Executive Summary:
Audit risk analysis gives a transparent image of the company. It shows that if the company is depicting accurate information in its financial report. In this report we did an audit risk analysis for Caltex Australia Limited. It is a company traded on Australian Securities Exchange (ASX: CTX). It is a company which has its business expanded all over Australia and they are involved in the purchase and distribution of oil and they have outlets spread across Australia.
We covered the challenges faced by Caltex about the underpaid wages to its employees by the franchises and also allegations against them about the price rise of the petroleum and they faced challenges regarding the safety of its employees with many questions being raised about it. We gave introduction about its Chairman and CEO and their views on the financial position of the company, we also did analysis of the financial report of the company and gave opinion on it based on the interpretation. We got all the financial statements and notes related to the statements with all the supporting documents which helped us in giving a fair and true opinion. Based on the Audit risk assessment we came to a conclusion that it is safe to go on board with Caltex Australia.
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Executive Summary: 2
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The audit was done by comparing the basis for recognition and measurement of remediation provisions for consistency, obtaining third party expert reports as well as internal and external documentation. Testing the accuracy and historical remediation. The independent auditor’s responsibility was to obtain reasonable assurance whether the financial statements are true and to give a report with his/her opinion. The auditor found the financial statements of Caltex Australia Limited to be fair and in compliance with Section 300A of the Corporations Act
CAS 300 requires auditors to their audit using a risk based model where the nature, timing and extent of audit procedures are based on the assessed risk of material misstatement. Pickett (2006) argues that for audits to be effective and efficient, much of the audit effort should be focused on areas that are considered to pose the highest audit risk. Additional audit procedures should be linked to individual audit assertions whereas other audit procedures need to be performed as and when needed. Thus, for an audit plan to be put in place, it is necessary for an auditor to come up with a risk profile of the client comprising an understanding of the business operating by the audit client, assess business risk and also perform its preliminary analytical review.
An assessment of the company’s financial statements will highlight the firm’s management of its risk and opportunities.
The audit team focused on preforming groundwork analytical procedures. A comparison of the performance of Smackey’s Dog Foods Inc to other similar industries was used to validate the original assessment of the risks. Performing the procedures helped detect areas that pose a high risk of the material misstatements. Another important part of the planning of the audit was to set a balance of materiality that is appropriate. The situations that
As I was reviewing the financial statements of 2013, I have found that, the company has more volatile industry which makes the investors to buy and sell. Through their improvement globally, their oil sands had become effective and efficiency through the public. Business risk of this client will be very high since the energy sector is more volatile, especially the oil sands of energy sector. Since Suncor has the lowest prices and operating costs, they will face huge competition within Canada and internationally. Such risks will affect the auditor’s assessment of audit risk for this client. Therefore, the auditor can
Financial statements could be examined with varied degrees, as part of the client acceptance procedures Paige CPA got to perform a horizontal and vertical analysis, and financial ratio analysis of Vinand Petroleum financial statements. These procedures are not as in depth as other procedures used by auditors on financial statements, but these procedures may show areas of concern for auditors. From 2006 to 2007, Vinand’s long term debt tripled and its interest expense paid for the year did not reflect this drastic increase. This could mean that Vinand has taken on a large amount of debt with a low interest rate, which will not bode well for the financial health of the company in the future. In the same breadth,
This paper contains the summary of the details and results of the audit tests on
This project presents an audit risk assessment on Telstra Corporation Limited using advanced accounting techniques
The analyzed case study refers to the Hollate Manufacturing company, which belonged to the home construction industry since 1950s. The company operated in the United States and Canada with 14 divisions spread throughout the countries. Hollate’s performance was significantly better than its peers, resulting in $1 billion sales. The company maintained its growth over the years due to growth-through-acquisition strategy. However, the home construction industry suffered downturn in recent years. Hollate manufacturing faced a problem with audit as far as with personnel. Four suggestions are given along with answer to the question how to avoid alike situations.
During the performance of this integrated audit, require numerous judgments about the internal control and overall financial reporting and how well it addresses risks of material misstatements within the financial statements (AICPA, 2014). After re-evaluating the previous errors found from the previous audit, the audit team found the corrective actions to be appropriate and justified in elimination of human error by implementing additional checks and balances within the manual process. No additional misstatements have been found and all internal controls off the financial reporting seem appropriate and just.
The chief executive of the company was closely working with the vendors whose confirmations were vital in the auditing work and hence they could have submitted false confirmations. The auditing firm established a national risk management program for its clients and so national reviews were done to identify the high risk items in the financial statement. The vendor allowances were particularly high but they were not documented. As such, the auditors were supposed to demand for the documentations and compare them with the real figures. It is however noted that most of the documentations received were non-standard and this could have led to a different audit report given that vendor allowances were earlier identified as a high risk area. Inventory management was found to be poor especially in the allowances for inventory reserves. The audit firm was therefore obliged to carry out a thorough evaluation of the inventory reserves and determine whether it was reasonable. The valuation was also supposed to include all classes of inventory but for the case of the company, the evaluation excluded instances where no sales had been made. Hence, this evaluation could not accurately represent the position of the inventory reserve in the company. (Waters,2003)
Professional auditing standards identify 5 “management assertions” that commonly underlie a set of financial statements. These 5 assertions are: occurrence, completeness, valuation/allocation, rights/obligations, and presentation/disclosure. With respect to the audit of Paragon’s construction project, some of these key assertions were overlooked by auditor Arthur Anderson. The main assertions that Anderson should have focused on for this audit include occurrence, valuation, and disclosure.
• Directing appropriate attention to the different areas of the audit such as assessing materiality, so that when the detailed audit plan is prepared, audit procedures can be directed towards the material amounts.
There are four stages in this audit. The first stage is the planning and risk assessment. This stage of the audit is completed during the initial planning. The risks for Smackey Dog Foods, Inc. can be better identified by understanding the business, its industry, environment, management culture, the type of accounting used, and the competition. The auditors should be able to understand why Smackey’s sales are steadily increasing and its competitors sales are declining. To be more specific, the implementation and design of Smackey’s internal control procedures, processes, and systems are studied and analyzed for the audit team to be able to assess the control risk for each of the transaction related audit objectives, which are accuracy, occurrence, classification, completeness, summarization, and timing and posting.
The purpose and responsibility of an audit is to provide reasonable assurance that the financial statements are free from material misstatements whether due to fraud or error. The audit will follow the authoritative guidance provided by the PCAOB and AICPA auditing standards. In relation to Johnson & Johnson Company, it would be a plus if the auditor had experience with the Consumer, Pharmaceutical and Medical Devices, but not necessary since a firm would be able to hire an expert to consult on the audit. The test will cover risk assessment procedures, tests of controls and substantive procedures.