Analysis Of Auditor’s Role In An ASX Listed Company – CSR Limited

Evalution of Auditor’s Assurance Services for CSR Limited

The global business scenario has developed and has become more integrated, inclusive as well as interconnected owing to factors like Globalisation, trade liberalisation and technological and infrastructural developments. With the businesses going global and becoming more complex, it has become immensely important for the same to have proper accounting and financial framework, which gets monitored appropriately and regularly (Kose, Otrok & Prasad, 2012). In this context, the term “Audit” comes into significance and the same can be referred to as the process of analysis and interpretation of the financial activities and statements of the companies for the purpose of ensuring accuracy and appropriateness of the transactions recorded. The auditors, thus, are bestowed with the role of revealing the relevant information related to the materialistic aspects of financial activities and statements of the companies (Arens, Elder & Mark, 2012).

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This is immensely important in the sense that the information is required by the different stakeholders, who are associated with the businesses, for their decision-making purposes. The audit companies pay immense importance to enhancement of the quality of their reports, especially in the contemporary period of upsurge and complexities in business activities, such that the stakeholders are increasingly benefitted (Louwers et al., 2015). Keeping this into consideration, the concerned report aims to evaluate the latest annual report of the concerned company, the CSR Limited, an Australian company venturing in the production of building products, in the aspects of auditing, the audit partner of the company for the year 2018, being Deloitte.

None of the members of the auditing company, Deloitte, were involved in any kind of business related operations of the CSR Limited, as can be observed from the company’s latest annual report (2018). There was also no presence of significant role played by any particular employee in the auditing group, on the auditing actions of the concerned company, which thus, goes in accordance to the “Section 342A of the Corporations Act 2001” (Javed, 2018). The auditing company also complies with the different requirements which are present under the “Section 307C of the Corporations Act 2001”, the primary ones of the requirements being as follows:

  • The applicable codes related to the professional conducts, mentioned in the concerned section of the Corporations Act, have been abided by for the audit related activities and operations of the CSR Limited Company (J. Clout, Chapple & Gandhi, 2013).
  • The requirement of independence of the auditors for the audit related operations in the concerned organizations has also been abided by as there is no presence of contraventions recorded in this aspect.

The auditing company, Deloitte, can also be seen to be providing different non-audit related services to the CSR Limited, as is evident from the 2018 annual report of the concerned business organization. These non-audit services are as follows:

  • Carbon and sustainability related assurance (Bae Choi, Lee & Psaros, 2013)
  • Other advisory and assurance related services

For the former non-audit related service provided by Deloitte, the company has received $77,108 from the CSR Limited and for the second service, Deloitte has received $9,000 from the concerned client company. The amounts, in total, is nearly 10.40% of the total remuneration amount which has been received by Deloitte for auditing the financial aspects of the CSR Limited in the current year (2018). Both the organizations (the CSR Limited as well as Deloitte) can be seen to be complying by the standards in the aspects of receiving as well as providing the above-mentioned non-audit services.

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Independence Declaration Compliance

As the non-audit services have complied to the general standard for the same (which can be seen in the Corporations Act, 2001), the same has satisfied the directors, as per the Risk and Audit Committee’s written report. It has also been ensured by the Directors of the concerned client company, the CSR Limited, that the non-audit services provided by Deloitte, does not include any kind of self-work review of the auditing personnel regarding the aspects of management decision undertaking and similar domains (Junior, Best & Cotter, 2014). The regulatory framework present in the aspects of the corporate governance in the domain of non-audit services have also been strictly followed and abided by the concerned organization. These aspects, cumulatively, has made the role and the independence of the concerned auditor in case of the latest auditing of the CSR Limited, unquestionable (Knechel & Salterio, 2016).

The remuneration received by Deloitte, for providing services to the CSR Limited, in the period 2017-2018, can be seen to be as follows:

Table 1: Deloitte’s remuneration from the CSR Limited (2017-2018)

(Source:, 2018)

The above table highlights both the audit related service payments and the payments for non-audit services, which have been received by Deloitte for its services provided to the CSR Limited. The non-audit services provided by the concerned company, from the above table, can be seen to include the carbon and sustainability related ones as well as the assurance and advisory ones. From the above table, it can be asserted that the payments related to auditing services and reviewing of the financial statements of the CSR Limited has reduced by nearly 5.89% from 2017 than in 2018 (, 2018). This can also be seen to be the case in the payments received by Deloitte, from the CSR Limited, in the aspects of other assurance and advise related services, where the payment decreased by nearly 77.83% from 2017 in 2018. However, the payment received by the concerned auditing company, for the non-audit service, related to sustainability and carbon, can be seen to have increased by 32.94% from 2017 to 2018. Together, cumulatively, these dynamics in the service related payments has resulted in a total decrease of the payments received by Deloitte, by 6.64% from 2017 to 2018 (Goulding, 2013).

