Australia Enhanced Auditor Reporting
This report focuses on evaluating the auditor report for the Altium Limited annual report for the year ended 30 June 2017. The report is divided into various sections including the introduction, discussion of auditor’s independence, key audit matters, audit committee, its structure, and responsibilities as well as the auditor opinion. Also, the report presents a vivid discussion of the differences between the roles of auditors and directors and managers. Finally, the report gives a conclusion basing on the audit report od Altium Limited (Auditor Reporting, 2018). (CPA Australia Podcast, 2018) (Board and Audit Committe, 2018) (Enhanced auditor reporting: questions and answers, 2018) (Altium Limited Annual Report 2017, 2017) Contents Executive Summary 2 1. 0 References 13 Australia Enhanced Auditor Reporting 1. 0 Introduction As of 2016, the Australian Audit Standards changed to incorporate the new regulations to enhance the auditor reporting in Australia.
Some of the changes affect all entities while other changes affect the listed entities only. In this case, the listed entities refer to the business organizations that have the stocks, shares or debt quoted in a recognized stock exchange such as the Australia Stock Exchange. It is important to note the change took effect as a result of various reasons including enhancing the value of communication of the audit report passes to the owners. From the annual report, the audit for Altium Limited for the year ended 2017 was done by PricewaterhouseCoopers (PWC) (Altium Limited Annual Report 2017, 2017). It is important for the auditor to declare the independence clause because it helps to reassure the stakeholder that the audit report will give a clear reflection of the proceeding of the organization.
The Australia Audit Standards also reports that it is essential because it gets rid of the doubts of collaboration between the management and auditor to provide a false report that can mislead the public and other stakeholders of the client firm (Auditor Reporting, 2018). A review of the Altium Limited annual report indicted the auditor’s declaration concerning the audit report. It is by the Corporation Act 2001 requirements and Accounting Professional and Ethical Standards code 110 that the auditor gives a declaration of independence of the audit service. However, the analysis shows the percentage increases and decreases in the remuneration amount for the years. An increase and decrease in the extent of service offered to cause the percentage increase and respectively reduced for the remuneration.
2017 US$ 2016 US$ % Change Audit services - PricewaterhouseCoopers Audit or review of the financial statements 310,587 368,367 (15. 69) Other services - PricewaterhouseCoopers Tax consulting and tax advice - 384,981 0 310,587 753,348 (58. 77) Other services - network firms Tax compliance services, including review of company income tax return 29,783 13,502 120. Various auditing procedures were followed and are classified into either test of control, a substantive test of details, a substantive test of balances or analytical procedure as discussed below. 1 Recovery of Deferred Tax Assets For the year ended 30 June 2017, Altium Limited reported $82. 9 million worth of deferred tax asset. According to the revised auditor reporting requirements, the Australia Accounting Standards require recognition of deferred taxes only the extent that taxable profits will accrue in a probable future to realize the benefits of deferred tax asset.
It is considered a key audit matter because it requires auditor’s judgment to determine whether there would be adequate taxable profit in the future to utilize proceeds from tax. It is a key audit matter due to its quantum as well as the need for auditor’s judgment to prove an assurance of the discount rates and growth rates applied in forecasted future profits. The auditor undertook four procedures that fall under the test of controls procedures to ascertain the correctness of the company’s report concerning carrying value of goodwill. For instance, the function of the developed model is tested to ensure a correctly working model was used estimate the ability of the firm to recover the assets; the company also considered the ability of Altium to make correct future forecasts by comparing the available values and the historic values (Altium Limited Annual Report 2017, 2017).
Also, the auditor performed a sensitivity analysis of the model and testing the formulas used to check the correctness of the final values. The auditor also uses a substantive test of detail by applying the knowledge personal knowledge about the company to ensure consistency of the report concerning the carrying value of goodwill (Overview of audits and reviews of financial statements, 2013). It is also a requirement the members need to have different experiences that will facilitate successful completion of audit-related services (Board and Audit Committe, 2018). The committee may also include the non-director members who can offer specific expertise to the board. The audit charter also requires all committee members to be independent and non-executive. This is important because it enhances the independence in carrying out the functions related to the audit.
However, following the annual report of Altium Limited, the audit report does not include the audit committee and audit charter. In this scenario, the auditor not only gives the opinion, but also has the responsibility of outlining reasons that justifies the existence of material misstatement. 0 Auditor’s and Directors and Management Responsibilities It is intriguing to realize that director and management roles are distinct from the roles of the auditor about financial report. However, it should be noted the two parties play a critical role in ensuring the going concern of an organization. The Australia Accounting Standard outlines the responsibilities of management and directors and auditors when it comes to the financial report. The responsibilities of management and directors including organizing, planning and preparing the financial report.
The review of the audit report prepared for Altium Limited meets the requirements of the standard audit report. It is evident that the various sections of such as auditor independence declaration and key audit matters are discussed. The audit report gives a useful guideline that can help the shareholders to realize the position of the company (CPA Australia Podcast, 2018). Furthermore, the audit report is necessary for the justification and approach that the auditor employees helps to build confidence among the stakeholders including the interested third party stakeholders. An evaluation of the audit report presented shows the commitment of the auditor in performing their duties. Retrieved from Auditing and Assurance Standards Board: https://www. auasb. gov. au/admin/. /04-17_AI_6. com. au/professional-resources/audit-and-assurance/auditor-reporting Auditor Reporting FAQs.
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