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Group Assignment Cover Sheet

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UNIT CODE HI6026

UNIT NAME AUDIT ASSURANCE AND COMPLIANCE

DUE DATE 28/05/2021

GROUP NUMBER 011

GROUP MEMBER DETAILS - This section must be completed for all contributing
members.
Members not listed will not receive marks.

STUDENT STUDENT NAME SECTION COMPLETED

NUMBER e.g. A, B, C, D
PFEC2218 SAMIR KUMAR PATEL AUDIT COMMITTEE
EFFECTIVENESS AND
AUDIT QUALITY AFTER
ADOPTION OF IFRS

OED20132 VISHAL PATEL ANALYSIS OF THE

INCOME STATEMENT
FOR THE XERO LIMITED

SSO3008 PARTH PANDYA ANALYSIS OF A RISK

ASSOCIATED WITH
AUDIT RISK,
MATERIALITY, AND
DETECTION RISK

NRI2021 FENIL PATEL CORPORATE

GOVERNANCE
COUNCIL PRINCIPALS
AND AUDITOR DETAIL
OF XERO LIMITED

DECLARATION
We certify that:

☐ This assignment is our own work.

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☐ We have acknowledged and disclosed any assistance received in its preparation
and cited all sources from which data, ideas, words (whether quoted directly or
paraphrased) were taken.

☐ This assignment was prepared specifically for this unit only.

☐ The reference list is truthful and accurate and in Holmes approved referencing
style.

STUDENT SIGNATURE /
NAME
(only one required on behalf of OED20132 – Vishal Patel
group)

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Executive summary
The motive behind the assignment is to a detailed understanding of the financial report
of the company listed in the Australian security exchange (ASX) 300 list, not only that
but the assignment will focus on the risk associated with the materiality, detection risk,
and audit risk in a company. with the help of an analytical procedure, there is a
detailed analysing of a company annual report and the risk associated with the
company. This will help you grasp the fundamental value of the corporate audit while
remaining relevant to the audit results of the organisation. It also examines the quality
of audits that are effective by means of the IFRS (international financial reporting
standards) that are carried out by the audit committee. It also helps to analyse why the
auditor is not obliged to report financially on the company. The chosen company is
Xero ltd, which was established in 2006 and has its head office in New Zealand. Xero
Ltd is a software for cloud computing. The yearly report and the related risks linked
with businesses will be thoroughly analysed.
Keywords: IFRS, Xero limited, risk analysis, audit committee effectiveness and quality.

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Table of Contents
Executive summary..........................................................................................................3
Introduction.......................................................................................................................5
Part A................................................................................................................................5
Measure and discuss income statement, balance sheet and cash flow ratios from
your selected company and How does this affect your assessment of materiality,
detection risk and overall audit Risk? Provide a brief explanation in the report. This
should be presented in a table format...........................................................................5
Part B................................................................................................................................6
“Audit committees do not prepare financial reports, nor do they conduct audits. But
they have an essential role to play in ensuring the integrity and transparency of
corporate reporting”. Explain this statement? Who should be members of the Audit
Committee? Is there an association between Audit committee effectiveness and
audit quality after IFRS adoption?.................................................................................6
Explain your selected company’s (same selected company from part A) and prepare
the following responses about the application of audit committee effectiveness
recommended by ASX Corporate Governance Council (CGC) principles using
Corporate Governance Principles and Recommendations (4th Edition) was released
on 27 February 2019?...................................................................................................8
Conclusion........................................................................................................................9
References........................................................................................................................9
Appendix.........................................................................................................................10

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Introduction
The assignment is split into 2 halves: the first part is an analytical method during which
a particular company is chosen from the ASX three hundred lists, and half B could be
a compact description of the money report of a corporation, similarly as an outline of
the chance related to the audit, materiality, and identification risk. The second half
lays its concentrate on audit committee effectiveness and audit committee
specifications in respect of the chosen company partly A as within the audit committee
size, member's profile, their qualifications and skill. It additionally helps perceive audit
quality when the implementation of International financial reporting Standards (IFRS).

Part A
Measure and discuss income statement, balance sheet and cash flow ratios from your
selected company and How does this affect your assessment of materiality, detection
risk and overall audit Risk? Provide a brief explanation in the report. This should be
presented in a table format.
Below is the analysis of the income statement, balance sheet and the cash flow ratio
of Xero limited:
From the analysis of an income statement, it is been identified that the company's
operational revenue is been increased by 30 per cent, not only that but the income
related to the subscription revenue increased by 29 per cent. With the conference
revenue and fintech partnership, the other operating revenue for Xero limited is
increased by 52 per cent, it is been observe that the company income statement
shows positive growth in the revenue, not only that but the Australian market shows an
increase of 23 per cent, in UK it is increased by 54 per cent. The operating revenue
graph is presented in the appendix part of an assignment.
The total operating revenue $718231 (000s). The cluster recognised impairment
losses of $1.6 million throughout the year terminated thirty-one march 2020 on
depreciation code development. goodwill is allotted to a cash-generation unit, that area
unit all-time low level of assets that classifiable income may be attributed, Xero
restricted goodwill at thirty-one march 2020 relates entirely to the acquisition of hubdoc
INC. and has been allotted to ANZ (Australia and New Zealand) market and
international. derivatives in hedge relationships square measure selected supported a
hedge magnitude relation of 1:1 hedge that doesn't have an extremely probable
forecast dealing square measure recognised as ineffective hedges. the cluster policies
are to hedge a portion of the next eighteen months forecast income.
The cash flow of a company shows that there is a positive flow of income, not only that
but the company have a positive income statement despite that there is a certain risk
which is associated with the market. it is been observed from the analysis of the
revenue and expenses made on the software services given by Xero limited, it is been
observe that the business has a sound financial position in the market. the free cash
flow is $27.1 (in million), Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA) is $137.7 (in million).

