TPG Telecom Audit: Key Audit Matters, Financial Reporting, and Risks

This report provides an analysis of TPG Telecom Ltd, a major telecommunications company listed on the Australian Securities Exchange, focusing on key audit matters and their impact on financial reporting. It identifies revenue from contracts with customers and the carrying value of goodwill and indefinite-life intangibles as critical audit areas. The report relates these audit matters to potential financial reporting issues, highlighting how they can affect the accuracy and reliability of financial statements. Furthermore, it discusses the audit risks associated with these matters, including inherent risk, control risk, and detection risk. Finally, the report suggests potential responses to these audit matters and formulates an audit strategy to address them, emphasizing the importance of a robust audit process to ensure compliance and accuracy. Desklib offers this and other solved assignments for students' reference.

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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Summary of operation of company.............................................................................................3
Identification of key audit matters..............................................................................................3
Relating the audit matters to financial reporting issue................................................................5
Audit matters affecting the audit risk..........................................................................................6
Potential response to the audit matters and formulating audit strategy......................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Auditing is being referred to as the on- site verification of the business and its accounting
process in order to ensure proper compliance with all the requirement. For the business it is very
crucial that proper auditing is being done so that its efficiency can be measured. The present
report will be based on TPG TELECOM LTD is the second largest telecommunication company
listed on Australian Securities Exchange. The current report will outline the operations of
company along with the key audit matters faced by the company. along with this, the analysis
will be outlined relating to audit matter affecting the financial reporting. In the end the discussion
will lead to audit matter affecting the risk of audit and development of some audit strategy for
solving the audit matters.
MAIN BODY
Summary of operation of company
The company TPG TELECOM LTD was formerly known as Vodafone Hutchison
Australia Pty limited and was renamed after merger with TPG. The company deals in the
telecommunication industry and was founded in 2001 and headquartered in New South Wales in
Australia. The company offers a wide range of product and services like fibre network access,
mobile plans, telephony services, networking solution, mobile broadband and many other related
services. The major area where the company operates is between Guam and Australia. Along
with this he company has many city Wi- Fi network in various cities like Bendigo, Ballarat,
Adelaide, Allarat, Canberra, Melbourne, Mildura and many other different cities. Along with
this, the company also provides for a wide range of communication services to all the residential
used, different large corporate companies, SME that is small and medium enterprises and many
other different consumers. Moreover, with help of good corporate culture the company has set
the industry standard relating to innovation and value and supplying services to the users.
Identification of key audit matters
Auditing is very important for the company in order to ensure that all the accounting
process is being followed by complying with the standards and other guidance. The reason
underlying this fact is that in case auditing is not being undertaken in proper manner then there
might be some issues in the accounting process (Schmitz and Leoni, 2019). Auditing is very
important for the reason that it ensures that all the regulations and requirements are being

followed while making the financial statements. But there might be some of the issues which can
affect the audit of the company. these matters affect the financial statement of the company.
Thus, it is necessary for the TPG TELECOM LTD that they ensure that there are not any audit
matters affecting the working of the company. but then also there are some of the issues or the
audit matters which company has included within the financial statement (Munoko, Brown-
Liburd and Vasarhelyi, 2020). These audit matters will be analysed and highlighted by the
auditor during the audit process.
The first key audit matter which is being faced by TPG TELECOM LTD is revenue from
contracts with consumers. This matter involved the fact that revenue from contract with
customers is a key matter because is defines the magnitude of the balance. Along with this, there
are different number of revenue streams and other variable consideration relating to diverse
product and services. Moreover, there is also sometimes complexity present within the
contractual arrangement within the telecommunication services. This is very important because
of the reason that there are different types of contracts and it is not necessary that every revenue
need to be recorded. Hence, this is an audit matter because of the reason that in case the revenue
will not be treated and recorded in proper and effective manner then this will affect the working
of the company and the financial statement to a great extent. this was the auditing matter because
the company was using complex manual calculation and this was dependent over the multiple
billing system. Also, this was the auditing matter because of the reason that in case any of the bill
was misplaced then this will be affecting the whole profitability of the company. Moreover, in
this matter the timing of revenue generation was also to be taken care. The reason pertaining to
the fact is that in case any date will be missed then this will be affecting the working of the
company and its financial statements to a great extent.
Along with this, another audit matter which was outlined by the auditor was the carrying
value of goodwill and the indefinite life intangibles. This was the audit matters because of the
reason that the company recognizes the asset for goodwill and the intangible asset which are
allocated to the different cash generating units. The company is having two different cash
generating units relating to goodwill which is consumer and the corporate (Tiberius and Hirth,
2019). As per the requirement of Australian Accounting Standards the company is mandated to
analyse the goodwill value annually for impairment. In the present situation the company may
face the risk that material impairment of the goodwill and the intangible assets. In addition to

