AUDIT REPORT 1

Audit report of Adverse opinion

Name of Student

Name of University

Submission Date
AUDIT REPORT 2

Audit report of Adverse opinion

Basis for Adverse opinion

The Ten Network Holdings operates and owns the national broadcast television
network in Australia, named TEN. The firms have 5 owned commercial stations along
with regional affiliates, thereby offering a combination of sports programs (Neighbors,
MasterChef, Celebrity, and Australian Idol), news, and entertainment programs
(Lorenzo-Dus, & Conejos-Blitvich Pilar Garcés, 2013). The inception of TEN’s in the
telecommunication corporate world is quite prominent. After analyzing the financial
statements of Ten Network Holdings, an adverse opinion can be concluded for the
firm’s due to presence of material misstatements.

In an adverse opinion, we are telling the shareholders that we don’t agree with
the way the Board prepared the Financial Statements and we will explain what they did
and give a quantum. The explanation might reveal serious crime or a huge quantum
that might not be expected if all the auditor does is shrug their shoulders with a
disclaimer. In those isolated cases, an adverse opinion might be “worse” for the Board.
It’s still good news for the shareholders though as they find out exactly what they are
dealing with.

To add on, the underlying paper will present a detailed risk assessment of the
Ten Network Holdings on the basis of control risk, inherent risk, and business risk. Audit
risk is the possibility that auditor issue inappropriate opinion that is he say financial
statements does not contain material misstatement when actually they do. Audit risk is
made by three types of risk which are inherent risk, control risk and detection risk.
Inherent risk is risk that financial statements are misstated before internal control are
put in place. Inherent risk is caused by nature of balance or transaction or the nature of
entity’s business. For example, inventories have higher risk of being overstated. Control
risk is the risk of internal control failing to detect, prevent and correct material
misstatement in the financial statements. Inherent risk and control risk are managed by
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management, therefore auditor can not control them, instead he will just evaluate them
(Fink, 2019).

It is further disclosed in the Notes to financial statements that Ten Network

Holdings completed its recent acquisition in November 2019. Before this acquisition an
assessment report was submitted to the board by an independent legal firm narrating
systematic override/lapses of internal controls. These investigations impact the numbers
as shown in the firm’s financial statements.

Emphasis of Matter

Every organization has to maintain books of accounts which are prepared based
on some assumptions. Now, going concern is one of those assumptions. It means that
in the foreseeable near future the organization has no plans to liquidate or shut its
business down and will continue the business. This has to be analyzed by the auditor
and he has to mention in his report whether he thinks the organization will liquidate itself
in the future or not (Gay, & Simnett, 2018). Even if he sees any kind of risk which will
bankrupt the company he has to disclose. To understand the above statement, we need
to understand two concepts:

 Going concern assumption- It is the basic assumption with which an entity

prepares its financial statements. It simply means that the management expects
that the entity will continue to be in the business for the foreseeable future and
that they don’t anticipate a closure of business or any such adverse happenings
in the foreseeable future.
 It is the responsibility of the management to prepare the financial statements of
the entity. Auditors are supposed to express an opinion on the truth and fairness
of such statements as on the reporting date

Financial statements are prepared in accordance with certain standards as

designated based on the jurisdiction of the entity. As per the Australian Auditing
Standards, the management is supposed to disclose whether the financial statements
have been prepared under the assumption of going concern or not. The term
“foreseeable future” is considered to the immediately succeeding 12 months. Now, there
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are three possible scenarios that might present the auditors with a dilemma as to the
kind of report that they need to issue.

 Where the entity is not a going concern as far as the auditor is concerned, but
the management doesn’t agree to restate the figures on realization basis nor
disclose this- Issue an adverse or a disclaimer opinion based on the facts.
 Where the entity is not a going concern but the management is in the process of
negotiations and mitigation activities- Draw attention to this fact by way of an
Emphasis of matter paragraph and then issue a clean report.
 Where the entity is not a going concern and the management agrees to that fact
and discloses it in the financials along with realization basis numbers- If this is
the case, issue a clean report.

After analyzing the financial statements of Ten Network Holdings it can be

concluded that there is doubt about the firm’s capability of continuing as a going
concern:

 The asset standing denotes that there is disposal of underlying assets that is not
carried out inside the business’ ordinary course.
 Restructuring debt without giving additional information in notes to financial
statements.

