Question

You a member of the audit team at Miller Yates Howarth (MYH), an accounting firm with offices throughout the major regional centres of NSW and Queensland. Although a medium sized firm by national standards, MYH is the second largest regional accounting firm in Australia. Most of MYH’s audit clients are in the agriculture, mining, manufacturing and property industries. All those industries are currently under pressure, either from a downturn in commodity prices or fierce competition from overseas competitors. MYH have now been appointed auditors of a community bank. Two audit directors have previous experience auditing in the banking sector and need to raise the awareness of staff with respect to the governance issues that have recently impacted the banking sector.

Question 1 (7%)

Required:

You have been asked to:

read audit standard ASA315 focusing on audit responsibility with respect to client governance,

read the web page on the ASIC report on the Commonwealth bank which details the governance issues raised by ASIC (http://www.apra.gov.au/MediaReleases/Pages/18_17.aspx), and

prepare a report that:

summarises and justifies the auditor’s responsibility to review the governance of an audit client, and

Includes a table for use in the audit which explains the impact of each of the ASIC identified Commonwealth Bank governance issues on audit risk. The table should further explain why each of the ASIC recommendations would reduce audit risk. The template below should be used.

Issue	Impact on raising audit risk	Recommendation	Reduction in audit risk because of the recommendation

Answer 1

1.