Corporate Governance and Audit Procedures in Woolworth

The report analyses the requirement of proper governance principles in a business environment and how the same helps the business in proper implementation of internal control process. The report also states the eight-corporate governance principles which are set out by ASX council for ensuring better governance standard in a business. The organization that is based for the assessment is Woolworth which is involved in retail business and the same is considered to be one of the leading businesses in effective implementation of the Corporate governance principles in a business.

Running head: AUDITING
AUDITING
Name of the Student
Name of the University
Author Note

1
AUDITING
Executive Summary
The objective of report is to analyse the requirement of proper governance principles in a
business environment and how the same helps the business is proper implementation of
internal control process. The assessment would also be discussing regarding audit procedures
which can be conducted on a business activity. The report also states the eight-corporate
governance principles which are set out by ASX council for ensuring better governance
standard in a business. The organization that is based for the assessment is Woolworth which
is involved in retail business and the same is considered to be one of the leading businesses in
effective implementation of the Corporate governance principles in a business. In addition to
this, the assessment relates effective implementation of corporate governance with audit
strategy and procedures and how the same is beneficial for the same in business environment.

2
AUDITING
Table of Contents
Introduction................................................................................................................................3
Corporate Governance...............................................................................................................3
Principle of Corporate Governance............................................................................................4
Principle 1..............................................................................................................................4
Principle 2..............................................................................................................................4
Principle 3..............................................................................................................................5
Principle 4..............................................................................................................................6
Principle 5..............................................................................................................................6
Principle 6..............................................................................................................................6
Principle 7..............................................................................................................................7
Principle 8..............................................................................................................................7
Effect of Adoption of Corporate Governance Principles...........................................................8
Risk Assessment Process.........................................................................................................10
Audit Approach........................................................................................................................11
Audit Strategy..........................................................................................................................12
Audit Evidence.........................................................................................................................13
Conclusion................................................................................................................................14
Reference and Bibliography.....................................................................................................15

3
AUDITING
Introduction
Auditing is the check and inspection of organization financial report which is carried
by the auditor to determine whether the entity has prepared its financial statement in regards
to accounting standard or not. Auditor has to ensure that the entity had maintained its books
of accounts correctly. Auditing process assures the stakeholder that the organization financial
report is free from any materiality in company accounts. Auditor had to carry many different
procedures in the company books of accounts to check the materiality in the entity accounts
balance. It has to check the internal control system as this will assists them to know the
amount of risk associated in organization financial report (Appelbaum, Kogan and Vasarhelyi
2017). The internal control system is a system which helps the entity to minimise the risk in
the entity so if the organization does not have proper internal control system then it will have
more amount of risk in the business. The risk lies in every company business, and the
management must minimise the risk associated in business activities. The report shows
corporate governance that should followed by entity while carrying their operation in the
country. It states the eight corporate governance principles and shows how the companies
should follow the same while carrying their business activities. It also denotes the effect of
the adoption of those principles in the company financial statement.
Corporate Governance
It is the collection of processes and mechanisms by which the operated and controlled.
It signifies the distribution of responsibilities and rights among different members in the
business (Eilifsen and Messier Jr 2014). Corporate Governance helps the company to
maintain a proper relationship between stakeholder and upper management of the entity. It
includes the objective of the company and how the entity pursued the same in the regulatory,
social and market environment. Corporate Governance helps the entity to manage the interest

4
AUDITING
of the stakeholder in the business. These are the rules and policies which are made by the
company to maintain corporate behaviour in the business. There are many principles related
to corporate governance which helps the entity to carry its business activity easily in the
business.
Principle of Corporate Governance
Principle 1
Foundation for Oversight and Management
An entity should state all the respective responsibilities of its board members and
should continue to review their performance in the business (Asx.com.au 2019). It should
form a board and proper disclosure should be made about the roles and responsibilities.
Company should maintain a proper recruitment process and shareholder has to support the
same in company business. Proper written communication should be there between the
company and the directors. Company should disclose the same in their financial report about
the procedure carried by entity in the appointment of directors. The agreement will be a form
of letter for non-executive director and service contract for executive director. These are to
ensure that if any breach is there than the director and senior executive are personally liable
for the same. The entity has to state the process which is used by them for the appraisal of
senior executive performance in the reporting period. The organization should disclose the
performance process evaluation for each reporting period.
Principle 2
Structure the board to be active and add value
The entity should have proper composition of board of directors, and they should also possess
the required skills in their business activity (Asx.com.au 2019). Members of board should
have proper knowledge about the organization business operation and should perform their

