Audit Issue Analysis: Westpac Banking Corp

Audit Issue Analysis
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Audit Issue Analysis
Westpac Banking Corp is a financial bank whose auditing firm is PWC. The company’s 2020 annual report has an auditor’s independence declaration section where the auditing firm confirms that it has not breached the auditor requirements laid out in the Corporations Act 2001, or any relevant code of professional condition while conducting the audit (Westpac Group, 2020). Similar declarations are contained in Westpac’s annual reports dating back to 2016. However, all three annual reports reveal extensive non-audit services to non-consolidated entities and trusts of which the bank is an entity. For instance, the 2020 annual report indicates that fees in respect of these non-audit services amounted to approximately $6.1 million in 2020 and $7.5 million in 2019 (Westpac Group, 2020).
While this policy on engaging PwC for non-audit services may not affect auditor independence, it heightens the self-interest threat where the auditor has a direct or indirect financial interest in the company or relies on the client for a large fee. PwC has been the auditing firm from 2016 to 2020 and this also exacerbates the familiarity threat where the auditor becomes too personally close to the managers or officers of the client company. Section 410 of the APES 110 Standard (2018) warns against large fees or excessive remunerations that might create a self-interest or intimidation threat. Section 921 of the APES 110 Standard (2018) also warns against family and personal relationships between the auditor and client personnel as this could result in familiarity, self-interest, o...