Qantas Airways Limited Auditing and Quality Assurance Free Solution

Question: Discuss about the Auditing and Assurance for Qantas Airways Limited. Answer: Introduction This study deals with auditing and assurance in Australia. In this particular assignment, emphasis has been given on understanding the audit procedures followed by Qantas Airways Limited. Qantas Airways Limited is one of the Australian-listed companies operating in airline industry in and around the world (Qantas.com. 2016). It is the largest airline company in terms of fleet size as well as international destinations and international flights. Qantas Airways Limited occupies the third position in and around the world. The first question requires identifying the inherent risks faced by Qantas Airways Limited in carrying out the audit functions (Soh and Martinov-Bennie 2015). The main objective of Qantas Audit Committee involves assisting Board for fulfilling corporate governance responsibilities. It should be in alignment with financial reporting as well as risk management and audit risk for future analysis purpose. It requires the integrity of operations for the company Qantas Airwa ys Limited financial reporting in compliance with legal as well as regulatory obligations (Varughese, Janda and Obermair 2014). This particular question determines the inherent risk factors pertaining to Qantas Airways Limited. Qantas Airways Limited views it as independence of external and internal auditors in conducting future plan of action (Simnett, Zhou and Hoang 2016). The combined part explains the rendering actions undertaken by audit committee on enterprise risk management and internal control framework. This particular part requires listing down the inherent risks faced by Qantas Airways Limited in the audit-planning phase (Simnett, Carson and Vanstraelen 2016). Below is the table that explains the four inherent risks with proper justification. For each category identified, audit procedure is explained for Qantas Airways Limited. In other words, Qantas Airways Limited has weak internal control system that needs improvement as per the auditors (Redmayne 2013). It requires obtaining list of financial facilities for viewing at the management of Qantas Airways Limited based upon terms and conditions. Qantas Airways Limited Audit Committee needs to perform the compliance of actions mentioning the underlying issues for the selected Australian company (Moroney et al. 2014). In this particular part, audit procedures are planned for carrying out in response with the identified inherent risks for Qantas Airways Limited. Inherent Risk Justification Assertion and Ledger accounts impact Audit Procedure or Task Fuel and Foreign Exchange volatility risk The above risk comes under medium category Inspecting the hedging programs for Qantas Airways Limited (Moroney and Trotman 2015) Inspecting the risk management planning for Qantas Airways Limited (Qantas.com. 2016) Inspecting the current hedging contracts for Qantas Airways Limited (Qantas.com. 2016) Continuity of critical systems The above risk comes under low category Inspecting the hardware as well as system software specifications for Qantas Airways Limited (Liao, Lin and Zhang, 2016) Inspecting on the IT contingencies as well as backup plans and failover for Qantas Airways Limited (Qantas.com. 2016) Usage of external confirmation for Qantas Airways Limited (Qantas.com. 2016) Credit Rating The above risk comes under Medium category Inspecting the debt of Qantas Airways Limited for assessing the cash flow operations (Junior, Best and Cotter 2014) Evaluating the state of current fleet stock for Qantas Airways Limited (Qantas.com. 2016) Obtaining as well as inspecting financing agreements of Qantas Airways Limited (Hardy 2014) Inspecting current liquidity position of Qantas Airways Limited (Botica Redmayne 2013) Industrial Relations The above risk comes under Medium category Observing the current working condition of Qantas Airways Limited (Hardidg et al. 2013) Impact widely in the financial statement of Qantas Airways Limited (Green and Taylor 2013) Inspecting worker as well as Union agreements of Qantas Airways Limited (Gramling et al. 2012) In this particular part, it is required to mention the analytical review as indicated in the financial statements of Qantas Airways Limited. Each area are identified and mentioned how far it is affected like high, medium or medium risk as well as need for improvement at the same time (Bdard et al. 2015) This part explains the audit procedures undertaken by the auditor in the audit-planning phase. Figures are extracted from the annual report of Qantas Airways Limited (Qantas.com. 2016). Analytical Review- Identification of area of concern Justification Assertion and Ledger accounts impact Audit Procedure or Task Liquidity Ratio The above risk comes under medium category Current Assets 2014- 0.746 2015- 0.655 Cash Ratio 2014- 0.426 2015- 0.399 Qantas Airways Limited has better liquidity position and need further improvement for retaining the global marketplace (Qantas.com. 2016). From the annual report of Qantas Airways Limited, it has been noted that the company requires achieving ideal current ratio as 2:1. In the year 2015, current ratio arrives at 0.655. There has been decrease in current ratio from 2014 to 2015. This means that Qantas Airways Limited requires acquiring current assets for meeting the short-term obligations in the upcoming financial year (Qantas.com. 2016). Collision on asserted ledger will be affecting in the company financial statement of Qantas Airways Limited (Qantas.com 2016) Inspection and Enquiry Profitability ratios The above risk comes under low category Return on Assets 2014- 1.79% 2015-(2.36%) Profit Margin 2014- 1.26% 2015- (18.52%) Qantas Airways Limited has weak profitability position and need further improvement for retaining the global marketplace (Qantas.com. 2016). From the annual report of Qantas Airways Limited, it has been noted that the company requires net profit and increase in Return on assets. In the year 2015, profit margin arrives at negative figure at 18.52. There has been decrease in Net profit from 2014 to 2015. This means that Qantas Airways Limited requires to work upon the profitability aspects in the upcoming financial year (Qantas.com. 2016). Contact on asserted ledger will be affected in the company financial statement of Qantas Airways Limited (Qantas.com 2016). Observation Recalculating interest amount as well as principal payments for allocating financial resources for the company Qantas Airways Limited Financial Leverage Ratios The above risk comes under medium category Debt to assets ratio 2014- 0.708 2015- 0.835 Debt to equity ratio 2014- 2.430 2015- 