HIH Insurance Ltd. Auditing Report

This report analyzes the auditing and assurance services of HIH Insurance Ltd., focusing on the business and inherent risks the company faced. It examines the legal liabilities of clients and creditors, the conditions for negligence actions, and the ethical implications of the firm's practices. The report also discusses the advantages and disadvantages of hiring a firm that provides both auditing and consulting services and offers suggestions for improving internal auditing practices. The case study highlights the importance of ethical standards in auditing and the consequences of their violation.

Auditing and
assurance services
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INTRODUCTION
Auditing and assurance services are crucial to identify organization's financial position
and making decisions on the basis of this assessment. It is related to determining actual
performance of company and taking guidelines for better quality services. The present report is
based on understanding different auditing and assurance services of HIH Insurance Limited that
expands its insurance venture with various insurance companies. In addition to this, several
business and inherent risks occur at workplace are to be described. However, risk factors impact
on financial position of organization can be expressed. Moreover, liability of clients and
creditors for firm's effectiveness is to introduced that affects insurance venture qualities. Along
with this, business ethics including ideal audit team and consultancy services value is to
presented. Therefore, students are able to understand auditing and auditing services significance
for improving services of organization through this report.
QUESTION 1
a) Business and inherent risks occur in HIH Ltd
Due to natural disasters and film financing insurance, different losses are occurred for
implementing service of HIH Ltd. It includes damages claims from major hailstorm in Sydney,
Florida typhoon therefore import and export of business organization get disturbed. In addition to
this, around 100 million loss is incurred that is related to its financial position however
deregulation for insurance curvatures with other countries (Junior, Best and Cotter, 2014). In this
regard, business risks occur for organization can be expressed as below:-
 Operational risk:- Under this risk assessment, it is analyzed that because of high risk
areas of marine and dramatic increase in cost of claims for insurance services. Therefore,
insurance ventures with other countries get impacted. However, business operations
related to providing insurance services including health and life savings are affected. In
this regard, operational risks emerges difficulties for business organization's performance
as well financial and non-monetary position of organization affected bu this risk
occurrence (Breeding and et.al, 2015). Thus, it is needed for HIH Ltd decision maker to
implement action plan for improving insurance services by considering time period for
investing fund.
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 Competitive risk:- Due to occurrence of such different kinds of problems, competitive
risks are obtained for insurance ventures. Similarly, it will be difficult for organization to
make place as well determining competitive strength regarding health and insurance
services (Martin, Sanders and Scalan, 2014). Therefore, competitive risks are challenges
for HIH Ltd to operate business activities withing countries worldwide. Including this,
due to poor financial position, there are competitive risks occur for organization's
performance.
b) Inherent risk factors affects HIH
Inherent risks occur financial omission and different tools that impacts on organization's
economic structure of entity. There are number of factors that affects HIH in terms of inherent
risk. Inherent risk refers to the error and omission that is in the financial statement due to the
factor apart from control. Inherent risk comes in existence when transactions that are entered in
the system are highly complex in nature. Apart from this inherent risk also comes in existence
when one have to make judgment in respect to the financial estimates. It is possible that one
make wrong estimates about the cash flows. If same will happened then in that case wrong
decisions can be made by the managers. Thus, high level of inherent risk is associated with the
HIH and it needs to formulate strategy to deal with the problem (Zorio, García‐Benau, and
Sierra, 2013). There are number of steps that can be taken to handle the situation. In this regard
managers must do deep discussion with the relevant candidates and on that basis must make
decisions.
QUESTION 2
a) Legal liabilities of clients and creditors
As per the given case scenario, it is analyzed that because of losses, there are different
kinds of difficultiees occur for insurnace venture with other companies. However, international
market get impacted through this process. In this case, there are some legal liabilities of
collaberative that are interrelated with business operations can be understood as:-
 Clients:- Clients including auditors and accountant of the organization who recognizes
financial position of the company through different statements such as income statement,
balance sheet and so on (Okolie and Izedonmi, 2014). Therefore, it is legal liability of
clients to identify actual performance and providing effective guidelines.
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 Creditors:- In this case, creditors can claim on HIH Ltd for defaulty insurance services.
In accordance to this, business operations for health and life insurance are needed to be
focused and preparing strategies for making fair decisions (Kimber and Ehrich, 2015).
b) Conditions required to exist for negligence action
Negligence is useful to care ethical ruled and specified circumstances. It involves law for
justice in case of harm and caused. However, different kinds of rules and regulations are
provided for effectiveness of insurance services (Gramling, Nuhoglu and Wood, 2013). In this
regard, several conditions are required to be followed for taking negligence action effectively.
