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Auditing Standards

The name of the company is macquarie group limited. The url of the official website of the company is: Https://www.macquarie.com/in/en/investors/reports.html#2020,macquarie-group-limited,annual-report. The website of its 2019/2020 annual report is: Https://www.macquarie.com/assets/macq/investor/reports/2020/macquarie-group-fy20-annual-report.pdf.

The reporting date of macquarie group limited is 31 march 2020.

The date of auditor’s report is 8 may 2020.

The name of the audit firm responsible for the audit of macquarie group limited during financial year 2019/2020 is pricewaterhousecoopers (pwc). The name of the audit partner signing the audit report is kristin stubbins (annual report 2020 2022).

The auditor’s report is addresses to the members of macquarie group limited.

As per section 7(c) of asa 700, the auditor issues an unmodified audit opinion when it is concluded by the auditor that the client prepares the financial report, in all material aspects, as per the relevant financial reporting framework. An unmodified audit opinion is also regarded as a clean audit opinion which demonstrates the presence of no material misstatement in the financial report (asa 700 2022). In macquarie group limited, the auditors of pwc have audited all the financial statements of the group. As per the outcome of the audit, the financial report, which has been prepared as per the corporations act 2001 (cth), provides the true and fair view of the financial position and financial performance of the group, which indicates the absence of any material misstatement; and the financial report complies with the australian accounting standards and corporations regulations 2001 (cth)(annual report 2020, 2022). All these aspects prove that an unmodified audit opinion has been issued to the group by the auditor.

In order to conduct the audit and express an opinion, all the applicable and required australian auditing standards have been followed by the auditor. Some of the key standards which have been followed include asa 200, asa 230, asa 240, asa 300, asa 315, asa 320, asa 500, asa 570, asa 700 and others (auditing standards 2022). In addition, the auditor has followed the requirements of companies act 2001 (cth) and accounting professional and ethical standards board’s apes 110 code of ethics for professional accountants (including independence standards) (the code) in order to maintain compliance with the independence and ethical requirements to conduct an audit (annual report 2020 2022).

The total amount of assurance fees changed to macquarie group limited by pwc for the financial year 2019/2020 is $31,019,000; and the total amount of non-assurance fees charged during for the same period is $9,045,000. Total amount of fees paid to pwc in 2019/2020 is $40,064,000 (annual report 2020 2022).

Consolidated

Company

2020 ($m)

2019 ($m)

2020 ($m)

2019 ($m)

Total assets

2,55,802

1,97,757

64,168

52,393

Total liabilities

2,34,018

1,79,393

35,197

23,971

Operating income

12,325

12,754

1,102

5,187

The number of shares at the yearend is 370,559,947.

Expressing a clean audit report when the financial statement is materially misstated forms the audit risk, and previous audit largely affects the audit risk. According to section a56 of asa 330, little or no evidence for the present audit is provided by the audit evidence gathered during the previous audit through substantive audit procedures (asa 330 2022). Hence, audit risk is increased in can extensive dependence is put on such evidence by not applying the required further audit procedures. As mentioned in section 13 of asa 330, there are certain key considerations which should be taken into account in case the auditor decides utilizing the previous audit’s results about the operational efficiency of certain control, such as assessing the internal control’s components, analysing the efficiency of it controls, and others (asa 330 2022). In case the previous audits show the presence of material misstatements in the client’s financial report, the auditor is needed to apply extensive professional scepticism while conducting audit for the present financial statements (pratiwi and rahayu 2020). Therefore, previous audit has a large significance in the present audit as well.

Financial Performance

There are different aspects which should be considered to prepare the financial statements. Amongst them, the most challenging aspects include the preparation of accounting estimates and adoption of the applicable accounting policies as these aspects significantly influence the audit risk. Accounting policies are the rules and regulations mentioned in the accounting standards and estimates are the monetary amounts fundamental to prepare the financial statements. The inherent limitations in accounting data and knowledge, the presence of inherent uncertainty can be seen in both accounting and estimates. This is because a single accounting policy or estimate can lead to different measurement outcomes. Management uses different models and method and makes many assumptions while applying the accounting policies and estimates. As a result, they lead to both complexity and subjectivity in financial reporting which can eventually lead to the risk of material misstatement (griffith 2018). In addition, these aspects also increase the risk of expressing an inappropriate audit opinion even when there is material misstatement in the financial report.

  1. Macquarie group limited operates in a highly competitive sector, and as mentioned under appendix 1 of asa 240, financial stability and profitability of the group can be adversely affected by such competition (asa 240 2022).
  2. Interest rate risk is a key factor which leads to the decrease in the group’s earnings. As a result, the management may come under pressure of maintaining the expected earnings (macquarie.com 2022).
  3. Asset risk is another key factor which can increase audit risk since it can reduce the group’s return due to the change in the assets’ physical value.
  4. The management of the group has used critical accounting estimates and significant judgements to prepare the financial statements, and it increases the audit risk.
  5. Adoption of the new accounting standards such as aasb 16 leasesincreases the audit risk as it is a non-routine transaction to the group (asa 315 2022).
  6. Liquidity risk is another key factor which increases the audit risk because it affects the group’s ability of meeting the financial obligations when they fall due(macquarie.com 2022).
  1. Pressure of intense competition can lead to fraudulent financial reporting, such as overstatement of operating income, or understatement of expenses. Hence, the audit approach should include the assessment of fraud risk in macquarie group limited.
  2. The factor of interest rate risk can involve the management of the group in earnings manipulation. Hence, the audit approach should include assessing the possibilities of earnings manipulation in the group.
  3. The audit approach should also include testing the group’s physical assets for accuracy, valuation and allocation as they might be overstated to register increased returns from them.
  4. The audit approach should also include developing independent estimates in order to compare the estimates and judgments made by the group’s management in preparing the financial statements (andiola, lambert and lynch 2018).
  5. The modified retrospective method used by the management of the group in adopting the new lease standard should be tested for accuracy because of the possibility of errors made during using this method.
  6. The approach should include testing the debt covenants in order to assess whether any violation was there for which disclosure was needed. The borrowings should be tested for completeness and classification as well.

