Task A

Part A (1)

Computation and Analysis of Financial Ratios

The analysis considers the operations of Transurban Group which is a The company in question is a publicly traded entity that will be evaluated for the audit engagement process. For the purpose of effective planning of the audit program, substantive procedures are applied where some of the key financial ratios are computed in the table below:

The table above shows some of the key ratios which can be used for identifying some of the probable risks associated with the business. The current ratio for the business is shown to be more in 2023 than 2022 which is a clear sign that the liquidity situation for the business has improved. The quick ratio for the business is also same as the current ratio as the business dodes not have any inventory (Transurban.com 2023).

The operating cash ratio for the business is shown to be 0.45 in 2023 and this has improved from 2022 estimate, clearly showing a boost in the liquidity position of the business.  The table further computes return on shareholders’ equity which is shown to be 0.69% which is considerably low for the biasness. One of the reasons for such a low estimate is the lower amount of profits which the business generates (Appelbaum, Kogan and Vasarhelyi 2018). The debt to equity ratio also shows a rise in the estimate which suggests that the management has taken additional debts during the period which has altered their capital structure. 
  
 The aspects which the auditor should consider during the planning stage is the fall of profitability estimates and the accurate presentation of the assets for the company. The auditor should formulate plans to review the expenses of the business so that overall accuracy can be established in the auditing process (Louwers, Blay and Sinason 2018).

Part A (2)

Identification of Risks for Transurban Group

The business of Transurban Group operates tool roads from which majority of its revenue is generated and the main risk in such case is the recognition for revenue. The recording for revenue is dependent on tolling equipment and IT systems which are quite complex and the billing criteria is quite different for different vehicles. As there is large number of transactions and revenue itself is a material item, there is the risk that the item might not be recorded in an appropriate manner.

The business further faces legal risks as well when it comes to contractual agreements with different parties especially concession grantor. The business develops toll facilities on roads which can be termed as concessional assets as these provide possibilities of future economic benefits for the business. For utilizing such concessional assets, the business often has to enter into contractual agreement with concession grantor (local transport authority). These contracts have direct impact on the financial statements and are often subjected to legal processes considering amendments in contracts often take place.
    
The analysis of the financial statements for the company shows that the revenue of the business has increased from 2022 estimate and this is due to the operational capabilities of the management. However, the business faces risks in terms of operations as there is high dependence on key suppliers, third parties and even employees at key positions.

The analysis shows that such risks can have a direct impact on the revenue which is generated by the management and also on the assets which is maintained by the company (Messier Jr, Glover and Prawitt 2017). In addition to this, there are climate related risks as well which falls under the category of business risks.

The climate changes have a direct impact on the transport operations and the roads and thereby having an effect on the organization. From the financial statements, it is clear that the debt proportion for the business has increased in the capital structure and this can add additional risks to the company considering high leverage rate. 

Part A (3)

 Some of the main risks which can have an impact on the audit engagements and in general on the financial statements are appropriately listed below:

Conclusion

The analysis which is undertaken above appropriately shows some of the main risks associated with the business of Transurban and which can have implications on the audit procedures. Some of the main risks identified are specific to the operations of Transurban such as climate risk, complexity of IT systems install in Toll facilities, concession assets and others. The audit partner needs to take all these aspects into consideration while formulating the audit plan for the business so that appropriate audit evidence can be accumulated.

Task B

Part B (1)

The disclosures which are required to be made on sustainability issues and climate changes are becoming important on a day by day basis. A consultation paper (CFD) which was introduced by the Government highlights the role of the assurance industry in ensuring that the disclosures incorporated by business are accurate so that accountability can be maintained.

Further an exposure drafts have been formulated which states the role of the financial auditors when it comes to management of sustainability criteria’s in business operations. For the business of Transurban Group, the business maintains a sustainability data pack where information regarding sustainability topics for the business is maintained (Farooq and De Villiers 2017).  For identification of some of the challenges which auditors face for providing assurance for such sustainability topics, explanations are provided below:

Energy Consumption: 

The main challenge for the auditor is to identify the source documents from records can be verified regarding the consumption of energy from different sources.  The information which is integrated in the financial reports might not be portrayed in an appropriate metrics and this issues a challenge for the auditors to verify the information and deem the same to be appropriate or not. As per ISSA 5000 Exposure draft, assurance professionals should look to use data available on energy consumption by using analytical procedures so that trends can be established and comparison can be made with previous period information (Peters and Romi 2015).

