Red Ltd is a media services company. It has radio, television and magazine divisions and operates in all states. Each division manager has a remuneration package that includes a base salary and short-term and long-term incentive payments based on a range of indicators. The CEO and other senior management also have remuneration packages with base salary and incentive payments, but the formulae used for each incentive payment varies. The following performance measures are used in the company’s balance scorecard measure of performance and calculation of incentive payments at various levels of management:

i. net profit after tax (NPAT) performance

ii. leadership and executive development

iii. ratings performance for the television business

iv. share of advertising revenue performance

v. development and execution of business strategy

vi. cost management across the group

vii. divisional earnings before interest and tax (EBIT) performance viii. performance for launch of new shows in the television business

ix. circulation performance for the newspaper executives

x. cost management and delivery of cost targets.

Required

(a) Why is an auditor interested in the details of senior management salary calculations?

(b) At which level of management would you expect to see the above performance measures? What would their implications be (if any) for the audit of the financial report?

Answer rating: 100% (QA)

a Sol An auditor is responsible for looking of a validity of a companys financial statements and writing a auditors report at the end of their investi... View the full answer