Section a35 of asa 200 mentions three components which form the audit risk; they are inherent risk, control risk and detection risk. Audit risk is the function of these three risks (asa 200 2022). The auditor needs to establish the level of detection risk based on his/her assessment of both inherent risk and control risk. The above discussion shows that macquarie group limited is exposed to many factors which increase the overall audit risk. Aspects like high competition, adoption of new accounting standard and use of estimates and judgments increase the inherent risk; and other aspects like interest rate risk, liquidity risk and asset risk increase the overall control risk. Since both the assessed inherent and control risks are high, the auditor needs to set the detection risk as low. Therefore, the risk is substantive audit procedures’ ability of detecting material misstatements is low. Hence, the audit risk model is as below:

Audit risk (high) = inherent risk (high) × control risk (high) × detection risk (low)

The audit strategy should be selected by considering the fact that detection risk need to be set as low. As per section a43 of asa 200, it is recommended to undertake adequate planning to commence the engagement. Proper assignment of personnel in the audit engagement team of macquarie group limited should be ensure, such as including the members in the audit team who have adequate experience, knowledge and competence. After that, professional scepticism should constantly be applied in every aspect of the audit given the fact that both inherent and control risks are high. All the audit procedures should be performed effectively while the results should be evaluated appropriately as well. Lastly, it is recommended to appropriately supervise and review the audit work performed (asa 200 2022).

References

Andiola, l.m., lambert, t.a. And lynch, e.j., 2018. Sprandel, inc.: Electronic workpapers, audit documentation, and closing review notes in the audit of accounts receivable. Issues in accounting education, 33(2), pp.43-55.

Auasb.gov.au. 2021. Auditing standard asa 200 overall objectives of the independent auditor and the conduct of an audit in accordance with australian auditing standards. Available at:

<https://auasb.gov.au/media/zpcgnsmi/asa_200_12-21.pdf> (accessed: 4 january 2022).

Auasb.gov.au. 2021. Auditing standard asa 240 the auditor's responsibilities relating to fraud in an audit of a financial report. Available at:

<https://auasb.gov.au/media/cyloqabg/asa_240_12_21.pdf> (accessed: 4 january 2022).

Auasb.gov.au. 2021. Auditing standard asa 315 identifying and assessing the risks of material misstatement. Available at: <https://www.auasb.gov.au/admin/file/content102/c3/asa315_03-20.pdf> (accessed: 4 january 2022).

Auasb.gov.au. 2021. Auditing standard asa 330 the auditor's responses to assessed risks. Available at:

<https://auasb.gov.au/media/ne4dxsd5/asa_330_12_21.pdf> (accessed: 4 january 2022).

Auasb.gov.au. 2022. Auditing standard asa 700 forming an opinion and reporting on a financial report. [online] available at:

<https://auasb.gov.au/media/da0clvbr/asa_700_12_21.pdf> [accessed 4 january 2022].

Auditing and assurance standard board. (2022). Auditing standards. Retrieved 4 january 2022, from https://auasb.gov.au/standards-guidance/auasb-standards/auditing-standards/

Company | risk management | macquarie group 2022. Available at: Https://www.macquarie.com/in/en/about/company/risk-management.html (accessed: 4 january 2022).

Griffith, e.e., 2018. When do auditors use specialists' work to improve problem representations of and judgments about complex estimates?. The accounting review, 93(4), pp.177-202.

Macquarie.com. 2022. Macquarie group annual report year ended 31 march 2020. [online] available at:

<https://www.macquarie.com/assets/macq/investor/reports/2020/macquarie-group-fy20-annual-report.pdf> [accessed 4 january 2022].

Pratiwi, l. And rahayu, i., 2020, march. Going concern audit opinion in agricultural sector. In 1st international conference on accounting, management and entrepreneurship (icamer 2019) (pp. 96-98). Atlantis press.

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My Assignment Help. (2022). Macquarie Group Limited: Annual Report 2019/2020 Financial Year Essay.. Retrieved from https://myassignmenthelp.com/free-samples/acct3004-auditing/australian-auditing-standards-file-A1D2A19.html.

"Macquarie Group Limited: Annual Report 2019/2020 Financial Year Essay.." My Assignment Help, 2022, https://myassignmenthelp.com/free-samples/acct3004-auditing/australian-auditing-standards-file-A1D2A19.html.

My Assignment Help (2022) Macquarie Group Limited: Annual Report 2019/2020 Financial Year Essay. [Online]. Available from: https://myassignmenthelp.com/free-samples/acct3004-auditing/australian-auditing-standards-file-A1D2A19.html
[Accessed 19 August 2024].

My Assignment Help. 'Macquarie Group Limited: Annual Report 2019/2020 Financial Year Essay.' (My Assignment Help, 2022) <https://myassignmenthelp.com/free-samples/acct3004-auditing/australian-auditing-standards-file-A1D2A19.html> accessed 19 August 2024.

My Assignment Help. Macquarie Group Limited: Annual Report 2019/2020 Financial Year Essay. [Internet]. My Assignment Help. 2022 [cited 19 August 2024]. Available from: https://myassignmenthelp.com/free-samples/acct3004-auditing/australian-auditing-standards-file-A1D2A19.html.

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