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Following is the table for the risk related to the materiality, detection risk, and audit risk
Materiality The analysis of the annual report of Xero limited the following risk
which is associated is related to the market risk, liquidity risk, and
credit risk. The risk over here is related to the missing of any
information which may not give a clear picture to the user or the
reader of an annual report of Xero Limited.
Detection risk There are chances of the detection risk, due to the dealing in more
than one market there is a constant fluctuation of a currency and
the economy of a company will be fluctuated, it is been observe that
the group is exposed towards the credit risk and liquidity risk, at that
time there is a chance that auditor will fail to find the fraud or error in
the accounts.
Audit risk The main type of risk associated with the audit risk is not detecting
the misstatements, fraud or error in the income statement of Xero
limited, not only that but the audit risk associated with the Xero
limited interest rates fluctuation and the foreign currency exchange.
Another audit risk is related to verify the information related to the
cash and cash equivalent, derivatives, receivables, and short-term
deposit of a company.
(limited, 2020)

Part B
“Audit committees do not prepare financial reports, nor do they conduct audits. But
they have an essential role to play in ensuring the integrity and transparency of
corporate reporting”. Explain this statement? Who should be members of the Audit
Committee? Is there an association between Audit committee effectiveness and audit
quality after IFRS adoption?
Auditor will facilitate the company in helping the technical facilitate or give data to
safeguard firms budget from the uncertainty, not solely that however, the auditor
provides steerage associated with the money report and therefore the management of
a corporation. money report is that the statement that is employed by the stakeholders,
investors, and therefore the third party, for that the committee mustn't have any
personal interest within the company, then solely the statement generated by the
auditor is freed from biasness, true and truthful price of a corporation may be
legendary through the budget of the corporate. therefore, the auditor needn't created a
money report for the corporate, the auditor will provide recommendation whenever the
company desires facilitate, however, didn't facilitate in creating money report. company
Governance is that the system by that firms are directed and ruled by the management
within the best interests of the stakeholders et al guaranteeing higher management,
larger transparency and timely money reportage. Responsibility for company
governance rests with the Board of administrators(Buallay and Al-Ajmi, 2019).
Audit committee members are additionally appointed for specific terms and wish to
have an associate applicable mixture of skills, experience and knowledge. The
members of the committee have to be compelled to have a mixture of accounting and
financial expertise, nonetheless as business data, to alter them to discharge their

