Independence of the Auditors and Non-Audit Services

For any successful organisation it is nowadays important to maintain transparency regarding everything that happens in the entity. All information is required to be transmitted to the stakeholders through the annual reports. One such information is of the audit function. The annual report needs to contain every detail regarding the auditors. The contents must include in clearly stated words the declaration that the auditor gives about his independence, the remuneration paid to the auditors, any kind of non-audit services if provided by him to the entity, the formation of any audit committee along with the audit charter, the kind of opinion that the auditor have expressed, and the key audit matters highlighted by him in the audit report. All information needs to be expressly included with the management affirmation to the same.  This report will reflects the independence of the auditors and non-audit services, auditing functioning, responsibilities and material details to bifurcate the key audit matters and auditor responsibilities of Flight Centre Travel Group Limited. The key auditor matters have highlighted the audit functions and undertaken audit activities of the auditors (Flight Centre Travel Group Limited, 2018).

The auditors have expressly provided their independence declaration to the Flight Centre Travel Group Limited’s management. It clearly states that the auditors have no intention and have tried not to contravene the regulations laid on them by the Corporations Act 2001 and the applicable codes of professional conduct as far as their independence is considered. This declaration is given in their utmost belief and knowledge (Tepalagul, and Lin, 2015). The auditor’s key functions have reflected the key compliance program which has been given in the audit report of company. It is analyzed that audit committee appointed in Flight Centre Travel Group Limited is done to evaluate and analysis the true and fair view of the assets and libiliteis recorded in the books of accounts (Worth, 2009).

Further, it is mentioned explicitly in the annual report that the Flight Centre Travel Group Limited has tried to exploit fully the potential that the auditors have. This is done by getting professional aid from the auditors on certain non-audit matters also. For the concern of auditor independence, it is believed to the satisfaction of the audit and risk committee that the provision of such services had not left any impact on the independence of the auditor (Wu, Hsu, and Haslam, 2016). The tax compliance program and audit functions are undertaken to analysis how well auditors have performed to explicit the fairness of the recorded details. The non-audit services are provided in compliance with the principles that the APES 110 Code of Ethics for Professional Accountants have set in relation to auditor’s independence. However, the list of non-audit services provided is set out below (O’Donnell, Arnold, and Sutton, 2010).

• Tax compliance, and
• Other services (Bell, Causholli, and Knechel, 2015).

Remuneration of Auditor

Nature of the non-audit services

These non-audit services provide by the auditors are of revenue nature. 

The remuneration that has been paid to the auditor comprises for the payments made to the lead auditor that audited the consolidated entity, its related practices and the other audit firms that are not related to the lead auditor (Choong, and Leung, 2015). The remuneration includes the payments that the auditors have received, or shall receive for the audit services and the non-audit services to Flight Centre Travel Group Limited (Yew Wong, 2015).

The company has formulated and audit and risk committee. All the members of the committee are non-executive members of the management. The Flight Centre Travel Group Limited has formulated an audit committee charter which shows that all the audit committee and charters are engaged in analysing the risk involved in the financial statements (Yew Wong, 2015). These all audit committee work as audit charter and analysis whether company has made default in complying with the applicable accounting standards and laws. It will assist in mitigating the chances of the insider trading and also allow company to keep its business more sustainable (Vangelisti, 2016). 

The structure of the audit is determined on the basis of the non-executive and executive auditors in organization. The members of audit committee consist of Gary Smith, who is non-executive chairman; John Eales, Robert Baker, and Colette Garnsey, who are the non-executive directors of Flight Centre Travel Group Limited. These all auditors are engaged in analysing the annual report and how well company has set up proper harmonization between the international and domestic accounting standards (Stueart, Robert 2008).

• To review and provide recommendations in order to make the corporate reporting of the entity acceptable by the applicable framework.
• To analysis whether the directors and key managerial persons are providing proper managerial representation letters in its books of accounts.
• To recommend, appoint and remove the independent auditors from the undertaken work and audit program (Bradbury, 2017).
• To analysis the fairness of booked assets and liabilities
• To identify and evaluate the carrying value of the values.
• To review the financial statements of the entity to gather an understanding of whether the requirement of compliance with the true and fair view is reflected in them (He, et. al 2017).
• Reviewing the appropriateness of the various accounting judgements, estimates and policies used by the entity in preparation of the financial statements (He, Pittman, Rui, and Wu, (2017).
• To recommend and decide on the appointment, remuneration, and removal of the external and independent auditor (Flight Centre Travel Group Limited, 2018).
• To manage the internal audit function by deciding the head of the same and assessing his capabilities to lead the internal audit team.
• To look into the efficiency with which the appraisal of the financial statements is being carried out by the external auditor.
• To bring into knowledge of the entity the relevant updates brought in the financial reporting requirements and help in complying with the recent and important changes taken place in the field of it.
• To assess whether the external auditors are complying with the requirement of the independence expected out of them and the ways in which they are dealing with the provision of non-audit services (Novitaningrum, and Amboningtyas, 2017).
• To act as fiduciary person for the stakeholders so that they could give transprent details of the financial statement of company.
• Auditors are also providing non-audit services such as insurance coverage details, computation and analysis of the accounts and assisting accountants to comply with the international and domestic financial reporting standards.

