Financial Statements Sustainability Report -Myassignmenthelp.Com

Question: Discuss About The Financial Statements Sustainability Reports? Answer: Introduction For the purpose of the report, Ancell Limited is selected that is a pioneer in giving health, as well as safety solution along with different products. The main operation of the company is in designing, manufacturing, as well as the development of a huge range of products that lead to the safeguard of the body (Ansell Limited, 2016). The company has provided adequate disclosures in its annual report that requires immense research in order to avoid any negative showcase on the company. Furthermore, the auditors has not provide the Key Audit Matter in the Audit report that is now needed to disclosed in tune to ASA 701 that is Communicating Key Audit Matter in the Independent Auditors Report, as well as ASA 315 that is Identification, as well as Assessment of the Risk of Material Misstatement through knowledge of the Entity and its environment. ASA 701 its relationship with audit report ASA 701 Auditing Standard ASA 701 came into existence chiefly for the need of financial reporting that ends on 15 December 2016. The introduction of this auditing standard was to assess the audit matter is important and when assessed, the communication should happen with an opinion that is not biased on the key matters and linked to the firms management that needs to be audited. The main aim of this communication resides in the fact that it leads to transparency in the financial statements that are audited and help the user of the financial statement to have a thorough look into the matter that can have an impact on the user's result. This can be properly explained with the help of Lehman Brother example where the use of ASA 701 can prevent the material fact concealment. The material facts are critical as it has a strong impact on the users and other related parties. Key Audit matters can be described as those matters that require a proper attention of the auditor when the financial statements need to be audited (Eccles Krzus, 2014). To consider such matter, it is the need of the hour that the auditor should spot the matter that is vulnerable to material misstatement, high level of uncertainty, etc. The auditor of listed companies is now required to disclose such matter in the audit report that according to their opinion is of major importance in the audit of the financial report of the present year. All these matters, as well as event, needs to be mentioned that were disclosed to the auditor till the audit gets completed and even those that were not needed to be disclosed (Eccles Krzus, 2014). Disclosures are important criteria and in the event of such not disclosed then it can hamper the proper management of the company that might create a rift in the process of decision making. ASA 315 its relationship with audit report ASA 315 Identification and Assessment of the Risks of Material Misstatement through knowledge of the Entity and Environment The auditing standard highlights that the audit should be of high competency so that any risks can be traced at the very beginning. This will lead to avoidance of the material misstatement in the financial statement. The presence of material statement hampers the normal progress of the company. It needs to be noted that the happening of such might occur as a result of fraud, error or mistakes that are not intentional in nature (Matthew, 2015). The auditor needs to report such happening after a proper understanding and evaluation of the entity, as well as environment. Moreover, the internal control needs to be ascertained and reported by the auditors as they put huge emphasis on the companys working. Important points that were of major importance while conducting the audit and that could have been disclosed by the auditors in the auditor report as Key Audit Matters: In comparison to the year 2015, the aggregate sales have declined by 4.4% that has caused the EBIT to report a negative trend amounting to 3.5%. Further, the companys EPS have also decreased that is a significant concern. Such lower trend of sales is because of translations in currency as the company pursues major international exposure. Besides, overall profits have declined because of enhancement in administrative, general, and selling expenses in comparison to enhancement in sales figures. Moreover, there were inappropriate results in the companys medical segment wherein it encountered manufacturing issues in Malaysia and Melaka facilities with sales depreciated by 8%. In contrast to this, the sexual wellness segment witnessed growth by 3%. Nevertheless, only the operating cash flows of the company witnessed significant growth by 24% (Ansell Limited, 2016). The auditors have failed to disclose various relevant matters that might have arisen after the termination of the financial period, which can impact the affairs and activities of the entire Group, its outcomes, and overall condition. It is the duty of the auditor to present or reflect a true and fair view of the companys activities and affairs. For instance, issue of dividend to the shareholders of the company (Holland Lane, 2012). Nonetheless, the company had come up with many plans and strategies like the assurance of international class standards of safety that can be continuously monitored and the same can be easily implemented at every fresh procured site. In addition to this, such preparedness included installation of fire prevention plans at the acquired sites of Ansell and adoption of a complete audit of health, safety, and the environment by the third parties (Ansell Limited, 2016). In order to ensure complete safety, Ansell can make insurance of its strategic partnerships, intangible assets, plant and machinery, and significant agreements as well. Further, it is the duty of Ansell to acquire intellectual property rights of all its findings and papers so that they cannot be compromised. However, the auditors failed to identify any such material risk in the audit report. As the auditor was incapable of identifying any deficiency, an inappropriate financial statement will be reflected that can play a key role in affecting the decision-making ability of the entire organization (Ruhnke Schmidt, 2014). Ansell takes major steps in assuring health and safety of its workers that includes monitoring of their safety graphs that is conducted by the Risk Committee. The company attained a score of 61% in cultural survey and engagement of 16000 employees that is at par with the international ranking (Ansell Limited, 2016). The auditors have also proved themselves incapable of reporting deficiencies or fatalities in the Thailand manufacturing facility that incurred in