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Topic - Research, Critically Aand Evaluate Key Audit Matters in Independent Auditor's Report.

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Required: Students are required to research into the rationale for the new auditing standard ASA 701 and explain clearly what it is. Each student is to 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 so as to evaluate the efficiency of reporting key audit matters in the independent auditor's report (i.e. does key audit matters disclosure provide more information to users).

Answer - RESEARCH, CRITICALLY ANALYSE AND EVALUATE KEY AUDIT MATTERS IN INDEPENDENT AUDITOR'S REPORT

Executive summary

The implication of the new standard in auditing includes ASA 701. It is able to take up initiatives to makes changes in their current government policies and adopt authentic methods of business execution. It includes the effective implication of communication practice in the auditing standards. It has been identified that the key matter of auditing might not include areas of conflict. It has been evaluated that the auditor must ensure that they do not disclose any matter which would lead to a violation in the industry. The effective individual auditor's report is beneficial for Altura mining limited in maintaining the capitalization of assets on an annual basis and thus are able to develop an idea about the expenditure.Thus it can be stated that the auditing report is a reflection of the company and enables the shareholders to take a decision regarding their investment procedure.

Introduction

Auditing refers to the conduction of official company inspection to ensure that the firm is not using any illegal process in their business execution. The key auditing matter includes the judgment of auditor'sprofessionals,which is considered essential in the financial evaluation in recent times. Auditors meeting are conducted after an interval of every six months where the annual report of the concerned firm is made. Among the other financial matters, the key auditing matter is given more importance,andthus, the matter is discussed among the shareholders. However, it has been evaluated that with the inclusion of key auditing mater in the annual report the company will be able to maintain transparency with their customers and allows the investor to risk their investment to the concern organisation.

This report deals with the auditing standard of ASA 701,which is a new amendment to the existing auditing standards with its detail explanation. In addition, the report takes into consideration analysis of key auditing of the Altura mining limited with detailed analysis of auditing standard of the organisation and its efficiency in key auditing executions.

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Research

The rationale of auditing standard ASA 701

Auditing standards are the regulations that auditorsneed to follow in order to make an annual report for a company. The annual and financial report of a firm is the reflection of their service,and thus it becomes essential for the auditors to be specific about the calculations that are incorporated by them in the annual report of a company. ASA 701 was included as standards of auditing on 5 December in the year 2018 (Brunelli, 2018, p.44). This amendment includes the criteria of communicating key auditing matter in the annual report in the independentauditor's report.

The scope of these standards of ASA 701 includes the essentiality of communication. It has been evaluated that effective execution of communication practice is essential for the auditors in maintaining an auditor's annual report for a company. The communication enhances the information provided in the annual report and thus is beneficial in maintaining transparency among the customers as well as the shareholders. As stated by Ferguson, Lam and Ma (2017, p.45), communication key auditing matter enables the management team to have an idea about the areas that are needs of management for better execution of business. However it has been identified by Carson, Fargher and Zhang (2016, p.450), the effective practice of communication in the process of discussing key auditing matter gives an opportunity to the concerned company to take up effective initiatives. The management team of firms associated with the implication of ASA 701 is able to take up initiatives to makes changes in their current government policies and adopt authentic methods of business execution.

The inclusion of ASA 701 in independence auditor's annual report of Altura mining limited has been beneficial in maintaining the treatment of mining development and thus enables the business to maintain their expenditure. The new standard is effective in analysing the satisfaction level for capitalisation conditions in the organisation. It has been evaluated by Singh and Taneja (2018, p.44), the introduction of ASA 701 in the Altura mining limited has been effective in indicating the assets that are required according to the circumstances for the development of mines. Communication of key auditing matters enables the business to allocate monetary resources according to the requirement and thus enables the user to maintain their assets. The business is also able to maintain its cash flow and thus maintain the recoverable amount of their assets in the long term. As stated by Chen (2016, p.89), details regarding loans of Altura mining limited is beneficial for the business to maintain transparency among customers as well as shareholders.