5.043 Qantas Airways Limited has better solvency position and need further improvement for retaining the global marketplace (Qantas.com. 2016). From the annual report of Qantas Airways Limited, it has been noted that the company requires achieving ideal debt ratio. In the year 2015, debt to equity ratio arrives at 5.043. There has been decrease in debt to equity ratio from 2014 to 2015. This means that Qantas Airways Limited requires reducing in the debt obligations in the upcoming financial year (Qantas.com. 2016). Crash on asserted ledge will be affected in the company financial statement of Qantas Airways Limited (Qantas.com 2016). Analytical Procedures Inspection Auditors require understanding case of financing structure in relation with financial coenants (Qantas.com. 2016). Type of audit opinion issued by Independent Auditor There are four types of auditor opinion Adverse opinion Disclaimer of opinion Unmodified opinion Qualified opinion The above are the four audit opinion types and the recommended audit opinion is unqualified opinion in this case. As per KPMG opinion, it suggested that Qantas Airways Limited annual report for 2014 is in accordance with Corporation Act in the year 2001. Secondly, Qantas Airways Limited complies with IFRS (International Financial Reporting Standards). In the above part, auditor has identified unqualified opinion. It is agreed with the audit opinion as other alternative opinion does not match with the company annual report figures as for Qantas Airways Limited (Qantas.com. 2016). Audit opinion given by Auditors is true and possess fair representation as stated in the financial statements. The audit report prepared by the auditor is in accordance with AASB and IASB guidelines for the company Qantas Airways Limited (Qantas.com. 2016). According to the auditor opinion, they suggested unqualified opinion as predicted from the annual report of Qantas Airways Limited (Qantas.com. 2016). There are no particular issues after conducting audit report that will individually strengthen or weaken audit opinion. Process of Corporate Governance, Audit Committee and Composition The Board endorses with the Australian Stock Exchange (ASX) Corporate Governance Principles as well as recommendations for establishment for the year 2014. Qantas Airways Limited follows the third edition of Australian Stock Exchange (ASX) Corporate Governance Council (Qantas.com. 2016). In this particular question, Qantas Airways Limited relates with applying corporate governance principles and recommendations mentioned in the annual report for the given year. Audit Committee of Qantas Airways Limited Qantas Airways Limited has an audit committee with correct composition. This particular company sets out required accounting standard such as Australian Stock Exchange (ASX) Corporate Governance Council for future analysis purpose (Liao, Lin and Zhang, 2016). Audit Committee sets out the audit opinion by keeping in mind attributes like safety, Security Committee and Health actions. Composition Selection of members who are financially literate Selection of Non-Executive Directors Three members Mostly or majority of independent Non-Executive Directors Audit opinion given by audit committee of Qantas Airways Limited is beneficial in carrying out the business operations in the most appropriate way (Qantas.com. 2016). There are several benefits of Audit Committee for any business organization for audit process activities (Qantas.com. 2016). Auditor need to perform internal as well as external audit in their respective position. Internal audit means establishing audit as well as risk management framework for assuring the given assessments on timely manner. On the contrary, external audit reveals monitoring as well as evaluating of performance and independence at the same time (Liao, Lin and Zhang, 2016). Audit Committee serves their service to the company for connecting direct line of communication between the Board as well as auditors The auditing Profession The audit Committee believes in ensuring auditing professionals in compliance regarding the code of ethics as well as regulations The Audit Committee aims at strengthening the information for helping capital investors. They interpret society expectations as well as standard of management for future analysis purpose (Simnett, Carson and Vanstraelen 2016). The Audit Committee is responsible in representing the experts in the required field of accounting as well as auditing and risk management. It enables undertaking responsibility by the Audit Committee for conducting accounting, audit as well as risk reviews. Audit Committee members are entitled in relying upon Qantas Airways Limited matters (Liao, Lin and Zhang, 2016). It requires undertaking responsibility on expertise especially by external professionals. It relies upon accuracy of information, as members may not be aware regarding issues of reliance or appropriateness of situation. Qantas Management is responsible in implementing as well as managing enterprise-wide accounting and risk management strategies. It involves policies and procedures in complying with applicable accounting standards as well as laws and regulations. Addition to that, it assumes for reporting on the effectiveness of Qantas Airways Limited for risk management and internal control framework for solving business risks (Simnett, Carson and Vanstraelen 2016). Audit Committee is responsible for reporting any incident in case of fraudulent activities on behalf of Qantas Airways Limited internal controls. It ensures reporting for Qantas Airways Limited insurance programs. It requires maintaining sufficient knowledge as well as skills and expertise in and within the Qantas Airways Limited finance function in the most appropriate way (Soh and Martinov-Bennie 2015). Conclusion At the end of the study, it is concluded that Qantas Airways Limited renders services in the airline sector. The above analysis involves understanding the fact regarding the audit committee of Qantas Airways Limited in carrying out the audit opinion in desired form. The Audit Committee requires maintaining free as well as open communication in alignment of Qantas Management especially for external and internal auditors. Audit Committee has the authority for seeking any potential information from any type of employee working under Qantas Group. This particular Committee can take any kind of independent legal as well as financial advices for appropriate course of action. They are responsible in reviewing as well as monitoring financial reports for Qantas Airways Limited. It further adds on advice for risk management issues by the auditors undertaken by CHESS. 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