JOHNSON & WANG CHARTERED ACCOUNTANTS

Vincent Wang is a Chartered Accountant (CA) and Audit Engagement Partner at a Brisbane Chartered Accounting - Johnson & Wang Chartered Accountants (JWCA).The firm was established five years ago by Vincent Wang and Peter Johnson and is a small-medium firm currently offering audit and non-audit services in Brisbane.The firm has experienced growth in its audit services over the last five years.JWCA has formed some solid professional relationships with many businesses especially in the construction industry and is working hard to increase its services to listed companies each year. The firm is also providing increased non-audit services (taxation, business services, business process improvement) to its audit clients.The firm has five partners - two in audit, two in taxation (Johnson and Stubbs) and one in business process improvement (Leung). The two audit partners (Wang and Murray) are registered company auditors under the Corporations Act and ASX requirements.

JWCA tendered to undertake the audit of Anderson Building Group (ABG) for 2020 putting in a low audit fee to ensure they have the greatest chance of winning the job.It is Wednesday 14 May 2020, and Vincent has just been advised that JWCA has won the tender for the FY2020 audit of ABG.Vincent is now determining how JWCA will conduct the audit and undertake the due diligence before agreeing to accept the ABG audit and signing the audit engagement letter.

ABG is an integrated building services group who specialise in building and restoration services across Australia.The company specialises in restoring and rebuilding a variety of properties after the properties were damaged by events such as weather, fire and other impact.ABG's earnings before interest, tax, depreciation and amortisation for the year ended June 30, 2020 were $25M and its overall revenue for the year was $335M.The low audit fee tendered has JWCA endorsed for FY2020 at the ABG's Special General Meeting (SGM) on Tuesday 12 May 2020.

Vincent Wang has agreed to be the Audit Engagement Partner (AEP) for the ABG audit for FY2020 assuming all ethical, legal and client evaluation issues are able to be resolved so that JWCA can undertake the audit for the first time.Vincent is a founding partner and has had considerable prior experience in a big 4 audit director role.Vincent has not audited a building group previously, but his experience covers a number of large company audits in other sectors.The ABG audit was up for tender as the prior audit firm who had completed 7 years of audits for ABG was up for partner rotation. Prior audits were conducted by a medium tier firm which ABG chose not to continue with after the rotation period due to the retirement of that firm's senior audit partner and a disagreement on implementation of new accounting standards in the FY2019 audit.Vincent was told of this disagreement after the tender submission date was closed and the tender was accepted and approved by the SGM.

Benjamin Sanders is the audit manager at JWCA, who has strong technical skills (he was a high achiever in the recent CA examinations) with five years of audit experience.Ben started as an undergraduate at JWCA and has advanced to audit manager during this period.Ben is well aware that in order to progress to Partner level within the firm, he needs to demonstrate the ability to handle larger audit clients and to be able to offer industry specific audit experience.Ben has agreed to be the audit manager of the ABG FY2020 audit.He is excited to be part of the audit to extend his construction audit experience.He currently is the audit manager on two other smaller construction companies and has undertaken these audits for the last three years.

Once the ABG audit is completed, Julian Murray (JWCA's second Audit Partner) will peer review the files.Julian does have some prior experience with audits of construction firms, but the experience was undertaken with smaller construction companies and was some years ago.When JWCA tendered for the ABG work, a third audit partner with more extensive construction experience was to be the reviewer.However, he moved to another partnership at the beginning of May 2020.He had been the partner reviewing work papers for other construction clients.

Working with Ben on the audit will be Natalie Thompson (Senior Auditor), Ingrid Su (Intermediate Auditor) and Caitlin Mendes (Graduate Auditor).Natalie Thompson is pleased to be potentially working on the ABG audit team, as construction is one area in which she needs more experience.Natalie has worked for JWCA for 2 years in the business services division and has undertaken 2 years in the audit division.

Ingrid came to JWCA at the beginning of the year and brings some audit experience from her time at one of the medium tier accounting firms in Melbourne.Ingrid is excited to be part of ABG audit as she has previously worked with ABG as an assistant accountant for 3 months before joining JWCA.Ingrid is hoping to catch up with friends at ABG during the audit process.Caitlin has just been promoted to graduate auditor as she has recently finished her undergraduate degree in accounting.Caitlin has been working with JWCA as an undergraduate for the last year and has joined Ben's team since her promotion and she will be supervised by Ingrid.

Ben and Vincent have had initial discussions with the Chief Executive Officer (CEO) of ABG Ltd on Monday 18May 2020 and have provided you with their notes of this initial audit meeting for the audit year ended 30 June, 2020.This information is provided in ABG Permanent Audit File - ACM1.1 Client Meeting Worksheet to assist you.Also provided is fraud questionnaire that has been completed by ABG management and the ABG audit committee in relation to ABG fraud processes.This questionnaire and responses are provided as ACQ1.2 Fraud Questionnaire in the ABG Permanent Audit File.

AUDIT PERMANENT FILE INFORMATION

Potential New Client - Anderson Building Group Ltd (ABG)

Anderson Building Group Ltd (ABG) is a well-established integrated building services group who specialise in building and restoration services across Australia.Warehouse facilities and supply yards with small marketing teams are located in Sydney, Melbourne, Townsville, and Darwin.There is a Brisbane warehouse facility at Geebung and the Head Office is at Milton and is from where the Chief Executive Officer (CEO - Mark Barwin) leads the organisation.The CEO has led this company for 15 years.He started his career as lead builder with ABG and worked his way up to the CEO.He completed a postgraduate accounting qualification and later an MBA to assist his knowledge in the running of the company as it grew in size.

In the early stages of the 2020 financial year, ABG was performing well and had a pipeline of existing and projected work on its books.The business landscape changed in the second part of 2020 when Covid-19 impacted Australian business processes.The impact on ABG was that many of ABG's existing projects were delayed for 1-2 years and bidding on future projects was postponed. ABG remains positive that they will survive with minimum stand downs and layoffs.The ABG workforce is a mix of full time and casual staff (many of whom have been working regularly with ABG over the past ten (10) years).

The Board of Directors is chaired by Jonathan Dixon who is a non-executive director with extensive experience in the building & construction industry.The four other board members have limited experience in the building & construction industry, although one director has been on the Board fifteen years and a recent addition (in October 2019) to the board is a CPA member.

Q: Evaluate the integrity of ABG management and any other special circumstances or risks (including fraud) with undertaking the ABG FY2020 Audit for notice to assist Audit Engagement Partner (AEP)

1. ABG MANAGEMENT INTEGRITY AND OTHER SPECIAL AUDIT ISSUES
2. Key Recommendations
3. Conclusion - OVERALL CLIENT EVALUATION OF ABG BY JWCA