Explanation

The recentchanges made in the auditing standards in the year of 2018 have included effective communication of key auditing matter in an independent auditors report. The implication of ASA 701 has taken up by the community of Chartered accountant to ensure that the auditors are able to maintain efficient transparency in the annual report of concern Company. As opined by (Brunelli, 2018, p.44), the communicating of key auditing matter implies discussion of the area in auditors judgement,which is considered to be essential in the annual report of the company. Introduction of this new standard of ASA 701 in the auditing criteria is the make their auditing system a bit more flexible. Communication makes them easily approachable. This enables the company to make sure that they are selecting collect approaches to deal with the management team and accounting department. In views of Nirupama (2019, p.98), identification of areas dealing with illegal practices is easily identified with the introduction of new auditing standards of ASA 701. As mentioned by Brunelli (2018, p.44), it is essential for the auditors to discuss the key areas of auditing in the section of key auditing matter. It has also been evaluated that this matter needs to be mentioned with the help of proper references forthe disclosure.

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However, it has been evaluated that by Ferguson, Lam and Ma (2017, p.44), the auditor needs to be specific about the matter they are discussing in the annual report. The key matter of auditing might include areas of conflict. It is beneficial for the auditor to ensure that they do not disclose any matter which would lead to a violation in the industry.

At the same time, Altura mining limited is an ASX listed company and thus uses individual auditor's report to maintain systematic business approach (Asx.com.au, 2019). It has been evaluated by Carson, Fargher and Zhang (2016, p.240), the community implicates Corporation Act 2001 in the execution of their annual report. The annual report of the concerned company is well organised and contains authentic company information. However, as stated by Bills, Cunningham and Myers (2015, p.791), the organisation of Altura mining limited with the implication of ASA 701 in their audition process are derived benefits. The business is able to allocate its resources effectively on their assets and maintain the stable development of mines. Altura mining limited takes into consideration the rules and regulations of Cooperation regulation 2001. Thus with the implication of new auditing standard, the business of Altura mining limited are able to maintain the development of mines and earn profit with financial stability.

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Analysis

Analysis of key auditing matters in independent auditor's report of Altura mining limited

Development of mining assets

The development of mining asset by the Altura mining limited is considered to be one of the essential elements of key auditing matter. Effective auditing of the assets enables the business to maintain development projects for their mines. As stated by Gimbar, Hansen and Ozlanski, 2015, p.26), it is beneficial for the organisation to allocate amounts for equipment, property and plant development. The judgement of auditing depends on the condition of capitalisation and its satisfaction. It also takes into considering the facts the provide details regarding the customer's satisfaction level. It also enables the business to take a decision regarding the appropriate market condition regarding the test of assets associated with the development of mines.

As opined by Joe et al. (2015, p.32), the execution of individual auditor's report needs an organised discussion among the management and the board of directors of Altura mining limited is conducted. It has been evaluated that the business is able to discuss areas of the development project and thus allocate time and money accordingly. This is effective in maintaining the transparency of the business.

The effective individual auditor's report is beneficial for Altura mining limited in maintaining the capitalization of assets on an annual basis and thus are able to develop an idea about the expenditure.

However it has been opined by Doxey et al. (2015, p.5), a physical tour during the inspection is considered beneficial for the identification of areas of development and the management of assets within the mine. The inspector is able to develop an idea about the management process and thus can conduct an effective audition for the Altura mining limited.

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Borrowing loan

Loans of the Altura mining limited is the second essential key auditing matter in their independent auditor's report. The business has a loan of around $ 145.887 million. However, the balance of significance is 83.1% of the total company's liability (Alturamining.com, 2019). It is the role of the auditors to ensure that the nature of the loan. They critically evaluated the amount and categories the loan into whether the financial liability to the equity instrument (Alturamining.com, 2019). The judgment of the transaction coast is maintained in case of capitalization. As opined by Brunelli (2018, p.22), the interest cost of borrowing is also analysed and maintained in the individual auditor's report in order to maintain privacy. Foreign currency and their ability for capitalisation are also maintained in the annual report according to the implication of ASA 701.

The report also takes into consideration the capacity of the Altura mining limited to pay their burrowing. This enables the business to maintain effective transparency among the investors regarding the financial condition of the organisation. As opined by Busweiler et al. (2016, p.1082), the process of maintaining the individual auditor's report containing an analysis of the loan related agreement of Altura mining limited. The warranty deeds, as well as subscription deeds, are evaluated to identify details regarding the loans taken up by the mining firm. This effective analysis of the regulation maintained in the loan agreement of the business enables the investors to make a decision regarding their resource allocation in the organization of Altura mining limited.