5
AUDITING
duty correctly in the business. Company should form a nomination committee and minimum
3 members should be there and the majority members has to be independent directors. The
skills matrix which is used by the company to achieve its goals has to be disclose in entity
financial statement. It should state the name and term of the directors in the committee. The
responsibility of managing the same is to be with independent member. The skills matrix
helps the management to identify the gaps in the collective skills which should address for
the development of professional skills of company directors. By providing the information of
skills of matrix company helps the investors to have an idea about how the board is carrying
their company operation. The maximum number of independent directors minimise the power
of the small group to dominate the management decision. The company should undertake a
program to include new directors in company as well as it should check the performance of
old directors as whether they require professional development in order to maintain the
knowledge and skills that required in the business (Asx.com.au 2019). The company has to
develop an induction plan in regards to the training of new directors which is related to the
skills and knowledge required in the business.
Principle 3
Acting Lawfully and ethically
Entity has to make proper rules and regulation which helps them to carry their
business activities lawfully, responsibly and ethically. Company to formulate ethically
behaviour in company business should establish a code of conduct principal in company
business activities. All the standard in the company code of conduct should be disclose by the
company. It should state the ethical behaviour which should be maintained by the director,
senior executive and employee. Any material breach of code has to communicate to the board
of members of the organization. Company employee is the eyes of management as they help
them to know whether the management policy implemented correctly or not (Asx.com.au

6
AUDITING
2019). An employee should report any lawful factor which are arises in company business
activities. It has to prepare an anti-bribery policy in company business and has to disclose the
same in company financial information. Company committee and board of member should be
informed about any breach in regards to anti-bribery policy in the business.
Principle 4
Protection of corporate reports
The company should make a proper process which helps it to verify the financial report of its
business activities. Company has to establish an audit committee which will help them to
keep a record of all the activities in company business. The committee should consist of at
least 3 members and the majority of them should be independent member. Proper declaration
has to be given by company CEO and CFO in regards of company financial statement. Proper
disclosure should be given by the company in regards of the process carried by them for the
verification of its asset and liabilities.
Principle 5
Balanced and timely disclosure
An organization should provide detail information in their disclosure related to
company activities as this will help the company investors to know the financial health of the
organization. It should form a disclosure policy that will help to track all the events in entity
financial report.
Principle 6
Protection of shareholder right
Organization has to provide detail information and the right of the security holders,
which help them to build a proper relationship with the company. Company should give
proper information about the business activity carried by them in their official website. It

7
AUDITING
should carry many meetings which will them to have a proper amount of communication with
the investors as it will be two-way communication process. The voting method company has
to use in the meeting is from poll and not by the show of hands. As it supports the principle
of “one security one vote”. The company uses the show of hand concept than proper decision
would not be able to be taken in the meeting.
Principle 7
Recognise and Manage Risk
Risk has to minimise so the company has to establish a proper risk management
procedure which assists them to control the risk in the business (Asx.com.au 2019). It should
also verify all the transaction which are taking place in the business. It should form a risk
committee that will help them to assist the risk associated in their business. Risk Committee
should have minimum 3 members and the majority of them should be independent members.
Audit Committee should assist the external auditor to carry its audit procedure in the
business. Company has internal audit function which should be adequately structure and
should perform the roles properly in the business. Company has to show the details of any
material exposure in regards to social and environmental risk, the entity manage the same
their business operation.
Principle 8
Remunerate fairly and responsibly
The entity has to pay the proper amount of remuneration to its director which helps
them to attract quality director and should design the remuneration of the executive which
help the company to attract high quality of senior executive. It should form a proper
remuneration company which will provide salary to the employee, senior executive and
directors. It should consist of minimum 3 members and out of which 2 should be independent

