Professional Auditing

Please find some guidelines below to assist with your completion of Task 2b … remember to read & take advantage of the detailed instructions.

Make sure you add the name of your chosen entity at the top of the template AND in the subject line of your DF post.


NAME of your Entity >>> Be sure to add your chosen entity name here please!
FACTOR According to ASA200.13 (n)(i) inherent risk (IR) is a measure of the susceptibility of material misstatement before considering any internal controls. LOW MODERATE HIGH
Nature of client’s business Heartland group is a financial services group. This company has a work in New Zealand and Australia. This is a registered bank which is concentrated on best value of banking products. This includes investment products, lending of consumers, reverse mortgage and lending of motor vehicles. The strategy of heartland includes digital distribution channels. This has an interest in launching of two new API standards which will lead to open banking. Company provides new digital platform to customers which helps customers to provide efficient and user friendly online banking system. Customers can use online calculations and automated application based on lending. Company provides facility of EFTPOS. This allows customers to shop online by participating as retailers without having need of debit card.  This works in three markets which involves households, business and rural. Household includes investment of products, lending of consumers, reverse mortgage. Business involves working capital, finances related to equipment. Rural involves loans livestock finances etc. heartland’s primary objective is to include acquisition and development of producing properties. Corporate strategy of company is to take benefits of properties that are already matured like who are already focused on new high risk, and drilling opportunities.


Results of previous audits As per the audit report of previous year company has an increment in profit of 9.0%. Gross financial receivable are $4.4 billion which is up to 10.5%. This excludes Impacts of changes in foreign currency.  Final dividend is 6.5% per share. Return on equity is 11.1% which is unchanged this year also. Earnings per share are 13.0. Net interest margin is 4.33%. Operating income is $205.8 million. This was impacted by portion changes in receivables. There is a strongest growth in reverse mortgage which has lower non-operating income. Reverse mortgage of Australia, net operating income is $20.9 million which has an increment of $2.4 million. Company is expecting growth of asset from core lending of activities. Investment is made to build awareness for reverse mortgage. Digital strategy of heartland has two main objectives. which are as follows:

·                Company is focused on products available to customers online through app etc.

·                Company needs to achieve low cost by target market through online app or Smartphone and automated process.

Heartland is actively working on a long term mortgage which is a structure for securitisation structure.

Initial versus repeat audits Company is not expecting any material change in respect of classification and measurement of financial assets. here are some highlights of year 2018 for the company are as follows:

·                Net profit of company is $67.5 million after tax.

·                Net finances receivable $4.0 billion.

·                Return on equity is 11.1%.

·                cost of income ratio is 40.9%

·                Final dividend is 5.5.

Highlights of year 2019 for the company are as follows;

·                Net profit after tax is $73.6 million.

·                Final dividend is 6.5%.

·                Finances receivables are $4.4 billion.

·                Return on equity is 11.1%.

·                Cost of income ratio is 39.9%.

Here are some code of conduct which are followed by heartland group:

·                Honest and ethical conduct which includes handling of actual conflicts.

·                Full, fair, timely disclosure of reports and files of company and submit these files to security and exchange commission.

·                Compliance of all applicable laws of government.

·                Prompt reporting of internal violations.

Company also follows confidentiality, customer relationship, conflicts of interest, compliances of interest etc. company is changing its policies to be more effective. Company is following all possible codes of ethics which are necessary to be followed.


Quantity of non-routine transactions Non-routine transaction are such transaction which includes acquisition, disposal, cancellation of plans, changes in principals of accounting, restructuring plant which are infrequent or unusual as per the business (Debreceny &Gray, 2010). Here are some non-routine works of company:

·                Repairs of departmental equipment are for example: appliances, furniture etc.

·                Events which are not identifies by physical plant policy. This includes ground and custodial supports.

·                Resetting of clocks and changing of time of clocks at the workplace.

·                Alteration or modify special projects and facilities.

·                Relocations of furniture and equipment’s.

·                Non following of any other laws to prepare documents of company.

·                Rebuild of accounts to complete incomplete records.

·                To prepare year accounts to file deadlines of audits.

These are some non-routine transactions that are done by companies. Companies should not involve any non-routine transaction. This can lead to loss of reputation. Company should control over such non routine transaction. To control company can make some policies related to this.


Quantity of estimates and judgement required for accounts ·                Supplying for impairment: In these whole judgement company said that their credit risk. Here whole information which is given by company is based on their estimates and judgement. This is based on future cash repayment and begins from any security which is organized by historical loss data.

