You a member of the audit team at Miller Yates Howarth (MYH), anaccounting firm with offices throughout the major regional centresof NSW and Queensland. Although a medium sized firm by nationalstandards, MYH is the second largest regional accounting firm inAustralia. Most of MYH’s audit clients are in the agriculture,mining, manufacturing and property industries. All those industriesare currently under pressure, either from a downturn in commodityprices or fierce competition from overseas competitors. MYH havenow been appointed auditors of a community bank. Two auditdirectors have previous experience auditing in the banking sectorand need to raise the awareness of staff with respect to thegovernance issues that have recently impacted the bankingsector.

Question 1 (7%)

Required:

You have been asked to:

read audit standard ASA315 focusing on audit responsibility withrespect to client governance,

read the web page on the ASIC report on the Commonwealth bankwhich 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 reviewthe governance of an audit client, and

Includes a table for use in the audit which explains the impactof each of the ASIC identified Commonwealth Bank governance issueson audit risk. The table should further explain why each of theASIC recommendations would reduce audit risk. The template belowshould be used.

Issue	Impact on raising audit risk	Recommendation	Reduction in audit risk because of therecommendation