Report on Auditing Issues of West Point Group of Industries
Table of Contents
1. Executive Summary
2. Introduction
3. Discussion
4. Audit Issues in the audit of West Point by KPMG
i. Failure to Obtain Audit Evidence
ii. Failure to give appropriate audit opinions:
iii. Inadequate Fund Raising
iv. Failure to identify solvency of the Company
v. Failure to follow directions of Corporate Authority
vi. Expectation Gap
5. ASIC Action against KPMG & West Point
6. Conclusion
7. References
Executive Summary:
West point group of companies was an Australian based company which was carrying on
Property development business throughout Australia. For extending its business, West point
Secured loans from many banks but it topped up those secured loans with risky, unsecured
mezzanine financing that it received from rich financial planners in a result of which it
collapsed in January,2006.
Failure to give appropriate audit opinions as in the later investigation conducted by ASIC, West point found guilty of breaching a number of accounting standards and policies regarding proper disclosures before investing the money and then paying interests out of capital investments rather than out of profit, KPMG auditors failed to qualify audit opinions on the basis of breaches of Australian accounting standards. Three partners of KPMG namely Brett Charles Fullarton, Robert Charles Kelly and Jonathan Grant Robinson were involved in conducting auditing of West point group of companies who were banned by Corporate watch dog ASIC. Failure to identify solvency of the Company , ASIC took action against KPMG for conducting negligent audit of west point and failing to identify issues related to the solvency st...
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...vil court are also launched under section 50 of the ASIC Act for compensation of the loss caused by soft auditing done by KPMG.ASIC has already separately commenced actions against directors and officers of the West point Group as well as a trustee and several financial services licensees.
CONCLUSION
West Point group of companies was one of the biggest giants of Australia, dealing with property and real estate business which became insolvent and went into liquidation because of many reasons, one of which was soft auditing of a big auditing firm KPMG. ASIC took action against some auditors of KPMG and recovered a huge amount from them as compensation for the damages caused by their conduct.
REFERENCES :
www.asic.gov.au
www.kpmg.com.au
The Business Journal , 2011, Andrew Burrell.
Audit Negligence, Publication No 11-04 , KordaMentha
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