The aim of this report is to provide a brief overview of the internal & externals environment of the National Bank of Australia (NAB). National Australia Bank (NAB) is among the largest banks of Australia. According to the statistics of 2014 NAB was the world’s 21^st largest bank in terms of market Capitalization. NAB Operates approximately 1590 branches across the globe.  The royal commission has identified various flaws in the internal control of the organization. The issues raised by the royal commission were regarding the consumer lending, financial regulators and business lending. It has been decided to undertake the audit of the National Australia bank because the organization has taken steps for enhancing the internal control of the corporation. The level of business risk is higher; however the audit risk of the corporation has been mitigated over the years.

Table of Contents

Overview of NAB’s Operations. 3

Business Risks that have impact on Audit of NAB.. 4

Fraud. 4

Technology. 4

Laws & regulations. 5

Accounts that could be at Significant Risk. 5

Cash Account 5

Goodwill 6

Revenue Account 6

Royal Commissions Findings. 6

Decision Regarding Undertaking the Audit 7

Reference

Overview of NAB’s (National Australia Bank) Operations

National Australia Bank (NAB) is among the largest banks of Australia. According to the statistics of 2014 NAB was the world’s 21^st largest bank in terms of market Capitalization. NAB Operates approximately 1590 branches across the globe.  The operations of NAB are divided into eight divisions which include personal banking, business banking, wealth management and insurance. NAB is Australia’s largest business bank in terms of assets and serves more than 700,000 clients. The business banking division & wholesale division has offices in different international cities such as Hong Kong, London, Shanghai, Tokyo and Singapore.

The NAB personal banking brands include Home side, NAB Retail & Advantage. The wealth management division of NAB provides services like private wealth solutions, investment, insurance and superannuation etc. The operations of wholesale banking division include project finance, capital markets, custodian services and derivatives. The major revenue of NAB comes from its Australia’s operations round about 74%. The next major revenue share comes from Europe which is approximately 12%. NAB uses the latest technology so that it can provide the best customer service to its customers. Over the years the bank has experienced massive growth. It can be said that in upcoming years the bank operations will experience further growth (Zopounidis & Galariotis, 2015).

Business Risks that have an impact on Audit of National Australia Bank Following are the three key business risks that can have a major impact on Audit of NAB:

Fraud of National Australia Bank

In many organizations, there are significant chances of frauds. The fraud can be committed by any individual like employee, manager or any stakeholder outside the organization. Many frauds have a significant financial impact, and chances exist that the impact of fraud might not be included in the financial statements properly. Therefore, it means that it is the duty of the auditors to include business risks while analyzing the financial statements. NAB has experienced trader staff fraud in the past, so this type of business risk can affect the audit of NAB up to a lot of extents. If the corporation has experienced fraud in the past than it can be said that it can happen in future as well. So the auditors who are going to audit the NAB must keep this business risk in mind so that they can evacuate the financial statements critically. Otherwise, the auditor might be unable to identify the issues that occur in the financial statements (Directors, 2008).

Technology of National Australia Bank

Improving technology has become necessary for all corporations. The technology keeps on changing with the passage of time and if the organizations do not update their current technology than they can leave behind as compared to other corporations. Sometimes issue in the technology occurs due to which operations of the temporary business halt. Due to this financial loss also occurs which might have an impact on the financial statements. Therefore, it is important that Auditor should keep this kind of business risk in mind as well. NAB has experienced system malfunction in the year 2010 which shows that this business risk would have a significant impact on NAB. Technology is related to performance & productivity of the organizations. If something happened to systems than the company faces financial loss which reduces the profit of the organization (Gay & Simnett, 2018)

Laws & regulations of National Australia Bank

NAB has a presence in other parts of the world as well the sudden changes in laws or regulations can affect the operations of the bank. It is evident that the bank will have to abide by the law of other countries even if its profitability experience decline. It means that this type of business risk will have an impact on the auditor process. The rules and regulations of specific countries have also impact on the decision making of the customers, and through this, the revenue of the organization disturbs. That is why law changes are considered a major factor that has an impact on the overall audit procedure. NAB has mentioned that due to law changes its operations have experienced a significant amount of impact.

