Auditing, Assurance & Services ACC707
Individual Assignment Research Question
The new auditing standard ASA701 Communicating Key Audit Mattersin the Independent Auditor’s Report is developed in the wake of the global financial crisis. This development is in response to calls from shareholdersto know more about the companiesthey invest in. Further, investors have also requested earlier warnings of potential issues that may exist with respect to an entity’s ability to continue as a Going Concern which resulted in the revision of ASA 570 (ISA 570) Going Concern.
Students are required to research into the rationale for the new auditing standard ASA 701, explain clearly what it is and select an industry, eg. banking, mining, etc and analyse Key Audit Matters in the Independent Auditor’s reports of all companies in that industry in ASX Top 100 listed companies as part of your evaluation of this new standard.
THE WESTFIELD CORPORATION GROUP
The report is all about the retail industry. It focused on the retail industry the Westfield Corporation. The report provides the clear explanation of the history of the company. In the report, we also discussed related to the ASA 220 of the audit of the company. It provides the information for ASA 701 of the independent auditor. The report reflects the effect of financial crisis over the retail industry and specifically over the Westfield Corporation. It also discussed about the APES 110 which is about the professional ethics and the behavior.
ABOUT WESFIELD CORPORATION
The company Westfield Corporation is an Australian Company which is based on the British American Company (Peter A, 2006). It is a shopping centre company which is a retail company that is situated in the United Kingdom and the United states. The two countries are the base of the company establishment. The company was first formed in the year 2014 in the month of June. The formation was done in the Sydney headquarter. It is a public limited company which is listed on ASX (JOHN, 2008). The company was established when the Westfield group makes the separation of the Australian and New Zealand businesses of the company from the international process. The company was very popular due to the ASX listed company.
The activities taken by the company for the management are the ownership, funds or asset management of the customers, leasing activities of the business, development and design of the projects and the development of the projects of the companies work with the Westfield Corporation (David Bogoslaw,2008). It has the investment portfolio of the centre’s with which the company works. The portfolio includes the total investment of 40 shopping centres in all over the countries of United States and the Europe. The total of 7500 retail centres outlets are the part of the Westfield Corporation. The centre of the company may have the asset management of the company in the excess of $ 28.5 billion (Frances, 2007). The Westfield labs are also in the operation of the Westfield Corporation. The labs are based inside the Westfield San Francisco Centre. It is a technology and design arm based on the above factor.
The origin of the company is in the Western Suburbs that is situated in Sydney. The first development of the company was in the name of Westfield place. It was operated in 1959 in the Blacktown (Peter A, 2006). The Westfield name of the company was derived due to the west Sydney Location and the field word was added due to the location of the company. The Australian Stock Exchange get it listed on the securities of the public in the year 1960. The five new centres was opened in the New South Wales (Johnson, Robin, 2014). After these five centres, the business was expanded over the Victoria and the other one is Queensland in the year of 1966-1967.
There are three more centres in the company that are California, Connecticut and Michigan. The expands the business in the year 1990. The business was expanded to the New Zealand. The company bought many shopping centres of the country to expand the business (Gibson, Anne, 2007). It helps to create the business by taking the other companies and the business to the company’s business. The Westfield group has also issued the retail Trust of Westfield which includes the result of the transactions of retail. It is a shopping centre. The group has split the total of 50% of the asset to the Australian and New Zealand asset that was used in the Westfield group. The group was the most popular group in the retail industry.
Audit of Financial Statements
The companies that wok in the current time, need to maintain the financial records of their organizations. The managers of the companies need to make the financial statements prepare by the management. The financial statements include the balance sheet, income statements, profit and loss account and the cash flow statements of the company (James, 2015). The investors of the company need to look for the investment to the financial statements of the company. The financial statements must be accurate that the investors can rely upon the statements for the investment purpose. For finding the accuracy of the financial statements of the company, the companies need to do the audit of the financial statements (Hughes, Anthony , 2004). The investors can rely upon the audited financial statements very easily. It becomes easy for them to take the decision of investment in the company.