However, if such information are not portrayed in appropriate metrics like Kwh than it would be difficult for the auditor to measure the reliability of the disclosure incorporated in the financial report. Further there is an issue with the sampling method which can be used and in most cases, random sampling methods are applied so that appropriate evidences can be accumulated so that effectiveness of the reporting can be established.
 
The sustainability data pack for Transurban show that the management has disclosed energy consumption in total and also by assets and further specified the activities for which the energy requirement arises. The data is available in appropriate metrics which suggests that these are measurable and comparable with previous period information (Reporting suite 2023). In an overall basis, it can be established that the information which is available can help in assurance and ensure that accountability is maintained.

Waste and Recycling:

For the purpose of identifying the waste and recycling efforts of a business, the auditor needs to check the disclosures which are incorporated in the financial reports. The auditor further needs to establish the materiality of the information considering the impact which it has on the environment. The guidelines of ISSA 5000 appropriately shows that the consideration of materiality is an important criteria as there are hazardous wastes which have more impact on the environment and thereby disclosure of such wastes are more material.  

The main challenge for the auditor would be face is identifying whether relevant information is portrayed by the management of the company and verifying the information from any source document maintained (Cohen and Simnett 2015). In most of the scenarios, the auditor in case of waste generation would not be able to verify the information and thereby there would be a difficulty in establishing what evidences can be accumulated. The sampling technique which the auditor would be applying is random sampling for identifying what information can be considered for establishing the effectiveness of the reporting process for the information.
    
The sustainability data pack for the Transurban appropriately show that wastes generation is categorized into three main groups and such wastes are generated from landfills. The waste which is generated by the business are measured in tonnes and categorized in terms of different activities. In a manner, it can be said that information related to sustainability data are appropriate and relevant for the business. Therefore, it can be said that the information covered can be verified by the auditors and effectiveness of the information can be established.

Water Reporting: 

 The reporting for water consumption are information which the auditor should verify by applying substantive procedures and checking the internal controls of the business. As per ISSA 5000, the internal control of the business needs to be strong before the auditor can place any reliance provided from internal sources. The auditor can take assistance from experts so that data can be verified and accuracy of the information can be established. The auditor should verify whether the water is potable, recycled and even establish the consumption of water by the business. The sampling technique which the auditor would be applying is random sampling where information would be assessed on a random basis so that accuracy of the information can be established.

The sustainability data pack for Transurban shows that the management has appropriately classified the information regarding the water usage, the water which is potable and which has been recycled for further use. The data pack further provides information regarding the ground water consumption level for the business. In terms of data presentation, the management has provided all relevant information for the business and this ensures that reliance can be maintained on the information as the internal controls for the business is also strong.

Conclusion

 The analysis which is portrayed above appropriately shows the disclosure requirements for businesses when it comes to sustainability and climate related disclosures. The analysis follows the consultation paper issued by Treasury and also exposure draft of ISSA 5000 to determine the responsibilities of assurance professionals when it comes to such data.

The analysis shows some of the key consideration which the auditor should identify during the course of audit so that reasonable assurance can be provide to the sustainability information as well that these are accurate. For the business of Transurban, it can be said that the management has incorporated detailed information regarding different activities for ensuring accountability is maintained.
 

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References

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Farooq, M.B. and De Villiers, C., 2017. The market for sustainability assurance services: A comprehensive literature review and future avenues for research. Pacific Accounting Review, 29(1), pp.79-106.
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Reporting suite (2023) Transurban Group. Available at: https://www.transurban.com/investor-centre/reporting-suite (Accessed: 31 October 2023).
Transurban.com (2023). Available at: https://www.transurban.com/content/dam/investor-centre/04/2023-Corporate-Report.pdf (Accessed: 31 October 2023).