ACCT3014 - Auditing and Assurance - Individual Research Assignment

22 Found helpful • 7 Pages • Essays / Projects • Year: Pre-2021 • Previously uploaded under: ACCT3014 - Auditing and Assurance

Genworth Financial, a financial service company providing insurance, wealth management, and investment solutions, has recently attracted considerable media attention in terms of its failure to report a substantial amount of calculation error. The fact that it failed to identify a 44 million dollars after-tax calculation error due to the ‘material weakness’ in its control system over the long-term care insurance claim reserves review, along with the enormous 50% share drop in the previous 12 months (Udland 2015), have strongly suggested that Genworth Financial faces significant challenges. The rationale of behind the selection of this media article is, as a subsidiary of Genworth Financial, Genworth Australia may be directly affected by the material control system weakness. As a result, the external auditors may face the risk of a potential material misstatement of the long-term care insurance claim account due to the wrong reverses assumption and methodology. Furthermore, given its poor financial performance, the long-term care insurance claim account could even be understated in order to prevent the annual result from looking even worse. Moreover, it is also noticeable that a large after-tax error has occurred, it is therefore highly likely that the tax expense account could be manipulated by a potential understatement, which should also attract the auditor’s attention.

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