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What can the Banking Royal Commission achieve Regulating for good corporate culture?

AMP Limited’s performance in the year 2017

Auditing can be defined in process of examination of books of accounts by qualified accountants so that a particular audit opinion can be provided on the accounting statements. Auditing is of significant importance for any business organization as audit opinion provided by auditor forms a base for investment decisions and other decisions taken by stakeholders in relation to the business organization. For example, shareholders of the company generally were the decision to invest in business according to financial data provided in the financial statements and authenticity of such data is provided by Auditor in their audit statement attached with the annual report. This report is prepared for the purpose of understanding the real life as it shows that an auditor might face during his audit process (Louwers et.al, 2015). In addition to that this report will be focused on Australian Mutual Provident (AMP) Limited that is operating in Australia. In recent time there has been a report issued by Royal commission in respect to operational misconduct on part of AMP. This report will analyze the misconduct that is conducted by the management of AMP and role of an auditor in such situation. The ethical requirement for an accountant that is working in such an organization will also be evaluated.

According to an annual report published in March 2018 in relation to operations in the year 2017, the financial performance of the company has been very good as compared to the last financial year. Financial report of the company states that there has been no material misstatement, errors, and frauds in financial data provided in financial statements of the company. This conclusion has been made on the basis of the audit report issued by the independent external auditor of the company. But in reality, this has not been the case as management of the company is the defrauding and charging relevant fees and charges from the customers without having any financial advice to them

Common good- the Main objective of any business organization is to provide Quality Services to the customer. AMP providing is in the business of providing financial services to the customer for a long period of time and it should be focused on customer satisfaction as it is an operation for such a long period of time. Is common good objective has been totally being recorded by the management of the company as they are defrauding their own customers and clients. You have been charging illegal service fees from there deceased customer accounts in 2009 (Beck and Paton, 2018). This is totally not in the standards of good practices that should be conducted by an organization. In addition to that, they are also providing inappropriate advice to their customer and charging high fees from them.       

Ethical performance of Accountants

Financial planning- One of the primary business of AMP is to provide Financial planning advice to their customer. Royal Commission has identified that they are providing wrong and inappropriate financial planning advice to the customer for their own personal benefit. In addition to that, AMP was charging fees for no services provided to their customers i.e. they were continuously building their customer but in exchange for such billing, no planning services were provided to this customer. This clearly shows that the intention of the management was to defraud the clients and increase the overall revenue generated by the company. They also interfere with the report prepared by independent law firm Clayton Utz. Level of interference which can be estimated by the fact that final report was prepared by Clayton Utz after receiving 700 emails and 25 grafts of the reports. This clearly shows that management of the company was constantly interfering with the work of law firm and a final report prepared by was not totally independent (Mayne, 2018).

Sustainability and social responsibility- Sustainability and social responsibility are the concepts that is concerned with returning to the society and environment buy business organization in exchange for natural resources used by such organization. It is important for every organization to protect and conserve the environment as they are using the resources of the environment. Business sustainability and corporate social responsibility can be achieved by business organization why adherence to the principles of sustainable development (Wishart and Wardrop, 2018). Therefore the concept of economic efficiency, social Justice and environmental accountability has to be considered by management of the organization while conducting its business operations. Instead of giving back to society, AMP limited was in practice of defrauding its customers which were the main source of revenue for the company. The company was concerned about its own profitability and development whereas it should have contributed up to some extent to its customers and the environment (Matthews, 2016).         

After analyzing the report issued by Royal Commission it can be said that accountant working in an internal environment of the company for totally incompetent in following ethical requirements issued under "APES 110 code of ethics for professional accountants". These code of conduct clearly states the roles and responsibilities of an accountant working in the business organization. It is hard to understand that Accountants that are working in an internal environment of the company and not aware of the wrong financial planning gave by the company to its customers. In addition to that report are generally prepared and approved by accountants data submitted to the Australian Securities and Insurance Commission. Therefore the internal accountant must have known about the actions taken by the management of the company in order to defraud their customers (Shafer, 2015). According to APES 110, this situation must be reported by these accountants to the security exchange board and other regulatory authorities. No actions were taken by these accountants that resulted in continuous operational misconduct and malpractices on part of the management of the company. It can be said that if accountants working in AMP has followed their ethical duties then malpractices of AMP would have been discovered in 2009 or 2010 when the whole process started (Martinov-Bennie and Mladenovic, 2015).