QUESTION 3
(A) Causes due to which HIH would have wanted to hire prior members of its external audit
team
In the current case study there is an auditing firm which done malpractices in business
entity such as HIH insurance due to having huge amount of loss in the firm. While checking as
well as evaluating various kinds of books and accounts that whether the specific financial
transactions are appropriate and reliable or not then auditing company and chartered accountant
is to be hire. In this case HIH hire Andersen audit firm who make the malpractices which lead is
opposite to the ethics and standards. Generally when the accounts and financial statements are to
be evaluated by the external party then they must show clear and original scenario of company
(Carey, 2015). The HIH insurance company would hire prior members because of determining
the actual scene as well as facts and figures about the financials of the firm. Furthermore,
external party provide better suggestions as well as play role as a consultant which is the most
profitable for HIH. Apart from this, after determine actual business condition for taking effective
and fruitful decisions of the company the prior member of external auditing HIH would go for
hire. Hence, it can be said that fraud in the financial statements also to be resolved in the better
manner.
(B) Advantages and benefits due to having the firm which give auditing and consulting both kind
of services
When the business entity hire the firm which providing and offering two simultaneous
services such as auditing as well as consulting, then it is profitable for it. At the time of auditing
if there are any kind of problems and obstacles related to the financial transactions are to be
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suspected then in this case the same company provide suggestions for reducing as well as
overcoming such kind of conditions. Apart from this, if the HIH have done any malpractices as
well as fraud in the overall financial statements for specific transaction then same firm will
provide methods and strategies that how to make proper transactions in the books of account
(Junior, Best and Cotter, 2014). However, sometimes due to giving auditing and consulting
services simultaneously chance of occurring errors comes under consideration. In opposite at the
majority it is profitable as well as beneficial for the company to use such kind of company to
evaluate financial accounts.
(C) Indication that existing circumstances present that whether ethical standards are violence or
not
By considering the current case scenario and circumstances arisen in the HIH insurance
company it can be said that this is fraud done manually which is the violence and break ethical
standards related to the auditing. Here the Andersen auditing firm did fraud in the HIH insurance
firm which is increase the revenue and profit along with reducing losses which are occurs due to
natural disaster. The respective situation lead to create positive image in the eyes of industry as
well as local community and stakeholders make investment in this firm because of having better
and profitable image. Furthermore, investment which is made by the stakeholders and other
investors that will be not earn any kind of return due to having huge amount of losses (Martin,
Sanders and Scalan, 2014). It is the big violence and reduce the earnings as well as trust towards
the HIH company. Apart from this, because of having loss the management cannot give better
insurance services but because of fraud and improve profit in the books of account they continue
to purchase insurance from that firm. Hence, it creates violence among the local community of
the country which is totally opposite to the ethical standards. In this, any kind of ethics and
responsibilities are not to be taken care and followed by both the firms such as Andersen and
HIH insurance.
(D) Providing primary suggestions in order to auditing within company
It can be said that auditing is one of the best method in order to evaluate and check out
several types of financial transactions and statements. As per the Ramsay report it can be
suggested and recommended to the firm that it should always hire the reliable as well as
authentic external auditing party. Furthermore, there are any kind of personal or professional
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relations not should be there (Zorio, García‐Benau and Sierra, 2013). It will affect to the firm in
form of profitable way because when there are any kinds of relations will not then chance of
occurring malpractices reduce and overcome up to the higher extent.
CONCLUSION
The report is concluded that auditing and assurance services are essential to present
organization's performance including taking guidelines for legacy. Including this, different
business risks are described for HIH Ltd including business and inherent that affects on
organization's performance. However, legal liabilities of clients, creditors are identified with
negligence of action to solve out issue of poor financial condition. Along with this, auditor's
independence and various kinds of auditors are presented through this report.
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REFERENCE
Books and Journals
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Junior, R. M., Best, P. J. and Cotter, J., 2014. Sustainability reporting and assurance: a historical
analysis on a world-wide phenomenon. Journal of Business Ethics. 120(1). pp.1-11.
Breeding, J. and et.al, 2015. A retrospective audit of insulin infusion management involving a
locally developed dynamic insulin infusion guideline in a tertiary ICU. Australian Critical Care.
28(3). pp.149-159.
Martin, K., Sanders, E. and Scalan, G., 2014. The potential impact of COSO internal control
integrated framework revision on internal audit structured SOX work programs. Research in
Accounting Regulation. 26(1). pp.110-117.
Zorio, A., García‐Benau, M. A. and Sierra, L., 2013. Sustainability development and the quality
of assurance reports: empirical evidence. Business strategy and the environment. 22(7). pp.484-
500.
Okolie, A. O. and Izedonmi, F. I. O., 2014. The Impact of audit quality on the share prices of
quoted companies in Nigeria. Research Journal of Finance and Accounting. 5(8). pp.150-166.
Kimber, M. and Ehrich, L. C., 2015. Are Australia’s universities in deficit? A tale of generic
managers, audit culture and casualisation. Journal of Higher Education Policy and Management.
37(1). pp.83-97.
Gramling, A. A., Nuhoglu, N. I. and Wood, D. A., 2013. A descriptive study of factors
associated with the internal audit function policies having an impact: Comparisons between
organizations in a developed and an emerging economy. Turkish Studies. 14(3). pp.581-606.
Carey, P. J., 2015. External accountants’ business advice and SME performance. Pacific
Accounting Review. 27(2). pp.166-188.
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