This research report is going to carry on an analysis of the detailed paper about the auditing and the new principles of the auditing that has been applied by the legal implications of corporate governance. The need for auditing has taken rise ever since the era has been involved and traced with never-ending hacking and the fraudulent activities which constantly take place in the corporate sector. Most of the fraud is related to the financial section of the companies as well as the confidentiality of the information that is often traded with other companies. All of these activities are part of criminal activities. These need to stop in order to prevent and protect the data and the personal information which is supposed to be kept as a secret from other companies. This gives us an idea and a sneak peek into knowing why the companies that are highly involved in large financial transactions and dealing with very private and confidential data are always trying to make sure to get their accounts audited and reviewed by the largest and the most reputable firms of auditing within the country. The auditing, therefore, is becoming almost a must thing to do before really publishing the financial statement and the financial accounts to the ghee the public. Therefore, this research report is specifically going to target and talk about how the auditing is controlled and governed by laws. This will suggest the readers how the auditing used to take place initially and how the latest applications of the ISA 701 have implied and brought into some rules that need to be followed by the companies which are planning to go ahead with the aid toting of their general public accounts and their financial statements before really publishing the final accounts. However, the research report will be considering the data of the auditing and the application of the currently developed Law and principles that have to be applied to the general guideline of the auditing reports, the ISA 701, will be researched and will be applied to the banking industry of Australia.
The selected industry is the banking industry of Australia, and the reason behind the selection of this industry is mainly because the companies that are a part of huge financial transactions and that are highly likely to get involved in a scandal related to big scams of the financial transaction can really take place. This will give the readers closer and a more relatable idea on how the new law and the new application of the ISA 701, will help all the corporate firms to take advantage of the auditing by the external or the internal auditors that are done periodically. But before going deep into Jenkins what the new application is about, let’s learn about what really auditing is. Auditing is a detailed process that is carried out by a group of people, known as auditors, who will review the financial accounts which have been prepared. Y the finance departments of the companies. The main aim and reason behind the auditing that really usually takes place is the protection of the companies from getting involved in fraudulent activities. By this, it means that the companies will be able to protect its operations and its image from getting involved in a big scandal which can ruin the image and the brand image of the bank. Moreover, the traces are usually analyzed and found by the auditors with the help of the evidence that has been provided to the auditors by the companies. The main and the whole point of auditing is to remove any inefficiencies and any unfair transactions that have been mentioned by the company’s accountant to make the company’s financial position look more lucrative than it really is.
The New International Standard of Auditing (ISA) statement number 701 titled key audit matters (KAM) has been reported as one of the most significant changes to the audit profession and the manner in which audit reports are to be delivered. This has been launched and have been effective in the run since 15 December 2016, and it identified that all the external or the internal auditors from the Johannesburg Stock Exchange (JSE) -ASA and its listed companies will have to make sure to disclose key and significant transactions that occurred on the audit, even in the event of an unmodified audit opinion. This has been modified and has been strictly implied to be followed by all the corporate companies and all the banks in the banking sector. This is said by the legislators as the most appropriate method of revealing fraud as it is increasing transparency and accountability to enhance the fairness of reporting and to assist the stakeholders with understanding the audited annual financial statements. This so why this research paper will include disclosure of potentially confidential information and potentially increased auditor.
The ISA, International standard of Auditing 701 is the principle that has been recently been launched in order to work on the key audit matters which have previously not been covered by the auditing. There are many scopes and the reasons for its application the banking industry and they are nonetheless but helpful for the prevention of the firms from really getting involved in the fraudulent activities. This International Standard on Auditing (ISA) deals with the auditor’s responsibility to communicate key audit matters in the auditor’s report. It is intended to address both the auditor’s judgment as to what to communicate in the auditor’s report and the form and content of such communication.
The main purpose of communicating key audit matters is to enhance the communicative value of the auditor’s report by providing greater transparency about the audit that was performed. The whole scope of the ISA 701 is to make sure that all the auditors who are really carrying out the audit of any banks in the banking industry of Australia, are eventually communicating the results and all the adverse or qualified audit opinion that they have come up with, to the stakeholders and the company people who will. E interested in knowing the information about the company. This is why communication all the key audit matters provides additional information to intended users of the financial statements (“intended users”) to assist them in understanding those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period. The communication that really takes place between the auditors and the managers or the intended users of the financial accounts of the banks will help them get better awareness on where the financial statements lacked the authenticity and where exactly can the fraud or the fraud has actually taken place.
Then finally comes the matter on how to really apply these standards to the overall procedure of Auditing that really takes place in the financial naming sectors. The importance of the auditing standards and the importance of then communicating the key audit matters and the results have been analyzed and mentioned above, which has been discovered and covers by the new ISA 701. And its application is mentioned in the description below along with its significance.
