MA611 Auditing - Risk of Material Misstatement Analysis and Report

This report examines the risk of material misstatement at the financial reporting level for Ausnet Services. It analyzes the company's control environment, the role of the audit committee in managing fraud and errors, and the importance of following accounting standards. The report discusses the significance of the independent audit report, directors' declarations, and the auditor's role in assessing potential misstatements. It highlights the risks associated with a fast-growing industry, including increased revenue and potential fraud. The analysis also covers compliance charges, directors' qualifications, and the impact of experienced management and independent directors on reducing fraudulent financial reporting.

Risk of material misstatement at the financial reporting level
a) In the context of the company based on its latest annual reports we can analyse that the company
Ausnet Services has in place an effective control environment for reporting of transactions and a
level of risk is reduced due to the presence of a corporate governance committee as per the
statement in the board report present in the annual report that is published, the audit committee
present in the company is effectively managing the reduction of frauds and errors in preparing and
presenting the financial reports as a whole which will in turn reduce the prevention risk and control,
as there is always an inherent risk in the form of audit risk which is detection risk that cannot be
eliminated, on observing the financials that are present in the annual report there is a confirmation
that the company has followed the applicable standards on accounting (Bizfluent, 2017).
b) The independent audit report and the declaration given by the directors of the company
regarding the compliance to ethics and financial reporting framework as is applicable to the
company and the confirmation from analysing the financials that proper relevant disclosures are
made making the auditor confirm that there is a reduced risk of material misstatements from
happening (Alieid, 2016).
On making further analysis of the financials there is a risk of account balances being overstated or
understated which needs to be checked based on prior experience of the auditor and a clear
evidence if available while making assertions such that there is no window dressing being done and
the financial report is free from any material misstatements (Gay & Simnett, 2015).
e) The entity is operating in a fast growing industry related to the transmission of network which
deals with an increasing revenue and as revenue grows inherently the chances of fraud happening at
the financial reporting level also increases, there are chances that the company is trying to report its
financial to have equal benchmark levels with the comparison to the industry which is a major
concern for the auditor as it increase the risk of fraud going unnoticed being top management
involved in such activities (Fukukawa & Mock, 2011).
Also the auditor has to check for any compliance charges on the company or the industry as a whole
which will assist in knowing the level of risk involved in the audit of such statements of accounts, the
directors disclosures and their qualifications have to be checked on sampling basis as there could be
an undisclosed undue influence on the reporting individual by the directors of the company or the
top level executives in the organisation, the directors are of integrity as per the mentioned audit
report (Jones, 2017).
The company based on its directors report have a well experience management with proportion of
independent directors as that required by the regulatory and the chairman of the board is an
independent director, the committee consists of non-executive directors as and when required
which would reduce the influence of the management on reporting of financials in a fraudulent
manner (Grenier, 2017).

References
Alieid, E. E. (2016). The Role of Accounting Information Systems in Making Investment Decisions.
Internal Auditing & Risk Management, 11(2), 233-242.
Bizfluent. (2017). Advantages & Disadvantages of Internal Control. Retrieved december 07, 2017,
from https://bizfluent.com/info-8064250-advantages-disadvantages-internal-control.html
Fukukawa, H., & Mock, T. (2011). Audit risk assessments using belief versus probability. Auditing: A
Journal of Practice & Theory, 30(1), 75-99.
Gay, G., & Simnett, R. (2015). Auditing and assurance services in Australia. McGraw-Hill Education
Australia.
Grenier, J. (2017). Encouraging Professional Skepticism in the Industry Specialization Era. Journal of
Business Ethics, 142(2), 241-256.
Jones, P. (2017). Statistical Sampling and Risk Analysis in Auditing. NY: Routledge.