The Westfield Corporation also needs to audit its financial statements every year. It is the most important measurement of the financial statements (Anthony , 2004). The investors of the Westfield Corporation needs the corporation to audit the statements for the investment decisions. They rely upon the audit statements of the company. The information for the decision of the standards of the financial statements is taken by the use of IBIS tools (Carlisle, James, 2015). The tool is the combination of information of different companies at one place. It provides all the information at a single place. It provides the facility of comparison of different companies and helps to find out the best company by comparing the companies.
The accounts of the Westfield Corporation are prepared on the basis of the going concern. The company’s transactions and activities show that the company will work in the future also. Going concern is a fundamental assumption. There is no need to ask for the proof for the going concern option. The Westfield Corporation is taking and investing in many companies. It shows that there is no point for the company to liquidate. The company is going well and the investors are also investing in the Westfield Corporation Group. Thus the company is on the basis of going concern.
Applicability of ASA 701
The standards of audit are compulsory to meet for the purpose of finding the accurate position of the financial statements of the company. The auditors need to comply with all the requirements of the standards applicable for the company (Sammartino, André, Van Ruth, Frances, 2007). The standards are different according to the company. It vary according to the level and nature of the company. The financial statements must go with the requirements of the standards applicable to the specific company.
The ASA 701 is about the key audit matters of the company. There are several matters that the auditor finds out in the audit of financial statements of the company. But all the matters may not be the key audit matters for the record. The standard wants the communication of the key audit matters by the auditor to the general public. It reflects that the auditor must provide the independent opinion on the financial statements of the company (Baskerville, Peter A, 2006). The key audit matters are that matters which can change the decision of the investors to invest in the specific industry.
The Westfield Corporation has some key audit matters included in the audit report of the company for the year 2017. The key audit matters therein are discussed for the year of March 31st. The auditors of the Westfield Corporation provides the independent audit report and reflects upon the factors that the auditor may think the key audit matters of the company (Ben Steverman, David Bogoslaw,2008). There are some key audit matters discussed below that are provided by the auditors of the company. The key matters are provided for giving the true and faithful opinion by the auditors of the company. The matters are the judgment of the matters of the financial reports as a whole.
Investment in unutilized Activities
The Westfield corporation has some investment that is in the unutilized entities. The values of the entities are measured at the total value of $2287.1 m at the fair value of the securities. It represents the total 37.6% of the assets of the company (Elysse; Verrender, Ian, 2017). The balance makes the effect that the company has invested 36.7 5 of the assets of the company in the securities that does not utilize the balance. It has interest in the entities that must have the interest in the assets of the company. The investments are mostly taken from the Europe investments. The fair value of the investment must be check by the company’s securities. The fair values may change in every reporting period. The fair value is used by the companies to find out the references of under value of the securities of the company. The fair value of the properties and investments that are the underlying must be used for the finding of the investment at the fair value. The value is used by the company for the securities of the company. The independent variables are the part of the audit of the financial statements. This is the key audit matter as per the auditor’s report. The auditors make it the key audit matter because the valuation of the property includes the judgment of the nature by the management of the company. The matter includes many assumptions from the financial reports which are made by the management of the company. The change in the assumptions may change the position of the company in the market. It may change the results of the company by changing the assumptions regarding the accounting or other matters of the company. The auditors present the view that the assumption may be taken by the unauthorized persons of the company. The notes of the financial statements include the report about the information of the accounting method used by the company. Note No. 20 is the measurement of the fair value of the investments of the company. The accounting policy treatment may be analyzed from the financial report note 2 (c) of the company.
