Auditing Case Studies

  1. Overview of CIM

CIM was formerly known as Leighton Holdings Limited and is a subsidiary of HOCHTIEF Australia Holdings limited. The company is one of the world’s leading contractors and contract miners. The company operates through its various joint ventures and subsidiaries to provide project development, contract mining, property and infrastructure development, construction, operation and maintenance services to both private and public sector clients across differing markets. The company provides corporate governance structure, strategic leadership as well as financial strength to its operating companies. Its services and hence income streams are offered to various sectors which include transportation, mining telecommunications. Power, oil and gas as well as healthcare. It operates in more than twenty countries spread across the Middle East, South America, Sub-Saharan Africa and the Asian Pacific with its headquarters located in New South Wales Australia.

As stated above, the company’s business processes are characterized by its various subsidiaries and joint ventures. These include CPB contractors which incorporates Leighton Asia and is the company’s leading international construction contractor. Thesis is CIM’s global contract miner with Sedgman being the company’s global mineral processing specialist. Another subsidiary is the Pacific partnerships which is the company’s developer and investor in Public Private Partnerships Projects (PPP) built by the company’s operating companies. The arm also provides operation and maintenance services to clients. The company’s EIC Activities subsidiary is its internal engineering and consultancy arm that provides specialist design, research and technology as well as technical support. The company has also 45% interest in Habtoor Leighton Group, 59.11% interest in Davine and 50% interest in Ventia.

The company competes with a lot of other companies in its industry. Thus, the company has come up with various competitive strategies to ensure it stays afloat. The company for instance has been accused by its competitors of charging cheaper prices for its contract. This is part of its strategy to ensure it continues to win attractive contracts that are delivered with the highest quality standards. The company’s competitive strategy lies in the world class capabilities it has developed in construction, contract mining, PPPs, mineral processing and engineering. The capabilities are ever in demand in the various markets it operates in and hence they continue to be the main drivers of Demand for the company and hence its competitive strength. Another competitive strategy adopted by the company is eco-efficiency through cost reduction as well as the reduction of the environmental impact of the company’s organizational processes wherever it operates. This enables to price its products in a competitive manner that enables it beat the competition. The company’s management is headed by Marcelino Fernandez Verdes as the Chief executive officer while he also heads the company’s board of directors as its executive chairman. Other directors include R Chenu, JLdel Valle Perez, K Ferguson, T Gerber, P Lopez Jimenez, Robinson D and P sass Enfield with R Seidler AM acting as an alternate directors. The directors are the people responsible for the company’s management and hence its current level of success.

4. The effect of the awarding of the new contract on audit plan

On 22nd April 2016, CIM was awarded a $500 million contract, by the level crossing Removal Authority (LXRA) to design and construct the Level Crossing Removal Project: Caulfield to Dandenong in Melbourne. This will have a great effect in the audit plan for CIM. It is worth noting that the project value is substantial to warrant auditing the project independently owing to the value of money involved in the project. It is also worth noting that the audit firm may not have enough expertise as far as valuing the projects of this kind is concerned. Thus, our audit plan for CIM will be affected as follows;

The scope of the audit will have to be altered in order to include the audit of the Level Crossing Removal Project. This will describe the extent to which audit will be carried on the project including the specific audit tasks to be conducted for the project. In this regard, the audit plan will have to include the details contained in the audit agreement between the auditee or CIM and the auditors regarding the audit of the project. The audit plan will also have to be altered so as to reflect the audit resources required for the audit of the project (, 2016). For instance, we need to establish whether there are enough staff for the current audit including the project. Should the audit staff not be enough, the audit plan should factor in additional staff for the project. Should there be enough audit staff, then the plan will reflect those that have been assigned to the project.

The Level Crossing Removal Project will also affect the audit plan as far as time is concerned. Auditing of a project of such a magnitude involves a lot of work and resources. This has time implication since a substantial amount of time will be required in conducting the audit. Thus, the audit plan will have to be altered in order to reflect the time to be used in auditing the project. There are audit risks that are specific to a specific project and hence the project introduces new risks to the audit assignment that are specific to it. Thus, the audit plan will have to be changed to reflect the new audit risks associated with the Level Crossing Removal Project (Brenda and Simo, 2012). It is also worth noting that auditing of such a project would call for some expert help in valuing and even in some aspects of the audit who are familiar with the execution of such projects. Thus, the audit plan will have to be altered to reflect the need for expert help. All the additional resources including staff and experts and such related resources have cost implications. Thus, the audit plan will be altered to reflect the additional cost required for the additional project. It is also worth noting that the audit plan will also need to be altered to reflect the audit process for the entire project including the new project dates since the new project may affect the start and finish time for the audit assignment and hence they may differ from the original ones.

References:, 2016, Audit Planning 1, Retrieved on 28th August 2016, From; eCh03.pdf

Brenda, P&, Simo, J20122, Principles of external auditing, New York, John Willey & Sons.