Discuss about the Corporate Governance and Regulatory Interest.
There are a wide variety and range of the business risks and threats that have a relation with the factors like local, global and other environmental factors and the HIH Insurance Ltd also constitutes the same that is evident from the findings of the company. There must be a proper evaluation and analysis procedures for knowing the same and the parameters must be taken into account that must be considered along with the above. The explanation is provided below:
There must be a determination of the risks of insolvency: There are various measures and tools for the determination of the nature of solvency and the major roles and responsibilities of the assessment of the risks i.e. risks of auditing. The structure of the productivity and profitability along with the risk of insolvency must be focused upon and centered towards launching the customers and the industry. The debts must be met in a proper and suitable nature by their capacity of holding and they are done as per the agreements made in a general way (Alexy and Reitzig 2012). The structures of hypothesis and theory has a relation to the ability of undergoing the way of meeting up the debts of the company and the solvency must be determined by the companies for the final assessment of the considerations including the finance and non financial natures and methods.
There must be assessment of the productivity and framework: The assessment procedures helps in the awareness and gaining knowledge about the business operations and profitability of the whole structure. The above approach leads to proper and effective assessment and the HHI Insurance Limited has carried the same for knowing about the effectiveness of the structure of the operations carried on by the company. The regulatory body for the management of the regulations and policies under Insurance is the Australian Prudential Regulatory Authority (Kaplan and Mikes 2012). The assessment of the risks and the hazards helps in undertaking the policies for the management of the insurance in the Industry of Australia and it also helps in creating ease of for the new and unknown analytics.
There are various risks present under the auditing and the sector of industrial risks and the company HHI Insurance Ltd has been concerned about the same. The risks and other factors are concerned in giving up an audit of unqualified nature that has a determination through the financial statements. The major risks head consist of the Inherent, Detection and the Control Risks that are covered below:
Inherent risk: The risk considers and takes into account the threats forming part of the financial statements and the company has taken into consideration of the margins of solvency. In the case of the HHI Insurance Ltd, there has been a charge on the premiums of the solvency margins and also the factors of the liquidity of the company have been considered by the management and the auditors. There must be a provision of important and varied documentations and records for maintaining the same.
Detection risk: The performances of the companies help in detection of the policies and the risk measurement strategies of the company. The procedures of the different audit roles and responsibilities have a relation in easily detecting the errors and the frauds of the material and significant nature.
This states that the HIH needs to work on the timely planning and effectively reduce the circumstances of not identifying the material misstatement. It is observed that HIH internal documents are unable to conduct the appropriate substantive procedures, as this will help to cope up with the better performance regarding the insufficient planning and goodwill for future tax benefits.
Control risk: The risks of checking the inaccuracy of the risks that are undetected by the systems of internal control comprises of the control risk. In case of the company, the reconciliation of ledger with the help of general ledger and the account of bank performed by the companies.
The discussions related to the clients and creditors are as follows:
- Clients: There is a relation among the auditors and the closer ones that has been depicted among the observations made by the audit team and the management.
- Creditors: the position of the liquidity must be noted down by the organization as it has major concerns with the activities of the operations and finance of the company HIH Insurance Ltd.
The conditions required to exist for the action of negligence for getting upheld are as follows:
The non independence of non-executive director must be observed and checked
There is a non existence of liberty among the non-executive directors that is not ideal and must be reviewed and controlled. The practices of the corporate governance and the other actions of negligence are a measure of responsibilities and plans of a company and in the given case, amid the five directors, there are two partners from the past firm i.e. the Andersons. HIH had compensated a figure of total $1.7 million as the auditing services with a total of $1.631 million for provision of non-auditing services. There is a lack of the analysis that forms independence of the directors and the same must be analyzed and corrected.
The lack in the information of independent resources to be analyzed and corrected
The systems of accounting engage in recreation of a noteworthy responsibility in the purpose of profitable domination arrangement. There are inherent risks as the responsibilities of the non executive directors are been compromised and there are no other availability of the systems of accounting.
There must be an effective use of the professional skepticism and also the managerial concerns towards the company.
Thus, keeping in mind the same, the following reasons are those related to the desire of hiring the external audit team:
- The auditors had the effective awareness and experience by means of the diverse matters of the economy and finance
- The auditors had proficiency and had been accustomed with the company’s operations and functions
- The clients trust and faith has been maintained by the work performed in relation to the audit procedures and hence developing the relations with the external auditors (Porter et al. 2014).
The companies of audit are supposed to make available the services of non audits that has a connection concerned with the matters and advice of the tax and other major concerns and the same enables in providing audit and non audit services to the clientele.
Also, the disagreement of the amount of the interest is set for making up the independence of the members. The consulting and the auditing services have a basis of handling the activities of the audits and the business. There are various reports and the documentations that have an objective and aim of maximizing the profits and the same are held by the auditors (William et al. 2016). The errors and the frauds must be identified and the same helps in the smoothening the processes of the auditors. The errors and frauds must be measured for helping the enveloping and coverage of the same and in provision of the constitution of the reports of the management. There must be measures of regulations for better reports and accuracy of the same for the benefits and efficiency of the operations of the firms.
The members of the company had been dishonest and were following unethical and misleading duties that were observed by the auditors and the management had not been taking any strict control and actions towards the same. The members of the organization had been unfair and dishonest and thus had a discharge of unfair duties. The Arthur had diminished the scenarios with the collapse of the Enron and also there was a guilt found among him that obstructed the just and fair scenes of the papers of the work (Hamer and Collinson 2014). There must be a commitment of the employees towards the discharge of the obligations that has been ethical in nature.
There are various recommendations and conclusions that are concerned with the strategies and the policies of the governance under the amendments of the CLERP 9 and the same involve the following:
- There must be an effective review towards the rotation of the partners for every five years in a row;
- The two year period of joining period towards the management or board must be extended to a total of four years.
- There must be an extension of the above policy among the senior personnel’s also.
The major and important aim of the recommendations is the recognition of the accountability of the employees in meeting up the performance of the company (Holm and Zaman 2012).
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Holm, C., and Zaman, M. (2012, March). Regulating audit quality: Restoring trust and legitimacy. In Accounting forum (Vol. 36, No. 1, pp. 51-61). Elsevier.
Kaplan, R. S., and Mikes, A. (2012). Managing risks: a new framework.
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