Accounts that could be at Significant Risk of National Australia Bank

Following are the three accounts that could be at significant risk:

Cash Account of National Australia Bank

The cash account is among the most important accounts that the organization maintains. It shows how much cash the organization have. The organization generates cash from various operating activities. It is the duty of the auditor to locate the source of cash and evaluate the account efficiently so that it can be known whether the corporation has shown the correct value of cash account or not. Sometimes organizations manipulate the figures to show a huge amount of cash for attracting the investors. Therefore, cash account would be at significant risk. Any manipulation in the cash account would have a significant impact on the financial statements; therefore, investigating this account efficiently is highly significant (Needles & Powers, 2010).

Goodwill of National Australia Bank

Goodwill is considered an intangible asset and mentioned in the balance sheet of the organization. The valuation of goodwill is a tricky task, and the chances exist that in the statements the value of goodwill might be overstated or understated by mistake. Many corporations today take help of valuation firms when the level of complexity increases. Therefore, the auditor should critically investigate the valuation of goodwill & intangible assets so that issue can be identified appropriately. In NAB the valuation of goodwill would be a tricky task, and it is suggested that the auditor must focus on intangible assets efficiently.

Revenue Account of National Australia Bank

The revenue account of the corporation shows how much revenue the organization is generating in a specific period. However sometimes due to negligence or purposefully the individuals overstate or understate the revenue so that the profit of the organization can be manipulated. The figures for profitability are manipulated for gaining different kinds of advantages. The main advantage the organization gets is attracting a significant number of investors. Sometimes the figures are manipulated to get tax advantages as well. So, this account of would be highly at risk in NAB (Christoffersen, 2011).

Royal Commissions Findings of National Australia Bank

The royal commission has identified various flaws in the internal control of the organization. The issues raised by the royal commission were regarding the consumer lending, financial regulators and business lending. The NAB has decided to cooperate with the royal commission so that the issues which the royal commission has raised can be addressed efficiently.  Although the issues which Royal Commission has identified serious consequences for NAB but NAB has established some goals which will allow NAB to manage the issues efficiently. NAB wants to establish a center for customer remediation through which NAB can address the issues of its customer more accurately. The organization has invested highly in technology so that the best services to the customers can be given. Overall, the organization has taken initiatives which will help the business to meet the requirements of Royal commission (Gowthorpe, 2011).

The Royal Commission findings will not have a major impact on the tender decision because NAB has decided to address the problems which the Royal commission raised. The organization over the years have experienced immense growth and improve its operations with the passage of time. In the following years, it can be said that the corporation will further improve its operations and will take such measures which will allow the organization to mitigate the chances of fraud.

Decision Regarding Undertaking the Audit of National Australia Bank

It has been decided to undertake the audit of the National Australia bank because the organization has taken steps for enhancing the internal control of the corporation. The level of business risk is higher; however, the audit risk of the corporation has been mitigated over the years. The organization has managed its financial risks and have taken significant steps to ensure transparency in the financial statements. It is recommended to the Audit firm to undertake the audit of this organization so that our team can evaluate the financial statements of the corporations. Although it’s going to be a tough task, but it will provide an opportunity to learn new things during the audit procedure. NAB is a huge organization and among the largest in Australia. It is a good opportunity for a Audit firm to investigate the financials.

References of National Australia Bank

Christoffersen, P., 2011. Elements of Financial Risk Management. s.l.:Academic Press.

Directors, A. I. o. C., 2008. Audit Committees: A Guide to Good Practice. s.l.:AICD.

Gay, G. & Simnett, R., 2018. Auditing and Assurance Services in Australia. s.l.:McGraw-Hill Education.

Gowthorpe, C., 2011. Business Accounting and Finance. 3 ed. s.l.:South-Western Cengage Learning.

Needles, B. E. & Powers, M., 2010. Financial Accounting. s.l.:Cengage Learning.

Zopounidis, C. & Galariotis, E., 2015. Quantitative Financial Risk Management: Theory and Practice. s.l.:John Wiley & Sons.