The auditors provide their opinion in different ways for the investors and the stakeholders of the company. The key audit maters are addressed by the auditors in their report. The investors and other stakeholders can take the benefit of the audit report. The auditors analyzed the fair value of the investment of the company. The auditors analyze the movements of the fair value of the property of the company. The auditors provide the key mater that the portfolio of the company related to the external data have the proper values and it helps in the performance of the specific properties. The values of the securities and assets of the Westfield Company have been valued on the fair value at the 31st March 2017. The valuation report of the property of the company is also checked by the auditors. They make the comprehensive study of the property valuation of the company (David Bogoslaw,2008). The objectivity and the suitability of the scope and methods of the company are used for the valuation of the methodologies of the company (Anne, 2007). The auditors examined the properties investments. They use the sample investments for the evaluation of the investment values. The auditors also checked the appropriateness of the securities of the bank. The valuation inputs of the company are also used by the auditors for the valuation of the financial statements. It provides the information about the financial performance of the company and the audit of such financial performance. The auditors of the company also checked the assumptions used by the management of the company in the financial reports. The assumption used in the related context of external market data. The evaluation of the data of the record of explanation effect of the values in the conjunction with valuation specialist of real estate also done by the auditors.The auditors give the report about the financial position. The auditors assess the fair value of the assets and liabilities of the company for the appropriateness of the values.
Effect of Financial Crisis 2008
The financial crisis of 2008 provides effect on all the categories of the industries of the world. The banking, manufacturing or retail industries of the worlds. The financial crisis effects the company performance. The Westfield Company also get affected by the financial crisis in the year 2008. It is the part of the retail companies of the world. The financial crisis effects the retail industries of the countries. The 2008 Financial crisis shows the actual turnover in the retail industry was great than $v 280 billion. Whereas the GDP of the industry was very high. But the amount of the investment of the retail company is very low in comparison to its profit. The financial crisis effects the long term view provided by the RSI that provides the information against the backdrop of the company. The company provides the information that it gets affected by the financial crisis in the year 2008. The retail sales get affected due to the change in the consumer behavior with the financial crisis. The consumers change their opinion of purchasing something due to the crisis. It affects the financial position and the values of retail market. The retailers face worst condition in the year 2008. They forced to pay for the expenses of the companies but they were not able to generate the revenue for the companies. It makes the people to think that they are facing the worst position. Some of the retail companies get closed by the financial crisis effect. Some companies become liquidate and taken by another companies. The Westfield Corporation also get affected due to the financial crisis. But it was able to generate some profits for the firm.
Applicability of APES110
The section APES110 reflects about the ethics and professional behavior. The behavior of the company is the measurement of the growth of the company. The growth depends upon the behavior of the people of the company. If the staff will behave professionally and ethically then it can increase the sale of the company. The Westfield corporation is a retail company. The professional ethics and behavior plays important role in the company. It is important to behave ethically with the customers of the company. If te staff will behave good with the customers, then it can attract the new customers and helps to retain the existing customers. The seniors of the company are liable for the behavior of the company staff. The staff will behave ethically if the managers or the seniors will behave well with the staff. The Westfield Corporation provides the rules for the ethical behavior. The guide for rolling the rules is provided to the staff. They must be appreciate for the good behavior and must get punished for the wrong behavior. Part C of the standard is applicable for the company in retail. The Westfield Corporation provides the rules of guidance in the part c that is for the business purpose.
Applicability of ASA 220
The standard of the audit is about the quality control of the audit. The Westfield Company provides the audited statements to the company that may provide the investment decision of the companies. The standard reflects that the auditor of the Westfield corporation helps the investors to take the decision of the investment. ASA 220 informs that the Westfield Corporation is under the great quality control of the audit. The audit statement of the company reflects the quality measurement t of the audit. The auditors provide their opinion on the quality control of the financial reports. The ASA 220 provides the information that the investiors believe in the investments of the company. The auditors must provide the audit quality that the investors can’t face the loss from the audit report.
The report concludes about the audit of the financial statements of the Westfield Corporation. It state that the financial statement for the year ended March 31 2017 are audited and provided for the purpose of accessing the decision on the basis f these reports. The report concludes that the key audit matters are must to be communicated. It concludes that the auditors must provide a clear and independent report on the financial reports of the company. The reports are must to be audited. It reflects that the company Westfield Corporation has some key audit matters. These matters are communicated to the investors in the report of the audited financial report 2017.