What do they do & can I audit them?

Access the link https://www.airnewzealand.co.nz/previous-reports and use these materials to support for your answers

• Air-NZ-2017-annual-results-analyst-presentation
• Air-NZ-2017-Financial-Results
• Air-NZ-2018-annual-results-analyst-presentation
• Air-NZ-2018-Financial-Results
• Air-NZ-2019-annual-results-analyst-presentation
• Air-NZ-2019-Financial-Results
• Air-NZ-2020-annual-results-analyst-presentation
• Air-NZ-2020-Financial-Results

Background information

Professional and Ethical Standard, (PES) 1, requires that professional accountants have the competence to undertake an audit. ISA (NZ) 315 outlines procedures that auditors must follow in gaining an understanding of a business. Assume that you are a manager in an auditing firm in New Zealand and your firm has been approached by the Office of the Auditor General (OAG) to carry out their audit of Air New Zealand for the year ended 30 June 2020. You have been asked by one of the audit partners in your firm, who is considering whether to propose for the audit engagement, to gather some information about the company. There are a number of sources that you can access for research in preparing information for the audit partners. For example the Air New Zealand website would be a good place to start your research.

Required:

a. What are the business activities of Air New Zealand Limited that you will need to understand to carry out a successful audit? Using information you obtain about the company, and the industry it is in, come to an informed view as to the 'business' and 'industry' risk for this prospective client. Be sure to set out the basis (reasons) for your decision.

b. Evaluate issues to do with (i) Self-review and (ii) Familiarity threats to independence that could potentially arise from performing a statutory audit on the financial statements of Air New Zealand. Explain why these issues could be a threat to the credibility of the financial statements and how those issues should be addressed before accepting the offer from OAG?

c. Evaluate issues to do with (i) Advocacy and (ii) Intimidation threats to independence that could potentially arise from performing a statutory audit on the financial statements of Air New Zealand. Explain why these issues could be a threat to the credibility of the financial statements and how those issues should be addressed before accepting the offer from OAG? Note: for question (b) and (c), refer to the Professional Code of Ethics as appropriate. Keep in mind the ownership of Air New Zealand, the role of the Financial Markets Authority (FMA), legislation, XRB Auditing Standards and the Auditing Standards and Statements of the Auditor General.

d. What are the key accounting issues from your review of other sections in the annual reports and financial statements, including the accounting policies? Based on your understanding of the business and the accounting issues, what specialist skills and competencies will you need to carry out the audit?

e. Identify "specific parties" who may rely on the work of the auditor and the audit firm. Also identify what remedies are available to those "specific parties" should they be dissatisfied with the standard of the audit work. Describe some conditions (with reference to existing legal precedent) in which they might be successful in any action taken.