The Essay On Telecommunication Industry In Australia: TPG And Telstra.

New Auditing Standards ASA701

Discuss about the Telecommunication Industry in Australia TPG and Telstra.

The Auditing and assurance standards board build an auditing standard ASA 701 that mainly focussed on finding the key adult matters as well as communicate those matters by explaining them in financial reports. The present report is focused on the new auditing standards ASA701 and its effectiveness in telecommunication industries in Australia. In addition to this the report also discussed and analyzed the key audit matters of telecommunication industries including TGP and Telstra. At last the report provides recommendation and evaluation associated to the ASA 701 communicating key audit matters in context to telecommunication sectors.        

The most vital enhancement in auditors reporting in present history, at the heart of the call from other users as well as investors of audited financial statement for relevant and more specific information, is the presenting KAM (Dogan Bozan, & Arefaine, 2017).  ASA 701 Auditing Standard applies to An audit of a financial report of an organization for a particular years or for a monetary year, or a review of a budgetary report for a half year, as per the Corporations Act 2001; and a review of a financial report of an organization, or a total arrangement of budgetary explanations, for some other reason. ASA 701 is compulsory for audit of finish sets of general purpose of financial statement of the organization as well as listed recorded elements; with voluntarily application took into consideration substances other than recorded elements. This ASA additionally applies when the professional or auditors is required by rules and regulations to communicate key audit matters in the evaluator's report.

As studies conducted by Carson, Fargher, & Zhang, (2016), said that the main objective of the introduction of the ASA 701 is to improve the organization audit reporting system as well as enhance the individual’s confidence in both the organization financial statement as well as the audit procedures by offering investors with higher level of trasperancey regarding the responsibilities. Moreover implementation of this auditing system within the financial report of an organization provider the individuals to insights into the key matters that mainly deals with how an auditor mainly covenants with those area (PwC, 2015).   Apart from that, it can be seen that the purpose of this auditing standard is to find out the key audit matters and formed an effective prospection of the financial report of an organization, communicate those matters by explaining them in the financial advisor’s report.      

Analysis and Evaluation of KAM of Telecom Industries

According to Brunelli, (2018), main scope associated with this legislation is that it is mainly deals with the auditor’s roles and responsibities to communicate KAM in the financial reports. This would help to provide the more meaningful and additional information to individuals of the financial statement to assists them to gain and understand those matters in a better manner. The change made to the auditing standards i.e. ASA 701 is mainly empathized on that how an auditor communicate with their work in their financial report as well as helps them to improve value of independent audit (Xu, Carson, Fargher, & Jiang, 2013). It helps the organization to increase the communication between the users and auditors, management as well as investors which have a positive significant impact on the individual’s confidence. This procedure mainly involves the audit report and focus on that have an outcome to improve in professional’s scepticism.                            

 As per the definition in section 8 of ASA 701 states that KAM i.e. Key Audit Matter are chosen from matters which are effectively communicated  with those accused with governance. Matters which are explained about with those accused with governance are then assessed by the auditor who at that point decides those matters which required huge auditor consideration throughout the review. Three matters which the ASA requires the auditor to consider when making this assurance: areas which were thought to be helpless to higher dangers of material error or which were regarded to be 'critical dangers' as per ISA 315 (Revised), evaluating and determining  the Risks of Material Misstatement through Understanding the Entity and Its Environment (IFAC, 2016). Critical auditor judgments in connection to regions of the financial statement of the organization that is mainly included huge administration i.e. management judgment. This may incorporate accounting assessment which has been distinguished by the auditor as having a high level of estimation vulnerability. The impacts on the audit of significant transaction or events have occurred during the certain time of period or financial years (Vanstraelen, Schelleman, Hofmann, & Meuwissen, 2011). In such procedures auditors of an organization must determine the matters that are most vital in the audit of the organization’s financial statements as well as these are regarded as Key Audit Matter.

Once the auditor has figured out which matters will be incorporated as KAM, the auditor must guarantee that each is effectively explained in the auditor's report including a explanation of: Why the matter was resolved to be one of most centrality and thereby a key audit matter, and How the issue was solved to in the review (which may incorporate a explanation of the auditor's approach).