May 2016. The company also took steps to assist the families of the dead and it also endeavored to find the main cause of the occurrence of the incident. Due to the high volatility of international markets, the Group is expected to encounter massive variations in foreign exchange rates together with their impact on earnings in US dollars. Moreover, almost half of the expenses of the Group are in currencies instead of US Dollars. The company entirely relies on the quality of the product and it must ensure their investment in quality checks by implementing the best team so that they can continuously monitor and supervise the same. Furthermore, the Group majorly depends upon their setup of Information Technology and any type of failure, ineffectiveness, and disruption of such setup is a major disappointment to the goodwill and overall affairs. The auditor has again proved himself incapable of recognizing the same as a material audit risk in the financial statements of the company. Ansell is an international company that is pursuing enormous diversifications and investments that also includes huge target sales and production figures. This can result in the incapability of the company to react efficiently to all the grave scenarios keeping in thought all the political and cultural affairs taking place in various countries in a timely fashion (Messier, 2013). Since the company is a manufacturing one, it has to encounter enormous arrangement of plant and machinery that are running both on the manual and automatic basis. Further, the company must attempt to maintain an environment equipped with safety strategies because human lives are constantly at risk owing to several unknown reasons (Messier, 2013). This can assist in identifying any casualty so that any loss of life or asset can be immediately prevented. Such risk has also not been recognized in the audit report by the auditors. The Group has employed new directors and experienced highly-qualified personnel who pursues perspective for new investments and procurement that is a good indicator of it (Ansell Limited, 2016). Even though the sources of finance for such investments are not adequately explained by the company, yet such enormous investments must be appropriately backed up by capitalization of markets and aggregate borrowings. Overall, if such matters are not made clear at the time of facilitating such investments, it might become troublesome for the company. Nonetheless, all these concerns and matters must be adequately and effectively addressed by the auditor of the company as relevant or key matters of the audit. These must form part of the companys audit report in order to enable better decision-making (Tepalagul Lin, 2015). The Group has a thorough remuneration policy like LTI, STI, and FAR for its employees that comprise of various incentive and remuneration plans. Such levels are framed to retain, maintain, and attract the best range of employees and to offer them share in the growth of company in the way of stock options and shares. This also comprises of both equity and cash awards (Ansell Limited, 2016). Further, in terms of CSR and HRM, the company also makes way to maintain best standards that can offer the society assistance in terms of pollution control, mitigation of natural disasters, and employment facilities. This involves a huge amount of expenses but the auditor has failed to mention the advantages and disadvantages of such strategy in their audit report. Further, the risk of foreign currency translation has also not been provided in the auditors report, which is believed to be a relevant factor in ascertainment of companys final profits (Moroney Trotman, 2016). It must be noted that the aforesaid factors are of relevant importance to the stakeholders of the company and the same must have been accommodated in the auditors report in the form of key audit matters. Therefore, to address such scenarios of non-disclosure, ASA 701 has been introduced for the audited financial reports that requires disclosure of key audit matters and steps facilitated by auditors to record such issues together with their impact on financial and non-financial segment of the company (Christensen, 2011). Further, the aggregate costing associated with the aforesaid situations and the projections or plans of the company must also be taken into account by the auditor. The reason behind such undertaking can be attributed to the fact that there may be no overstatement or understatement of costs in the financial statements. This risk may result in a material misstatement in the financial statement level, and the auditor must disclose and assess such risks so that misstateme nts can be immediately mitigated (Ghandar Tsahuridu, 2014). Such disclosure must be based on the significant accounting standard ASA 315. Recommendation The audit report must be an exact copy of the non-financial and financial health of the company so that the stakeholders can evaluate the companys exact position. Further, the companys transparency is a significant consideration when it comes to the procedure of financial reporting. Thus, it is crucial for the company that the statutory and internal auditor must possess a sharp mind presence so that every affair corresponds perfectly with the required standards. Overall, a proper guidance of a moral system must be in place so that corporate governance and ethics are properly addressed. Conclusion From the study, it is clear that organization must adhere to the regulations of accounting that need to be implemented. The standards help in the assessment of the influence of every financial matter that is required to be implemented when the financial statements are prepared and can lead to an immense problem for an economy of a country if not managed with a proper clarity. Therefore, it is required that the companies do such reporting that helps the stakeholders to assess the position of the organization. Further, the financial statements should highlight the correct position of the company and hence, it is highly needed that accounting, as well as auditing standards, needs to be followed precisely. The auditor plays a pivotal role in providing a true and fair view of the books of the accounts. In short, the auditor must comply with the auditing standards so that the real position of the organization is reflected. The auditor must understand the potential and scope of work References Ansell Limited 2016, Ansell Limited Annual report accounts. [online] Available at: https://www.ansell.com/-/media/Corporate/MainWebsite/About/Investor-Center/Annual-Report-2016/Annual-Report-to-Shareholders-2016.ashx?la=en Christensen, J., 2011. Good analytical research. 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