial balance (William Jr, Glover and Prawitt 2016). After
that, the auditors can adopt the policy of ratio analysis in order to compare the current year’s
ratio with prior years. Apart from this, the auditors of CSR Limited can also take up regression
analysis for reducing the overall audit risk (Leung et al. 2014).
Conclusion
The above discussion shows that CSR Limited complies with all the eight corporate
governance principles of ASX with the implementation of different strategies like development
of effective board, correct remuneration structure, code of ethics, timely disclosure, recognition
and management of risk and many others. The above discussion also states that the company
operates in the construction material industry of Australia and operates under the Australian
regulations. After that, the above discussion also shows the presence of some of the major risks
in the business operations of CSR Limited; they are liquidity risk, credit risk, market risk,
currency risk, digital innovation risk and others. For this reason, CSR Limited has adopted some