Executive Summary
The report is based on discussing the review of the financial year of 2019 audited annual reports which includes financial statements that are presented to the shareholders. There are two companies which are taken for analyzing their recent financial year that involves Ramsay Health care Ltd and Telstra Ltd. The main purpose of this report is to discuss the different strategies and tactics which address all the tasks in a better manner.
Introduction
The report describes auditing theory which helps in providing a relevant framework for auditing, uncover the legal laws which are regulated and operated the audit processing, and develop a strong relationship between various parties of the companies. Along with this, a firm needs to focus on maintaining and managing business operations and auditing procedures effectively. Auditing is the examination and monitoring of different records and this report also evaluates the financial statement of two different organizations.
Main Body
Inherent risk identification of each company
Ramsay Health Care Ltd is a private healthcare organization which is situated in different countries such as the United Kingdom, Malaysia, France, and Indonesia. The founder of the company is Paul Ramsay and it was established in 1964 in Australia. An organization mainly specialized in rehabilitation, surgery, and psychiatric care (Alles, et. al., 2018). It is analyzed that auditing is important for conducted by each company and while doing this there are various risk arises that creates a negative impact on the business operations and its functions. The respective firm also faces certain inherent risks which include:
- The company board is accountable for maintaining and controlling strategic and political risk activities.
- The second one is the audit committee is responsible for managing the direct financial issues and risks to the organization and some matters occur associated with accounting and taxes.
- The last one is Global RMC is liable for monitoring and controlling whole other companies, along with specific concentrate on medical points, place of work health and safety and environmental risks.
For such issues and risks, they need to develop accurate strategies and policies which help them in managing problems that occur while doing auditing processes.
Telstra Ltd is an Australian telecommunication company that develops and regulates telecommunication networks and markets voice, pay television, mobile, variety of goods and services, and internet access (Appelbaum, et. al., 2018). The company is a member of S&P/ASX 20 and the Australian largest telecommunications organization by required market share. This firm also conducts auditing processes that assist them in keep relevant records of business income and expenses properly. Besides, a company needs to identify major risks that create issues to the business functions and related activities effectively. Such risks involve inventory valuation risk, intangible assets valuation risks, and tax risks. These are considered as risks as this state the pose potential material misstatement on the financial statements. The lack of inventory or stock is the major risk for the company because this will lose its customers and reduces the profitability level. Besides this, intangible assets are also determined as an issue in an organization and it will create major loss to the business operations or functions (Byrnes, et. al., 2018). At the time of conducting auditing, it is required for Telstra to keep separate details of the tax information and data that will develop negative influences on the company’s activities and functions.
Audit procedures in response to inherent risks identified
The audit process is important to conduct for giving response to the inherent risks recognized in an organization. Such procedure helps in designing and managing audit process which includes tests of regulating the effectiveness of controls, in which accurate or required and substantive process. For the above described inherent risks, the auditor is focused on performing and designing the audit process in which nature, extent, and timing are approachable to the identified risks of material misstatement at the accurate level. The main motive of this gives a clear connection between the timing, extent, and nature of the auditors and analyzes risk assessment (Cao, et. al., 2017). While conducting the audit, the auditor needs to consider various points of auditing procedure that includes:
Analyze the importance of risks – In this, the company’s auditors should understand the significance of all the inherent risks of every firm. As per this, they need to develop accurate solutions and strategies to eliminate such risks. Both the companies have face risk which can create issues and difficult situation in attracting customers towards their products or services.
Understand the material misstatement – Also, organizations should evaluate the material and its evidence related to the records or information in a better manner.
Features of class dealings account balance and disclosure involvement – In this, the company can evaluate the transaction records, balancing the accounting statement, and disclosure engagement in a better manner (Ciołek, 2017).
Nature of particular management and control which is used by entity whether they are automatic and manual – This is required for both the firms is to manage and maintain business information and facts. Also, develop strategies and adopt the latest technology that can be used to perform manual practices and automatic processing.
With the help and use of such a process of audit, both the company’s auditors easily identified and keep accurate records and details of the risk which arise and develop issues in an organization. It is required for a firm’s auditor to concentrate on maintaining and performing great tasks in dealing with major risks and issues effectively. Along with this, both the Telstra and Ramsay Health Care Ltd auditors are analyzed all the five years of the annual report of the companies for evaluating the risks that occur and build negative influence on their functions or activities (Cole, et. al., 2018). The above processing of auditing helps manage and maintain business operations and work for reducing the risks in the auditing functioning. Moreover, the auditor develops a plan to recognize major and complex issues that may impact the company’s performance and also examine financial statements.
Analytical review of the financial statements with the purpose of identifying areas of concern or comfort
The analytical review is one of the audit methods which can be used to evaluate and measure the sensibleness of the accounting balance, dealings, and amounts that the report in the financial statements (De Masellis, et. al., 2017). For instance, the auditor may review and analyze the cost of products sold which is recorded in the income statement against the line of income. Telstra and Ramsay Health Care Ltd are focus on maintaining the planning stage and identifying major risk concern areas that should be resolve in a limited time.