The key audit matters, in general, refer to the significant aspects which exist in the domain of auditing and financial activities of an organization and which are thus needed to be taken into consideration (Bédard, Gonthier-Besacier & Schatt, 2014). In this context, two particular key audit matters can be seen to be observed, as per the 2018 annual report of the concerned organization, the CSR Limited, which are discussed as follows:

Non-Audit Services Compliance

a. Valuation of the assets 

The annual report of the CSR Limited, 2018, highlights the presence of the following assets valuation for the concerned company:

  • Goodwill amount – $98.1 million
  • Intangible assets (others) – $45.8 million
  • Plant, equipment and property- $834 million

Considerable clarity in the judgements is required for the purpose of analysing the presence of any kind of impairments in such assets and their balances. For judging the same, the aspects like discount tasks, inflation, growth rates, changes in building cycles as well as the future cash flows estimation need to be incorporated in the judgement (Kachelmeier, Schmidt & Valentine, 2017). For the purpose of detection of any kind of impairment in these cash generating units, the CSR Limited can be seen to have designed an impairment triggering assessment. The Viridian cash generating ones can be seen to be generating very low returns on the capital employed, which in turn indicates towards the fact that further evaluation of impairment is required in these cash generating units (Holm & Zaman, 2012). Thus, due to the presence of the judgement related to the future cash flows in the concerned organization, this can be seen to be considered as one of the key audit matters of the CSR Limited.

The auditing company, Deloitte, can be seen to be considering this key audit matter and for the purpose of dealing with the same, it can be seen to analyse the management process of its client company, with the aim of pointing out those cash generating units in which further impairment assessment is required. In this process, insights about the annual financial performance, consistency in segmental reporting, external market situations as well as goodwill allocation to the cash generating units (especially those requiring further impairment assessment) have been gained by the auditor, who in turn, can be seen to have critically analysed the impairment model and impairment assessment methods and assumptions of the company (Bell & Griffin, 2012). The accuracy and mathematical efficiency of the cash flow models can also be seen to be examined with the help of sample testing, thereby analysing the appropriateness of the aspects of disclosures in the concerned client organization’s financial statements.

b. Provision for product liability 

As per 31st March, 2018, the CSR Limited recognised a $289 million liability provision, related to the disclosed as well as future claim which are foreseeable, linked to asbestos. The advice of management appointed external advisors in the USA and Australia, has been incorporated for ensuring the same. Thus, considerable judgement is required for the purpose of ascertaining the future claim’s profitability in case of the provision and the provision estimate is also influenced significantly by the assumptions related to the discount rate as well as movements of the exchange rates over time. The variance in the complexities of the assumptions, thus, make this aspect one of the key audit matters, taken into consideration by Deloitte (Gimbar, Hansen & Ozlanski, 2015). 

Auditor’s Remuneration Analysis

The independence and the level of expertise and knowledge of the company hired external experts can be seen to be evaluated by the auditing company, Deloitte, which also critically analyses the suitability and appropriateness of the methodology and the assumptions taken into consideration by these external experts. For assessing the consideration and exclusions of the asbestos related claims, the company can also be seen to be using the sample testing method. The provisions, being designed and formulated on the basis of the reports, this becomes extremely significant for the auditing aspects and procedures. Deloitte has also conducted enquiry about both the external experts appointed by the CSR Limited as well as the internal and the external legal counsel for the concerned company. The auditor can also be seen to analyse the level of suitability of those of the pertinent disclosures which are present in the financial statements of the concerned client company.

The Directors of the concerned organization, as per the annual report (2018) of the same, can be seen to have developed the “Risk and Audit Committee”, with the primary aim of the same being that of reviewing the procedures and policy frameworks of the companies in the aspects of imposition of internal controls for the asset and liability protection and ensuring integrity in the aspects of financial reporting of the CSR Limited (Lary & Taylor, 2012). The four non-executive directors of the company, in their Risk and Audit Committee are:

  • John Gillam
  • Penny Winn
  • Matthew Quinn
  • Mike Ihlein

The primary roles of the concerned committee can be seen to be as follows:

  • Analysing the assuring procedures of the integrity in the aspects of financial reporting of the concerned company
  • Analysing and evaluating the audit risk management framework present within the concerned company (Brennan & Kirwan, 2015)
  • Evaluation and assessment of the dynamics related to that of commercial income realisation and any kind of influences working in this aspect in the concerned company

The annual report of the CSR Limited, in 2018, however, does not show any evidence regarding that of the charter of the concerned audit committee.