The auditors of the entity have expressed an unmodified opinion or a clean opinion on the financial statements of Flight Centre Travel Group Limited. In their opinion and according to the audit procedures performed by them, the financial statements are made in compliance with the provisions of the Corporations Act 2001. The regulations provided by the Australian Accounting Standards and the Corporations Regulations 2001 are also being followed. There are no visible material misstatements that came to the knowledge of the auditor from the procedures that he has performed. Further, the auditors have stated that they have completely embraced the independence requirement expected out of them throughout the audit. Moreover, they have mentioned in the audit report itself that the ethical requirements laid by the APES 110 Code of Ethics for Professional Accountants have also been complied with. The auditor’s opinion reflects that Flight Centre Travel Group Limited has complied all the applicable rules and made complete disclosure in its financial statement (Flight Centre Travel Group Limited, 2018). It is further analysed that non-qualified audit report given by auditors helps stakeholders to determine that all the information shown by the Flight Centre Travel Group Limited in its financial report reflects eh true and fair view of the assets and liabilities. This audit opinion given by the auditors is very much required for the stakeholders to take their financial investment decision. It will assist in boosting their confidence on the annual report and financial statements shared by the auditors (Flight Centre Travel Group Limited, 2018).

Key audit matters

The key audit matters do not cast any modification on the financial statements of the entity. They are just the areas which concern the auditors as professionals and they wish to further inform the stakeholders regarding the same (Cordo?, and Fülöp, 2015). From the annual report of the entity, the following key audit matters can be identified which helps in analysing the key performance of the auditors and fairness of the financial statement shared by the company.

Impairment Testing Of Goodwill And Other Intangible Assets

This is a key audit matter in the judgement of auditor because of the huge balance of the impairment amount in relation to the total assets. Further lot estimation is also involved in the same

• AUDIT PROCEDURE: The requirements of AASB 136, Impairment of Assets are considered. Valuation specialist is being called to determine the accuracy of the valuation and the cash flow statement is also assessed to determine the level of accuracy with which the forecasts and the assumptions are being made.
  • The audit procedure followed can be brought in the category of the test of control.

Business Acquisitions

The huge number of the business acquisitions and the combinations entered into by the entity has made this a key audit matter (Flight Centre Travel Group Limited, 2018).

• AUDIT PROCEDURE: the audit procedure included the assessment of the procedure that the entity has followed along with the compliance of the applicable accounting standard. The adequacy of valuation is also checked (Flight Centre Travel Group Limited, 2018).
  • This audit procedure can be called as the test of control.
  • The test control has been undertaken to determine the fair value of the recorded assets and liabilities in the books of accounts.
  • The impairment test is also assessed by the auditors to help accountant to determine the true and fair view of the assets and liabilities in the books of accounts (Flight Centre Travel Group Limited, 2018).

Recoverabiltiy Of Override Receivable

Certain factors related to this account that are beyond the control of the Flight Centre Travel Group Limited have made it a matter of key concern.

• AUDIT PROCEDURE: This included verification of the receipts in this account, sampling technique to examine certain override contracts, and observation of the calculation methodology of override receivable amounts.
  • These audit procedures fall under the purview of test of control and substantive test of details. However, impairment test and assertion test have been implemented by organization to determine the carrying value of its recorded assets in the books of accounts.

The preparation of the financial statements and following the requirements of the corporation’s act 2001 and the accounting standards in such preparation is the duty of the directors. Further they are the responsible party for assessing the ability of the consolidated group as a going concern (Shaukat, Qiu, and Trojanowski , 2016). The director’s responsibilities show the extent to which they will be liable if in case company fails to comply with the applicable laws and accounting standards (Mock, Ragothaman, and Srivastava, 2018).

The auditor’s responsibility is limited to do an appraisal of the financials prepared by the entity and the internal controls existing in the entity to provide a reasonable assurance on the same. The assurance relates to the presentation of financials in accordance with the applicable standards and regulations. Nonetheless, if in case they will to identify the discrepancies and issues in the financial statement shared with them then they will be held liable for the same. Until and unless, auditors are given management representation letter with then only they will have to analysis financial details by documenting and doing the personal visit with the company. It will assists in confirming the right value of the recorded assets and liabilities in the books of accounts of company.  it includes any kind of non-audit services if provided by auditors to the entity, the formation of any audit committee along with the audit charter, the kind of opinion that the auditor have expressed, and the key audit matters highlighted by him in the audit report (Flight Centre Travel Group Limited, 2018).

Analysis of Auditor’s Opinion

The material subsequent events include the dividend declaration and the acquisitions made subsequent to year end. They have been treated as per the regulations and comply well with the requirements (Knechel, and Salterio, 2016). It has also increased the transparency of the details recorded in the books of account of Flight Centre Travel Group Limited.  The main material details reflects how well company has complied with the applicable rules and accounting standards while formulating the financial statements (Flight Centre Travel Group Limited, 2018).

Conclusion

From the study made of the annual report and its components, the auditor’s appraisal seems perfect. No information seems missing or unrecognised. All the required information is well presented by the auditor in his report. There stand no questions which are required to be asked to the auditor. The crux of this auditor’s independence report is based on the independence of the auditors and their opinion on the annual report given by Flight Centre Travel Group Limited. Company has kept transparency in its financial statement and reflected true and fair view of the assets. It is considered that satisfaction of the audit and risk committee that the provision of such services had not left any impact on the independence of the auditor and shown better auditing compliance in organization. it is stated that auditors needs to undertake their responsibilities in effective manner to increase he overall outcomes and efficiency by complying with the audit program.

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Flight Centre Travel Group Limited, 2018 retrieved, Available at https://www.fctgl.com/investors/annual-reports/., Accessed on 12^th June 2018