Audit report of Adverse opinion

Responsibilities of Directors for the Financial report

In a firm, the directors typically review the financial reports provided by company
management and prepared by the company and its accountants, in connection with
each regular board meeting. They ask questions, provide feedback and guidance, and if
necessary direct the company CEO to take action, based on their review. They are
expected to probe further if the financials appear inaccurate or incomplete, or reveal
undisclosed problems, but are generally not held accountable for these errors or
problems as long as they have made a good faith, attentive effort and exerted
reasonable judgment. Other accounting and finance related board activities include
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approving budgets and officer salaries, and approving major new loans, financings,
capital expenditures, and other large money items.

Auditor’s responsibilities for the Audit of Financial report

There are two kind of auditors: External Auditors and Internal Auditors. The job of
the external auditor is to issue an opinion on the accuracy of financial statements of an
organization (Statement of financial position, Statement of comprehensive income and
Statement of cash flows) to enhance the degree of trust of the users of that financial
statements. Now how to form an opinion on the accuracy of financial statements. For
that purpose, auditors perform different task, they gather sufficient appropriate evidence
to support their opinion. Most of their work comprises of planning and then
implementing procedures to find those evidence to support their opinion. External
auditors are not employees of the organization they are auditing. On the other hand, the
internal Auditors focus on the optimization of organization’s resources, ensure effective,
efficient and economic operation of affairs and smooth flow of standard operating
procedures. Internal auditors are employees of the organization they are auditing.

Our targets are to get sensible affirmation about whether the financial statements
of the Group and of the Company all in all are liberated from material misquote,
regardless of whether because of extortion or blunder, and to give an auditors' report
that incorporates our feeling. Sensible confirmation is a significant level of affirmation,
however isn't an assurance that a review directed as per endorsed guidelines on
inspecting in Australia and International Standards on Auditing will consistently
recognize a material misquote when it exists. Misstatements can emerge from
misrepresentation or blunder and are viewed as material assuming, independently or in
the total, they could sensibly be relied upon to impact the monetary choices of clients
assumed the premise of these financial statements.

As a major aspect of a review as per endorsed measures on inspecting in

Australia and International Standards on Auditing, we practice proficient judgment and
keep up proficient incredulity all through the review. We likewise:
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 Identify and evaluate the dangers of material misquote of the financial statements
of the Group and of the Company, regardless of whether because of
misrepresentation or blunder, structure and perform review methods receptive to
those dangers, and acquire review proof that is adequate and suitable to give a
premise to our sentiment.
 Obtain a comprehension of inside control pertinent to the review so as to
configuration review methodology that are proper in the conditions, however not
to communicate a supposition on the viability of the interior control of the Group
and of the Company.
 Conclude on the suitability of the Directors' utilization of the going concern
premise of bookkeeping and, in view of the review proof acquired, regardless of
whether a material vulnerability exists identified with occasions or conditions that
may provide reason to feel ambiguous about huge the capacity of the Group or of
the Company to proceed as a going concern.
 Evaluate the general introduction, structure and substance of the financial
statements of the Group and of the Company, including the exposures, and
whether the financial statements of the Group and of the Company speak to the
basic exchanges and occasions in a way that gives a valid and reasonable view.
 Obtain adequate proper review proof in regards to the financial data of the
substances or business exercises inside the Group to communicate a feeling on
the financial statements of the Group. We are answerable for the bearing,
management and execution of the gathering review.

Adverse Auditor’s opinion

After analyzing the financial statements of Ten Network Holdings, an adverse

opinion can be concluded for the firm’s due to presence of material misstatements. We
have audited Ten Network Holdings’ financial statements comprising on the statement
of financial positing on 31st December 2019, along with statements of cash flows of the
Group, the statements of profit or loss, and comprehensive income statement. As per
our knowledge and judgement, the accompanied financial statements do not present a
fair view of the firms’ operations in accordance with Auditing Standards of Australia.
AUDIT REPORT 7

Key Audit Matter (KAM)

 Impairment of investment in a subsidiary

 Impairment of the intangible assets and goodwill

We communicate with the Directors regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit. We also provide the
Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards (Severo, 2012).

From the matters communicated with the Directors, we determine those matters
that were of most significance in the audit of the financial statements of the Group and
of the Company for the current year and are therefore the key audit matters. We
describe these matters in our auditors’ report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our auditors’ report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

Five (5) Auditor’s procedures for KAM

Activities taken after the discoveries by the outer legitimate firm as for the
discoveries by the outside lawful firm, the Subsidiary Board has actualized explicit
improvement ventures to reinforce the procedure and control condition. These
incorporate audit and update of operational and financial power levels, more prominent
oversight by Subsidiary Board, survey and improve financial reporting forms,
increasingly strong secretarial documentation with respect to consistence to
administrative prerequisites and improving frameworks plan and control upgrade. In like
manner, steps have been taken according to upgraded authority levels for
installments/move of assets inside Subsidiary Group, and survey of borrowings over
specific levels by the Subsidiary Board. Subsidiary Group had additionally withdrawn
AUDIT REPORT 8

itself from the previous controlling investors. Subsidiary Board keeps on assessing
different regions to reinforce procedures and manufacture a hearty administration
structure. The Subsidiary Board has started an enquiry of the administration of the
specific elements in the Subsidiary Group that were affected in regard of the issues
explored by the outside lawful firm.