The key audit matter which is considered important to be discussed along with the panel of the company and the auditors need to be material information. However? The significance can be described as the relative importance of a matter, taken in context. The significance of a matter is judged by the auditor in the context in which it is being considered. The importance or the Significance of the matter that is being discussed can be analyzed and judged on the basis of quantitative and qualitative factors, such as relative magnitude, the nature, and effect on the subject matter and the expressed interests of intended users or recipients.
Moreover, there is no point of the audit to really take place in the baking sectors, but the intended user to but really get the grip on the information and the private or confidential data that has been discovered by the companies. This shows that the there has been an increased pressure shown from the side of the users of financial statements who have come forward and expressed an interest in matters about which the auditor had the most robust dialogue with those charged with governance as part of the two-way communication required by ISA 260 (Revised)7 and have called for additional transparency about those communications. This means that there needs to be an expression and the inclusion of the detailed communication of the data and research to be shared with the user of the financial accounts. This includes, for example, users have expressed particular interest in understanding significant judgments made by the auditor in forming the opinion on the financial statements as a whole because they are often related to the areas of significant management judgment in preparing the financial statements.
Furthermore, the communication that really takes place between the auditors and the managers of the bank will improve and enhance the communication skills that take place between the auditors and the users of the financial statements.
This has been not only understood but has been religiously followed by all the banks in the banking industries in Australia, ASX Listed companies. The auditing has to become the core element of the corporate sector businesses. This is as it has been analyzed tells us that it will try and detect as many frauds as possible. The fraud and its detection is the only key responsibility of the auditors. However, after the detection and the communication of the fraudulent activities , if any, has been detected and communicated amongst the auditors and the users, then there will be a need by the managers and the owners of the company to make sure that they are taking strong actions to take the steps to control the fraud from really taking place.
Moreover, the auditing procedure before the application and the introduction of the international standards of the auditing 701 , the auditing used to take place by the auditors , either external or the internal ones and the results and the consequences were simply opinionated by the auditors or just mentioned as the important clause or the important matter paragraph by the auditors. However, the communication of the results and the communication of how the auditing and the results can lead to the protection of the company accounts. The analysis shows that even after the auditing has been carried out, the success of the auditing will only be realized and will only be felt if the companies and the banks will take actions relevant to take curative actions to support the accounts.
The auditing procedure should be the same throughout the organizations in the same industry. This means that all the audit documentation and the procedures used by the auditors, whether the external ones or the internal ones should be the same as they will be easily compared and made use of against any other bank in the baking industry. Moreover, the auditing procedure should be followed by all the banks within a similar industry to be following the same International Standards of auditing 701. This is because there are many companies who have still continued to follow the old style and the method of the auditing that takes place. This means that they will hire the external auditors and will only get the audit opinion and the reviews will then be worked upon, if only the company wants to remove any discrepancies that have occurred, either by mistake or purposely by the company’s accountants. This will suggest that unless the International Standards of Auditing will really call for the strict implication of the standards to the auditing that takes place within any banks in the baking industry, there will be no bank who will go an extra mile to host a meeting to further talk with the auditors to find out where the financial statements of the banks lacked the fair representation and where the frauds have occurred. This show why the legal bodies of the corporate governance in Australia should ensure that all the banks are therefore falling in line to arrange a meet up with the auditors to find out where they have gone wrong in the preparation of their financial accounts and the financial statements. This is why the recommendation of the legal and the authoritative bodies should be that there should be increased accountability given to the banks as the banks and the companies should be asked and checked on if they are implying the International standards of auditing.
After all the analysis and the research that has been gathered regarding the data about how the auditing has always taken place and how it should be done now, it is rightful to say that the current implication and the changes brought by the corporate governance is a very useful one. This is because of the aspect of the communication of the key audit matters and thus the identification of who, when and where all the discrepancies have been identified needs to be talked about and discussed with the owners and the responsible authorities of the banks. This will not only assure that tens auditing has detected the fraud, but the communication will help the companies and the banks analyze the ways and the loopholes that they need to improve in order to get rid of the tendencies of committing the same general fraud again. Moreover, if the fraud has taken place internally, the company and the banks can simply hold the person who is supposed to be held responsible to answer why they did so. Moreover, they can either lay off the person or can simply completely change the job role of that specific person.
However, in the end, it also has to be understood that the amalgamation of the manager with the wrong and unethical means to the auditors can lead to the wrong audit opinion and a completely wrong picture of the company accounts given the intended users. This will mean that the auditors can be unfair too at the time and this will devalue the overall significance of the idea is having the company’s financial statements and financial accounts auditors.
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