Key Audit Matters

The new reporting requirement under section IAS570, individuals needs to gain and understand how issues determined regarding going concern with the needs of IAS701. By their exceptionally nature, issues recognized identifying with going concern are probably going to be viewed as a KAM and subsequently should be conveyed in the auditor's report (Litjens, Buuren, & Vergoossen, 2015). Where the auditor has distinguished conditions which cast question over going concern, yet audit prove confirms that no material vulnerability exists, this ‘close call’ can be revealed in accordance with ASA 701. This is due to fact that while the auditor may conclude that no material vulnerability exists, they may verify that, at least one, matters identifying with this conclusion are KAM. Example incorporates available borrowing facilities, substantial operating losses, non-compliance or possible debt refinancing with loan agreement as well as associated mitigating factors.  In outline if an affirmed material vulnerability exists it must be revealed as per ISA 570 and where there is a ‘close call’ over going concern which has been observed by the auditor to be Key Audit Matter it will be revealed  in accordance with ASA 701.   

Telstra is the leading telecommunication and technology organization in Australia and provides services including media, connectivity and content to the clients in Australia and enterprises and connectivity services internationally. Telstra fulfil the roles and responsibities of auditor’s for the review of the financial statement. Telstra includes the performance of process mainly designed to respond to the organization assessment of the issues of material misstatement of the financial statement (Telstra, 2017). Moreover, the organization can includes the procedures performance to determine the matters in audit process and offers the organization audit opinion on the associated financial statement.

TGP is the IT and telecommunication organization that mainly offers the internet and mobile services to consumer and business. It is the second largest organization in terms of internet service provider in Australia with more than 358000 land line subscriber’s (tpg, 2018).   
              

From the above discussion and findings it can be observed that the new standard i.e. IAS 701 helps in contributing to the reduction of the expectation gap , in light of the fact that the audit report presently contains a clearer depiction of the auditors' duties. This should help clients to gain and understand how the audit has been performed and what the auditors have looked into in the financial statement of the organization. Apart from that the above discussion shows that the data gap is reduced, yet not to an indistinguishable degree from the desire gap, since the auditors are confined to the degree of particular data they can impart. With respect to KAM's effect on the customer relationship, the conclusion is achieved that it doesn't influence the relationship to any noteworthy degree.

This is most probably because of that the auditors have a straightforward exchange with the organizations about KAM, as well as auditors are carefully while computing KAM (Carson, Fargher, & Zhang, 2016). Moreover from the findings it can be recommended that the committee needs to eliminate the hard cap limits as well as remove the requirements that advisors and consultants be natural person.  As per the rule IAS 701 needs expanded discloser to be submitted in a particular time of period to sale therefore it is recommended that delivery of the discloser be permitted at any time before sales therefore it would helps the telecommunication organization to provide information in consistency manner. 

References

Dogan Bozan, B., & Arefaine, B. (2017). The implementation of ISA 701-key audit matters:: Empirical evidence on auditors adjustments in the new audit report.

Carson, E., Fargher, N., & Zhang, Y. (2016). Trends in auditor reporting in Australia: a synthesis and opportunities for research. Australian Accounting Review, 26(3), 226-242.

Brunelli, S. (2018). The Firm’Going Concern in the Contemporary Era. In Audit Reporting for Going Concern Uncertainty (pp. 1-25). Springer, Cham.

Xu, Y., Carson, E., Fargher, N., & Jiang, L. (2013). Responses by Australian auditors to the global financial crisis. Accounting & Finance, 53(1), 301-338.

IFAC. (2016). Proposed international standard on auditing (ISA) 701 communicating key audit matters

in the independent auditors report. Accessible at: https://www.ifac.org/system/files/publications/files/Proposed%20ISA%20701%20(Revised)

-final.pdf.

Vanstraelen, A., Schelleman, C., Hofmann, I. & Meuwissen, R. (2011). A Framework for Extended Audit Reporting, Maastricht Accounting, Auditing and Information Management Research Center (MARC).

Litjens, R., Buuren, J., & Vergoossen, R. (2015). Addressing information needs to reduce the audit expectation gap: Evidence from Dutch bankers, audited companies and auditors. International Journal of Auditing, 19(3), 267-281

telstra. (2017). Telstra Annual Report 2017. [online] Available at: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/Annual-Report-2017.PDF [Accessed 22 May 2018].

tpg. (2018). tpg Annual Report 2017 [online] Available at: https://www.tpg.com.au/about/pdfs/FY17%20Annual%20Report.pdf [Accessed 14 May 2018].

PwC., (2015), Delivering the value of the audit: New insightful audit report. Available at: https://www.pwc.com/gx/en/audit-services/publications/assets/pwc-auditingreport-new-insightful.pdf