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mandate effectively. it's counselled that a minimum of 1 member be good a licensed
capitalist or different finance skilled with expertise in financial associated accounting
matters; whereas different members have an understanding of the business at
intervals that the entity operates. an audit committee helps the board of administrators
to implement company governance and additionally assist within the entity's money
reportage, risk management, control system. Internationally the need for the audit
committee varies by country. The membership of the audit committee is most up to six
members. The audit committee should comprise freelance administrators with a
minimum of one money skilled(Gorshunov et al., 2021).
Audit committees don't prepare monetary reports, nor they bear audits. however, the
audit committee and physical body rely on management to run the day-to-day
operations within the company. Their role is perceptive and overseeing instead of
execution. Responsibilities of the audit committee include:
• Examining of the budget and auditor’s report
• update or approval of the party transaction
• company assets valuation
• Monitoring the utilization of funds
Audit committee members ought to be massive enough and its members unbiased
and technically knowledgeable to make sure its mission may be with efficiency dead.
The Australian security exchange (ASX) Recommendation states the structure of the
Associate in Nursing audit committee to make:
• in the committee most of the members ought to be autonomous administrators
• minimum members in the audit committee are three
• the audit committee must be non-executive
The International finance reporting Standards developed by the International
Accounting Standards Board whose aim is to harmonize the monetary accounting
standards across the countries. The audit committee effectiveness has additionally
shown forceful improvement as there exists a typical and also the procedure that is to
be adhered to within the monetary report of the corporate. Thus, with the adoption of
International financial reporting standards, there's an acceptable amendment within
the audit quality and audit committee effectiveness. the introduction of reportage
mechanisms and also the international monetary crisis. With the implementation of the
international monetary reportage commonplaces the audit committee effectiveness is
additionally improved as there's an outlined standard and also the procedure that
ought to be followed by the auditor at the time of commenting on the monetary report
of a corporation, not solely that however auditor will have a transparent plan
concerning that data of a corporation got to be disclosed and also the quantity beneath
that section. Thus, with the assistance of a global monetary reportage standard,
there's a significant amendment within the audit quality and audit committee
effectiveness(Amartey et al., 2019).
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Explain your selected company’s (same selected company from part A) and prepare
the following responses about the application of audit committee effectiveness
recommended by ASX Corporate Governance Council (CGC) principles using
Corporate Governance Principles and Recommendations (4th Edition) was released
on 27 February 2019?
Eight principles area unit extracted from the company Board of Governance that the
auditor of any firm ought to fulfil, otherwise the auditor's report isn't deemed to be
complete or the equal and real worth of the company's monetary position within the
market can't be achieved. eight ideas originating from the CGC area unit as follows:
Lay solid foundations for management and oversight – A designated entity should
clearly outline its board and management's different tasks and duties and examine its
performance on a regular basis.
Structure the board to be effective and add value - The board should be of an
acceptable dimension for a listed company and having the skills, engagement and
data together to enable the entity and also the business within which it operates
Effective discharge of its duties and pricing.
Instil a culture of acting lawfully, ethically and responsibly - A listed entity should enter
and regularly strengthen the culture of legally, ethically and responsibly operating
throughout the organisation.
Safeguard the integrity of corporate reports - To verify the integrity of its reporting, a
listed firm would have to take suitable measures.
Make timely and balanced disclosure - The listed entity should provide prompt and
balanced disclosure of any issues that would be expected by a cheap individual to
have a significant effect on the price} or value of their securities.
Respect the rights of security holders - A listed firm should offer its security holders
acceptable data and equipment to enable them to successfully exercise their rights as
security holders.
Recognise and manage risk - A listed firm should set up a sound framework for risk
management and examine the effectiveness of that framework infrequently.
Remunerate fairly and responsibly - To attract, maintain and promote top-quality
senior managers, and match their interests to the creation crucial to security holders,
and the values and the aptitude of the entity, a listed business must pay director's pay
spare and retain top-quality managers and their Govt payment (Council, 2019).
The audit committee of Xero limited is consist of four non-executive directors, who
working as an audit and risk management committee for the company, and one
external auditor which is Ernst & young. The knowledge shared by the non-executive
direction in audit and risk management is having sufficient knowledge, proficiency in
the financial market and legalities of an Australian and New Zealand market. as per
the annual report generated by Ernst & young, it is been analysed that there is a piece
of detailed information about the income statement and the balance sheet of Xero

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limited, along with that report also mention the exposure of risk associated with the
Xero Limited(Limited, 2021).
Live data related to the money trading of a firm have been appropriately reported, and
not just that it is also noted that close data exist in the hedge’s money-risk business of
the Xero limited the risk management framework of an organisation is understood. In
addition to managing capital risks, the auditing committee can clearly state that the
company is exposed to the foreign currency fee per unit. The audit committee does not
question the risk potentiality that may influence the financial power of the firm.
There is a correct channel for the meeting that the corporate company organises, the
only default is that the company normally consists of an internal calling committee
because there is a danger of materiality, nevertheless, when a non-executive director
holds a meeting, it mainly takes place on the telephone or online. The audit
committee's meeting format in the Xero limited must insure modifications to the
organization's higher performance. The corporate analysis audit Committee monitors
and monitors the management of economic risk and fiscal policies. Company
graduates the cost-effective and economical management culture of the organisation
is essential for the long-term competitiveness of the enterprise and its property(limited,
2020).

Conclusion
It has been known in this task that the company's financial situation should be properly
handled and the monetary ratios should be continuously controlled in order to ensure
that the company will survive and develop among its competitors to become the most
efficient in its business line. The associate degree analyses the importance and
facilitates a company's credit rating by extensive analysis and the significance of an
auditor's freelance declaration concerning the audit committee, as well as the legality
of the Australian Security Exchange. An audit committee is a complete analysis. In the
future, it will be familiar to analyse the corporation monetary report and also to analyse
the hazard linked to the materiality, the risk of audit and also detection risk.

References

BUALLAY, A. & AL-AJMI, J. 2019. The role of audit committee attributes in corporate
sustainability reporting: Evidence from banks in the Gulf Cooperation Council.
Journal of Applied Accounting Research.

Corporate Governance in Ghana: An Analysis of Board ...

COUNCIL, A. C. G. 2019. Corporate Governance Principles and Recommendations.

The 8 Principles, 4th Edition February 2019.
Corporate Governance Principles and Recommendations

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GORSHUNOV, M. A., ARMENAKIS, A. A., HARRIS, S. G. & WALKER, H. J. 2021.
Quad-qualified audit committee director: Implications for monitoring and
reducing financial corruption. Journal of Corporate Finance, 66, 101854.

Quad-qualified audit committee director: Implications for ...

LIMITED, X. 2020. Annual report. Xero is a unique company - a digital disruptor, born
in the southern hemisphere - that operates at the intersection of technology and
finance
Xero Limited Annual Report 2019 - ASX

LIMITED, X. 2021. Board of Directors. Investor information.

Board of directors | FedEx - Investor Relations | FedEx

Appendix
Image of an operating revenue for Xero limited:

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