Purpose of auditing

Specific roles and responsibilities are also explained by APES 110 with respect to functions to be performed by the external auditor of the company. It can be said that PwC was not very vigilant in their audit process as they have been auditor of the company for a long period of time and they were not able to identify any problems with their operations in all these financial years. APES 230: Financial planning services has clearly stated some rule and regulations that should be followed by an organization that is providing personal financial planning services to its customers. It clearly states that the financial planning given by such an organization should be in the best interest of the client. If not then such business organization will be in breach of these rules and regulations and that will expose such organization to criminal and civil liability. It is the responsibility of an external auditor to examine all the laws and regulation applicable to a particular organization for which an audit is conducted. If these rules and regulations were properly examined by the auditor then they would have identified the malpractices of the company (Brown, 2015).  

The main purpose of auditing in the cases similar to AMP limited is to identify that there is no material misstatement, errors, or frauds in financial data and actions of management during a particular financial year. In addition to that auditor of the company is also required to address malpractices or misconduct that is conducted by the management of a company during a particular financial year so that management of the company can rectify their errors and mistakes (Ni and Van Wart, 2015). Auditor of the company is required to conduct a corporate social audit in order to promote common good, stewardship, and sustainability in a business organization. This type of audit conducted by an auditor will help the management of the company to understand the concept and importance of corporate social responsibility.

In these type of audits, the auditor of the company is required to report that is the actions of management are in best interest of the company or not. In addition to that, the auditor will also evaluate whether the concept of corporate social responsibility is adopted by management in their business operations or not. The auditor can check whether the company has contributed towards society in exchange for their consumption of social and natural resources or not (Cohen and Simnett, 2014). All the finding of the corporate social audit must be reported by the auditor in his/ her audit report.

Conclusion 

It can be concluded that there are very specific roles and responsibility on an auditor that are defined in by various accounting and auditing authorities. It is important for every organisation to effectively follow there rules and regulation otherwise primary objective of financial statement and audit can be achieved. Inefficiency in process of auditing can result in various material misstatement and frauds conducted by management of the company in order to misrepresent financial statement of the company. The case study of AMP limited has also discussed in this report along with role of internal and external auditor in the company.

References

Beck, J. and Paton, G., 2018. Corporate law: The Royal Commission: Corporate culture spotlight: Where is all this heading?. Governance Directions, 70(6), p.351.

Brown, R., 2015. The profession: The tangled ethical web. Professional Planner, (78), p.30.

Cohen, J.R. and Simnett, R., 2014. CSR and assurance services: A research agenda. Auditing: A Journal of Practice & Theory, 34(1), pp.59-74.

Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015. Auditing & assurance services. McGraw-Hill Education.

Martinov-Bennie, N. and Mladenovic, R., 2015. Investigation of the impact of an ethical framework and an integrated ethics education on accounting students’ ethical sensitivity and judgment. Journal of Business Ethics, 127(1), pp.189-203.

Matthews, A., 2016. The financial services industry: Whistleblowing and calls for a royal commission. Precedent (Sydney, NSW), (136), p.35.

Mayne, S., 2018. AMP saga a lesson in transparency. Equity, 32(5), p.11.

Ni, A. and Van Wart, M., 2015. Corporate Social Responsibility: Doing Well and Doing Good. In Building Business-Government Relations (pp. 175-196). Routledge.

Shafer, W.E., 2015. Ethical climate, social responsibility, and earnings management. Journal of Business Ethics, 126(1), pp.43-60.

Wishart, D. and Wardrop, A., 2018. What can the Banking Royal Commission achieve: Regulating for good corporate culture?. Alternative Law Journal, 43(2), pp.81-88.

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