The report of the independent auditor highlights that the concerned organization has abided by the “Section 300A of the Corporations Act 2001”, for the purpose of formation of the remuneration report. The financial reports and statements of the organization, as per the independent auditor, have also been formed, under the regulatory framework of the “International Accounting Standards Board”, “Australian Accounting Standards Board” and the “International Financial Reporting Standards” (Shah, 2012). The financial conditions and dynamics of the CSR Limited has been accurately represented in its financial reports, as per the assertions of the independent auditor as there is no presence of wrong statements and claims. Thus, unqualified opinions can be seen to be provided by Deloitte, regarding that of the CSR Limited, after analysing their financial aspects and after conducting fieldwork in their effectiveness testing (Mock et al., 2012).

Evaluation of Key Audit Matters

There exist different variations in the roles and responsibilities of the directors, management and the auditors, in the aspects of development of the financial reports for the concerned organization, the CSR Limited, as is evident from the latest annual report of the concerned company. One of the primary responsibilities of the directors of the concerned company is that of analysing the organization’s capacity to continue as a growing concern (Nobes, 2014). Moreover, the management and the directors of the company also need to formulate the financial statements and reports of the CSR Limited, in compliance to the regulations and the accounting standards which prevail in the country (Australia) where the company ventures.

The auditors, however, have different responsibilities, in the sense that it is their role to effectively assure whether the financial reports formed by the concerned company, are devoid of erroneous statements or not. Apart from this main role, the auditors, in this case, also have several other responsibilities like that of detection of risks which arise from misstatements of the company, examining the appropriateness of the accounting policies, analysing the internal control, evaluating the accounting basis used by the company’s  directors, collecting relevant audit evidences and also examining the representation of the financial reports and statements as formed by the concerned client organization, the CSR Limited.

Two material subsequent events can be seen to be contained in the 2018 annual report of the CSR Limited:

  • Sale of the Horsley Park surplus land-The company announced this on 3rd April, 2018. The selling terms indicate the need for recognition of $30 million income before tax by the CSR Limited, in the income statement of the company for period before 30th March, 2019 and the settlement is due in April, 2019.
  • Declaration of dividend-Franked dividend of 13.5 cents/share has been announced by the CSR Limited, which contributes to $68.1 million dividend and 3rd July, 2018 has been the date of payment of the dividend, which is yet to be given by the concerned company.

The auditing company, Deloitte, has effectively and unbiasedly analysed the material information of their client company, the CSR Limited, as per the assertions of the third-party stakeholders of the company. The actions of the auditors can be seen to be adhered to the regulatory requirements of the APES 110, the Corporations Act, 2001 as well as the auditing standards present in Australia (Carson et al., 2012). The auditing company can also be seen to disclose the key audit matters in the CSR Limited, along with the necessary steps for dealing with the concerned issues, which in turn indicates towards high effectiveness and efficiency of Deloitte in the aspects of auditing the financial activities, reports and statements of the CSR Limited.

As can be seen from the 2018 annual report of the CSR Limited and the operations of Deloitte, all the material aspects and other relevant information of the company, especially those which if unaddressed, could have led to misstatements, have been taken into consideration by Deloitte and considerable explanation as well as disclosure of the required information have also been given by the concerned auditing company, regarding the financial aspects of the CSR Limited. This in turn indicates that there is no such missing aspects or omission or partial reporting of any information on part of the concerned company.

Role, Functions and Composition of the Audit Committee

For Deloitte, the company auditing the financial aspects of the CSR Limited, the follow-up questions which can be asked in the general meeting held annually, are as follows:

  • What are the planned auditing scopes?
  • Has any kind of discussion related to accounting or auditing aspects taken place between you and the management of the company prior to your retention?
  • Does the company have any external auditor you are aware of?
  • How effective is your auditing scopes in the aspects of error identification, fraud detection, analysis of internal control and illicit acts?
  • What risk assessment techniques are used by you?
  • Are there any concerning or alarming issues present with the management of the concerned company regarding the control of its business processes?
  • Is there any visible complexity in the aspects of auditing which you think should be taken into consideration?


From the above discussion, it is evident that Deloitte, the auditing company for the CSR Limited, in 2018, has adhered to the regulatory frameworks and auditing standards which are present in Australia, while carrying out their audit and non-audit related services for the CSR Limited. The company has also complied to the highest level of ethical standards while providing the non-audit services to the CSR Limited. The overall remuneration of the auditing company can be seen to have declined by 6.64% from 2017 in 2018. The auditing company of the CSR Limited can also be seem to have reported and disclosed the relevant information fully as can be seen in accordance with the 2018 annual report of the company and there is no such evidence of presence of missing or partially reported or disclosed information, which makes the overall auditing and disclosing activities of Deloitte highly standardised and considerably trustworthy.


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