Liquidity and funding

The business of Altura mining limited has to incur a loss of around $ 12.82 million after the implication of taxation policy. At the same time, the outflow of cash has been recorded to be $ 5.45 million. The consolidation entity has been around $28.76 million at the end of the year 2018 (Alturamining.com, 2019). As stated by Lento, Bujaki and Yeung(2018, p.432), the evaluation of consolidation entity ensures that business will not have a financial crisis of at least 12 months of time and thus can operate in an efficient manner.

The individual auditor'sreports identify the cash in hand at the year end and evaluate the areas of futures expenditure through assumptions and thus givejudgment with effective use of communication practice. The introduction of ASA 701 has been considered effective in the auditing of funding and liquidity. The auditors with the help of effective execution of communication practice are helpful in maintain correct assumption and thus are able to maintain consolidation entity.

As mentioned by Sánchez-Medina, Blázquez-Santana and Alonso (2019, p.542), it is, however, essential for the auditor's annual report to get accepted before the time period of 12 months before the assumption of consolidation equity of cash flow in the business to maintain their implicating power. At the same time, Carson, Fargher and Zhang(2016, p.240) were in opined that the assumptions made in the independent auditor's report need alteration during a sudden financial crisis. It is also essential for the auditors to have effective analysis of the disclosures made by them in the auditing report to ensure that the company of Altura mining limited is not confined in any serious conflict.

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The efficiency of reporting key audit matters

The key auditing matters of Altura mining limited is beneficial in maintaining the stability of the business. It has been evaluated the mining development, loan, as well as funding and liquidity, is considered as key matters of auditing (Nirupama, 2019, p.95). The business of Altura Mining limited is a concern with their mining development project and thus takes into consideration the effective physical inspection of the mining sites. As opined by binti and Rahman(2018, p.10), this enables the company to develop an idea about the mine management and thus helps them to allocate their resource in a systematic manner towards the development process of the firm. Area of corruption within the mines is also identified by the authorities of Altura mining limited (Alturamining.com, 2019).

The business is also able to maintain transparency. The company,with the help of effective individual auditor'sreports,are able toanalyse the documentation of loans and investment made by the company. As stated by Singh and Taneja (2018, p.85), the effective evaluation of the company's assets enables the business to maintain financial transparency. The annual report of Altura mining limited enables the business to maintain their investors and convinces them to invest in their organisation for the future benefit [Refer to appendix].

Auditing standards of the company

The company of Altura mining limitation maintains the Australian Auditing Standards. The financial report is being executed with the effective implication of ASA 701,which is recently incorporated within the auditing standards through amendment. This standard includesthe effective execution of communication practice with the boards of directors and management team in the identification of areas in urgent needs of management. As opined by Chen (2016, p.89), professional specification and the judgement are conducted in the formation of an annual report for the company.

Recommendation

Objective

Specific

Measurable

Attainable

Realistic

Time-bound

Including Corporate social responsibility as a key auditing matter

The business can include CSR investment in their annual report as a key matter of auditing

It is measured by the amount the company is spending on social development

It is attainable with the help of  efficient analysis of the documentation associated with charity events

It is possible in real life application

4 weeks

Include employee development plans in key auditing matter

The business can incorporate the development of human assets as a matter of auditing

It is measurable by the amount that the company needs to improve for employee betterment

It can be attainable with the help of account keeping of amount spend on skill development of employees.

It is possible in real life application

8 weeks

Table 1: SMART recommendation

Conclusion

Hence, it can be stated that the individual auditor's reports are considered beneficial for effective financial management. The annual report is a method of providing transparency of the company among their shareholders and investors. This is beneficial for the auditors to maintain efficiency in their judgment. The implication of Australian Auditing Standards enables the organisation of Altura mining limited to ensure that they are able to maintain the rules and regulations and thus take current judgment in the annual auditing report. The report is a reflection of the company and enables the shareholders to take a decision regarding their investment procedure.

The business of Altura mining limited, however, takes into account three areas of key auditing matter. Mining development is, however, the key concern of the business. It has been evaluated the company is able to maintain their cash flow with the effective auditing judgment. The implication of ASA 701 has been considered beneficial for the business as they are able to discuss the areas that need management and thus work towards the company's benefit.

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