this, the recoverable amount of goodwill and the other asset was the key audit matter provided in
the financial significance and within the consolidated statement.
Thus, for the effective working of the company it is very important that they effectively
review the process of making the financial statements. This is necessary pertaining to the fact
that there are many different areas in which company may lack or face some issues (Knechel,
Thomas and Driskill, 2020). Hence, for this, it is necessary that proper audit is being undertaken.
This is necessary as the auditor will evaluate the working in better and effective manner and will
ensure that whether all the working is in accordance with the requirement.
Relating the audit matters to financial reporting issue
With the above analysis it is clear that the audit matter affects the working of the
company and the presentation of the financial statements as well. Thus, this also creates problem
within the financial reporting. The financial reporting is being referred to as the process of
documenting and communicating the financial activities and performance of the company for a
specific period of time. For the business to be successful it is necessary for TPG TELECOM
LTD to report each and every transaction in better and effective manner. This is necessary
because when the reporting will be better than this will provide better and effective information
of the company. But in case there are some of the audit matter being faced by the company then
this will also have an effect over the reporting of the business issues in better and effective
manner.
For the business it is necessary that all the key aspect need to be reported within the
financial statements. This is essential because of the reason that when the audit matters will be
highlighted then these also need to be involved within the financial statements and this can affect
the working of the company. In case there will be less audit matters then this will not be
affecting the financial reporting to a great extent. This is pertaining to the fact that in case the
audit matter will not be present then this will be affecting the financial statements. Moreover, in
case the audit matter will be more than it will be affecting the financial reporting. The reason
underlying this fact is that all these changes will be affecting the reporting of the company and
its financial matters (Appelbaum, Kogan and Vasarhelyi, 2018). Hence, these matters and issues
will be affecting the recording of the business transaction to a great extent. For example, in case
any digit while calculating the profits will be missed then this will be affect the profitability of

the company to a great extent. thus, this will be impacting the financial reporting to a great
extent.
Audit matters affecting the audit risk
The audit risk is being defined as the risk which the company faces because of some
immaterial information present within the financial statement. The audit involves a wide range of
risk which can affect the audit process to a great extent. Hence, for this, it is necessary for TPG
TELECOM LTD to have proper audit process so that the working is managed in proper manner.
There is different audit risk which can be faced while managing the audit matters (Moffitt,
Rozario and Vasarhelyi, 2018). The most common audit risk being facts by the company while
managing the audit matters is the inherent risk. This is the risk which the company and
management cannot try to prevent. This is particularly because of some uncontrollable factor and
also it might not be highlighted by the auditors as well. This is pertaining to the fact that when
the company will be having some inherent risk then this will affect the working of the business
and financial statement to a great extent. This risk occurs when the auditor is not able to identify
the risk because that transaction involves high level of judgement.
In addition to this, another crucial risk which is faced because of the audit matters is that
control risk. This is a type of risk which involves misstatement and errors present within the
financial statements. In case of TPG TELECOM LTD this risk could have been controlled but
the management or other regulatory authority was not in position to control the risk and this
resulted in audit matters. For instance, the management was inefficient in managing the internal
control. Further, with respect to TPG TELECOM LTD the control risk was that the company
was relying on manual calculation and this can affect the working efficiency of the business to a
great extent. Thus, this risk also leads to the audit matter and this can deviate the auditor in
identifying and checking the financial statements in proper manner.
Moreover, another risk which is being identified at time of audit matters was the
detection risk. This is the risk wherein the auditor also fails to detect the errors and misstatement
being present within the final accounts. Thus, this can lead to wrong opinion of the auditor and
wrong auditor feedback will be provided to the company (Jeppesen, 2019). Thus, it is the
responsibility of the auditor that they musty effectively ensure that there is not any aspect which
is being left by the auditor to analyse and evaluate the financial position of the company. For
example, the auditor of TPG TELECOM LTD was not able to understand the complexity of the