·                Fair value of reverse debt: This fair value is measured by doing transactions prices managements which are based on their company’s estimates and risk profile of their debt portfolio.

Reverse debt are very innovative method which this company used for their transactions.

·                Goodwill: In this company they will regulate all fair value of assets and their liabilities of obtain business requires and this will also include exercise of management judgement (Ghosh, 2016). Judgements and approximate of this company transaction in Goodwill are also shown on their Balance Sheet.


They said that their approximate and transactions are based on dates. This company also have some internal control on their financial statements to measure their transactions on an appropriate manner.

This Organization has based on their historical experienced, and their      use this experience on their work of financial and accounting related to this company.


Potential for fraudulent financial reporting & misappropriation of assets (fraud risk factors, see ASA 240) ·                Market Risk: Organizations are all covered with fraud risk in their work, or say without risk no work or projects will be done in companies (Mehta, et. al., 2012). Market risks are very familiar for employees and staffs, because they also face fraud risks on their daily work. Share markets income ups and down and demands of their products sometimes may rise or sometimes fall.

·                Liquidity risk:  Companies funding are sometimes very big problem for them, as they will not able to collect that much fund for starts their new projects. Donations are very likely preferred in companies for funding’s and they will then get to start their new projects and brands which are very costly.

·                Foreign exchange rate risk: When companies did their partnerships with foreign companies then they spend their assets on foreign companies. Sometimes companies face fraud risk while doing business with foreign brands, because of their brands and products (Takatoshi, et. al., 2013).

Capital Management: In management frauds are done between them, because in managements capitals are very important for them to grow their business. Frauds are done and this will also include risks in management, due to some bad peoples who will want only their profits in Organizations.

List any other factors (can you see any illustrations in your client’s annual report of the examples in ASA 315, Appendix 2 and ASA 570.A2 A3?)(updated for 2016 version of the ASA) In this Organization they will show their financial statements, which are prepared by their ongoing concern, and based on after bearing on mind their Group’s funding and liquidity position. Reports which are made by Organization, shows managements concerned, RMP in circumstances of Risk Appetite Statement to make sure Board of their programme’s productiveness.


These concerns are also for economic changes, which are occurred in managements. New brands impacts which are done and make their positions in market, sometimes not being that effective and loss their reputations in market. These factors have some similar risks and to monitor them, Board of Directors are taking some innovative steps and finding opportunities to solve that issue.

Sometimes they will show concern for some serious factors which are appeared on management and this also includes revealing, as relevant, and account related issues.

Organizations also have big concerned for their employees and staffs, because this are their first priorities and they should take special care for their employees. Organizations always make reports in which they will includes all information’s of their managements and employees works efficiency are also included on them.


Conclusion:  Overall inherent risk level Heartland is a company of New Zealand and Australia, and this company is very popular for their brands and demands of their products in markets. In this company we will discussed about their transactions, audits, risks, frauds and other things which are effect on company’s assets. Heartland company who provide best service to their employees and take best care of them.


All information’s and reports are made with including their transaction and employees works efficiency on their workplace. This company organizing many programmes for their employees to make them educated and to make them learn new methods to deal with new projects with an innovative way. Audits and funds are measured in very appropriate manner, so they will get to know what exactly they will show in their reports.

Frauds and risks which they have to face in their daily work and how they will get to solve their problems by using their innovative minds. While doing their business with so many peoples, they faced some fraud peoples who cheated them by taking their ideas and implement on their projects. Heartland will provide best service for their employees and good environment for their employee’s workplace.





  • Debreceny, R. S., & Gray, G. L. (2010). Data mining journal entries for fraud detection: An exploratory study. International Journal of Accounting Information Systems11(3), 157-181.
  • Ghosh, A. A., Xing, C., & Wang, J. (2016). Audit quality of complex accounting estimates: evidence from audit tests of goodwill and special charges.
  • Mehta, A., Neukirchen, M., Pfetsch, S., & Poppensieker, T. (2012). Managing market risk: Today and tomorrow. McKinsey & Company McKinsey Working Papers on Risk32, 24.
  • Takatoshi, I. T. O., Satoshi, K. O. I. B. U. C. H. I., Kiyotaka, S. A. T. O., & Junko, S. H. I. M. I. Z. U. (2013). Exchange rate exposure and exchange rate risk management: The case of Japanese exporting firms(No. 13025).