Activities taken after SEBI's interval arranges according to the bearings from
SEBI, Subsidiary Group has likewise found a way to recuperate duty from the previous
controlling investors of Subsidiary and different substances. These incorporate starting
common activities against these substances requesting recuperation of the exceptional
sums along with intrigue and to make sure about reimbursement of the extraordinary
sums on the benefits of these elements. In view of the discoveries of examinations to-
date, all recognized/required modifications/disclosures have been recorded in the
financial statements of Subsidiary Group preceding the Group's securing in November
2019.

Extra activity to deliver the changed sentiment To additionally address the altered
conclusion, Ten Network Holdings Board has started a free scientific review on the
activity of Subsidiary Group. Subsidiary Board will likewise start its own free
criminological review to determine the degree of preoccupation of assets from
Subsidiary Group. Excepting unexpected conditions, the Group anticipates that the
measurable review should be finished before 31 December 2019.

Weakness of the generosity and elusive resources - In perspective on the

financial essentialness of the parity, the inborn vulnerabilities and the degree of
judgment required by us in assessing the Group's presumptions included inside the
income model and reasonable worth less expenses to sell model, disability of altruism
and immaterial resources is a key review matter. The Group directed a hindrance
appraisal on the entirety of its money producing units to recognize if the recoverable
sum is not exactly the conveying sum, demonstrating that the generosity and
impalpable resources might be debilitated.

The Group decided the recoverable measures of CGUs utilizing an incentive

being used model including income projections with a terminal worth or reasonable
AUDIT REPORT 9

worth less expense to sell model. Key suspicions inside these models incorporate
income development, EBITDA edge, long haul development rates, markdown rates and
a proper control premium rate (Mees, & Smith, 2019). During the year, a hindrance
charge of RM66.2million was perceived in the benefit or loss of the Group in regard of
one money creating unit where its recoverable sum is not exactly the Group's conveying
sum. We played out the accompanying review methods, among others:

 We surveyed the fittingness of utilizing an incentive being used or reasonable

worth less expenses to sell models as the reason for deciding the CGUs'
recoverable sums.
 We assessed the Group's income projections by performing review appraisal of
the key presumptions driving the specialty units' income projections, specifically
income development and EBITDA edge, to the most recent inside board
endorsed financial plan and plan, outer market information, the recorded
exactness of the Group's evaluations in the earlier years and our comprehension
of things to come possibilities of the business or ventures.
 We worked with our own valuation pros to challenge the rebate rates, long-term
development rates and control premium rate, and contrasting these suppositions
with financial and industry gauges.
 We played out our own affectability of the hindrance figuring to changes in the
key presumptions utilized by the Group to survey the degree of the progressions
that would be required for the advantages for be impeded.
 We likewise evaluated the sufficiency of key presumptions disclosure in the
Group's financial statements.
 We assessed the suitability of the executives' appraisal on when the Group got
command over Subsidiary by looking at of the terms and states of the offer
membership understanding and other related records according to the
membership of 31.1% value intrigue.
 We played out an autonomous conversation and team up with the Company's
outside attorneys who were associated with the drafting and settling of the offer
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membership understanding, on the footing and states of the offer membership

understanding and related nearby laws and guidelines.
 We have likewise surveyed the ampleness of the disclosures for the order as an
auxiliary and obtaining in the Group's financial statements.
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References

Fink, A. (2019). Conducting research literature reviews: From the internet to paper.

Sage publications. 

Gay, G. E., & Simnett, R. (2018). Auditing & assurance services in Australia. Sydney,
NSW: McGraw-Hill Education (Australia) Pty Ltd. 

Lorenzo-Dus, N., & Conejos-Blitvich Pilar Garcés. (2013). Real talk: reality television

and discourse analysis in action. Basingstoke: Palgrave Macmillan. 

Mees, B ., & Smith, S. A. (2019). Corporate governance reform in Australia: a new

institutional approach. British Journal of Management, 30(1), 75-89. 

Severo, T. (2012). Measuring systemic liquidity risk and the cost of liquidity insurance.