business and the operations of the business. Along with this another detection risk which might
be faced by the company is that there is not proper and clear communication within the auditor
or the management of the company (Ribeiro and et.al., 2020). This can also lead to some of the
audit risk because in case the auditor is not in position of effective communication with the
management then some of the points can be missed. Hence, as a result of this, there can be some
areas lacking in proper auditing of company's financial statements.
Potential response to the audit matters and formulating audit strategy
The audit matters need to be corrected in proper manner as this will be affecting the
working of the company. In case the audit matters will not be solved then this will be affecting
the profitability of the company. Hence, it is very essential for TPG TELECOM LTD that they
must formulate the audit strategy in proper manner. This is necessary because of the reason that
in case the audit strategy will not be used in proper manner then this will affect the working of
the business and its financial statements (Raji and et.al., 2020). Thus, for the auditor of TPG
TELECOM LTD it is necessary that proper audit strategy need to be used and followed. The
audit strategy will guide the auditors of TPG TELECOM LTD in analysing the audit matters in
better and effective manner. For the effective management and analysis of audit matters the audit
strategy the use of system based audit approach.
This is an approach of audit which assist the auditor in analysing and evaluating the work
of the company and analyse whether they have followed the standards and regulations. This
system involves the strong internal control which is being used by the company in order to
evaluate the performance of the company. with help of this approach the auditor tries to test the
internal control and validate that whether the internal control is being used in proper and
effective manner or not (What are the 4 audit approaches? 2021). Moreover, in case the auditor
will not validate the internal control then this will be affecting the overall working of the
business. This is the major responsibility of the auditor because in case the internal control will
be having some issue then this will be affecting the working efficiency. Thus, the first and
foremost step of system based audit approach is to evaluate the internal control.
Further, after the review of internal control system the auditor need to evaluate all the
financial statement and check the working and records with proof. This is very important for the
company as this will provide the basis to the auditor to evaluate the working in better and
effective manner. This is necessary because of the reason that in case auditor will not cross check

each and every transaction then this will be affecting the working and making of the financial
statements. Along with this, by evaluating the proof the auditor will ensure that each and every
transaction is being recorded in proper and correct manner (Kotsanopoulos and Arvanitoyannis,
2017). This is necessary for ensuring the fact that when any of the transaction will be missed
then this will be affecting the making of financial statement to a great extent. Thus, this
technique of system based audit approach will definitely help the auditor of TPG TELECOM
LTD in ensuring that the financial statement is being prepared in proper manner by complying
with all the regulations and standards in proper and effective manner.
CONCLUSION
With the above analysis it is clear that the auditing is being defined as the process of
evaluating the financial statements of the company. The auditing is very important for the
company in order to ensure the proper working of the business and whether the regulation and
standards have been properly followed or not. The above report highlighted the fact that TPG
TELECOM LTD is having some audit matters like recognizing the revenue from consumers and
the recording of goodwill and other intangible assets. Further the report also evaluated that there
is different audit risk which can be faced by the company like detection risk, control risk and
others. In the end it was also evaluated that using proper audit strategy is necessary like use of
system based audit approach.

REFERENCES
Books and Journals
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quality standards in the food industry: A review. Comprehensive Reviews in Food Science
and Food Safety. 16(5). pp.760-775.
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Online
What are the 4 audit approaches? 2021. [Online]. Available through: <
https://goriouxsiam.com/2021/01/09/what-are-the-4-audit-approaches/ >