Ramsay Health Care Ltd Concern areas:
The three areas of concerns are discussed as under:
Using huge Debt – The main issue which has been faced by the company is the use of a large amount of debt and this will create negative influences on the business operations effectively. This is important for a firm to concentrate on using required debt which is best suitable and easily applied to the company’s operations. Along with this, the hospital provides the best treatment to their patients and resolves their issues for increasing the goodwill of the organization in the market area (Dumay, et. al., 2018).
Value preposition – In this, the risks face by the company in terms of stocks and inventory which is complex and long-term issues of the Australian margins, and value the private health insurance that will be available while the virus has passed. It is required for a firm to concentrate on value proposition and how this will develops major difficulty to reach with desired goals or objectives.
Impact on the treatment of patients – The major risks and issues which has been faced by an organization while treating patients and people in a better manner. This is necessary for the company to concentrate on providing the best treatment to their patients if they are not adopting the latest technology then this will negatively influence the treatment process. Sometimes, the company does not develop strategies and this can be used to providing proper care to their patients in a better manner.
Telstra Ltd Concern areas:
There are various risk areas which are faced by a company that is described as follows:
The lower level of income – Telstra Ltd has face issues in terms of the lower level of revenue in which both the companies do not focus on spending income or expenses. Along with this, the company needs to deal with customers and fulfill their demand which enhances their income level (Gepp, et. al., 2018).
Huge competition – Telstra also deals and facing a huge level of rivals in which they need to analyze their competitor company strategies and plans according to this they require to develop an accurate procedure. In addition to this, there are large competitions which can create a negative impact on the business functions properly.
Balance the budget – It is important for the firm is to analyze and maintain their budget otherwise they can face difficulty while planning and processing the auditor.
Substantive audit procedures addressing the identified risks
Auditor’s main role is to maintain and manage the records or important information of an organization. In the audit of a financial statement, the auditor needs to perform a substantive process that includes testing the details and this is responsive to the assessed fraud issues. If the auditor chooses some controls intended to identify the assessed fraudulent issues and activities for checking and monitor (Hoang, et. al., 2017).
Telstra needs to be prepared for the budget as this is the risk that can impact the functioning operations of the company. This risk is very effective as the company’s budget is the major factor for the working operations in the company as the balance of the budget of the company is very crucial.
Telstra Company should analyze the competitive companies in the market place and apply the changes in the organization for competition with the competitive companies as this can impact the business culture of the company in a harmful way as the customers will be lost to the competition and business will be affected.
The company needs to enhance the usage of advanced technology for the treatment of patients which can impact the lives of the patients (Jagielski, et. al., 2020). This is a very important risk for the company to deal with for providing the best services for the patients in process of treatment.
The company needs to focus on the budget planning of the company’s functioning in which the company should be alert for the huge debt as the debts are the risks which can highly influence the whole working process for the company which will affect the treatment process for the patients.
Audit report, its basis and legal issues
In the case of both the companies, the auditor has various legal responsibilities and roles performed for achieving desired goals and targets effectively. For achieving potential objectives, there are different legal responsibility that includes objectivity, confidentiality, independence, and technical standards which are necessary to satisfy as per the International standard of accounting and NSAs. The auditor’s main role is to verify the ransom payment and income which are developed with the context of outstanding liabilities in the accounting year. Along with this, the auditor should monitor and check the calculations and numerical values and clarify the amount which is received. It is important for auditors are to focus on ethical responsibilities when another auditor provides inappropriate views and opinions regarding specific information and function. The ethics of auditors develop trust and this will provide a basis for reliance on their conclusion (Kearns, et. al., 2018).
They are performing duty along with integrity, honesty, and loyalty and also complete each task in the best manner. It is an important role of auditors is to give their opinions and reviews on such terms which is not legally right or correct and which create a negative impact on the business operations and its functions. If any audit members do not appropriately perform their duty then this will show their lack of knowledge and poor information of auditing. There are some safeguarding and protection process available to the auditor that involves assisting in reducing the risks or threats such as eliminating a person from the participation team or disposing of financial interest in the audited entity. Also, this will reduce the threat to an acceptable level (Dumay, et. al., 2018). In this case, safeguarding is important when the auditor concludes to recognize risks and this will observance with primary principles is compromised. Moreover, this is required for an auditor to concentrate on business functions and helps in managing the threats or risks effectively.
Conclusion
From the above-described report, it is concluded that auditing is required to conduct in the company and auditors are focus on maintaining all the business records or information in a proper manner. Telstra and Ramsay Health Care Ltd develop strategies for addressing their inherent risks and how to deal with such issues are discussed in this report.
References
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