8
AUDITING
members. Company should give all the disclosure which is followed by company in their
remuneration committee. Company has to disclose all the practice and policies in regards to
the salary of non-executive director and also in regards to the executive director. A company
should disclose all its policy or the summary in the financial statement.
Effect of Adoption of Corporate Governance Principles
Lays Solid Foundation for Management and Oversight
The analysis of entity. Corporate Governance Report state that the entity can manage
their operations easily in the business. The policy and measure which the company has made
to meet the requirement of corporate governance has been laid down in their corporate
governance report. Woolworth provide proper description of the roles and responsibility to
each directors of company. All the information is directly reported to company charter in
their business.
Structure of the Board of Directors
As per the Woolworth report it can see that the principle of independent directors has
been maintained by the company while carrying its business operation. Entity is always
considered to act as per the expectation of shareholder as it appoints proper number of
directors who possess all the skills and knowledge required in company business activities.
Company is able to meet the criteria of composition of directors as this will help them to
carry its operation easily and able to meet the expectation of shareholders.
Act Responsibly and Ethically
Woolworth is able to act ethically as they are able to formulate a proper code of
conduct in company business which help the employee to reach the business objective easily
in their business. The gender equality is properly maintained by the company which signify

9
AUDITING
that the entity able to meet recommendation of the principle. Proper disclosure has been
given by the company in related to the corporate governance that provide a base to the
investors of the organization.
Safeguard Integrity in Corporate Reporting
Proper disclosure is been given by Woolworth about the environmental, social and
economic risk that help in safeguard of integrity in corporate reporting. Company is able to
fulfil all the requirement which are there in Global Reporting Initiative and also proper
disclosure is been given by the entity in their financial report.
Timely and Balanced Disclosure
Woolworth has provided all the disclosure which they have to disclose in their
financial reporting. Directors are able to disclose all the important factors timely which
assists the user to take proper amount of decision in organization books of accounts. Entity is
having proper disclosure policy which assist the business to provide detailed information in
their notes on accounts. All the activities and marketing operation are been disclosed properly
in organization financial report.
Right of the Shareholders
Entity is having proper management which lead them to fulfil all the expectation of
company shareholders. It encourages the shareholder to take part in the business activities of
organization and can take proper decision regarding the business operation. Company has
proper process for the communication with the investors so this help them to carry its
operation easily. Woolworth official website show all the new project in which company is
carrying their business activities.
Recognize and Manages Risk

10
AUDITING
Woolworth is having proper risk committee which help them to minimize the overall
risk associated in their business. The company has followed the requirement mention in the
principle as it was a separate charter in regards of the risk committee. The composition of risk
committee is also maintained by the company. The responsibility of the committee is to
minimize the risk in company business as per the nature of operation carried by the company.
Remuneration Fairly and Responsibly
Woolworth is having a proper remuneration committee in company business which
help them to provide proper remuneration to each employee of the company. The committee
is managed by the independent director so it helps them to carry operations as per the norms.
Remuneration committee make different plan in regards of the payment of the company
employee so that each employee can able to work for the company only and it can decrease
the employee turnover rate.
Risk Assessment Process
Risk Assessment is also one of the criteria which should be consuder while
proceedings with the audit process in a business organization. The auditor of a business faces
numerous risks which is commonly known as audit risks. The audit risks of a business
comprise of detection risks, control risks and Inherent risks. All these risks are considered to
be major risks and can impact the overall audit process in a business.
In a business environment if the principles which are suggested by ASX ‘s Corporate
Governance Council is implemented that the same would be a step towards risk assessment
and minimization. Principle 4 of the corporate governance regulations state that a business
needs to have an audit committee which would be looking in regards of the risk in the
company. The audit committee is accountable for ensuring that the corporate reporting
framework which is followed by an entity is accurate and proper independence is provide to

11
AUDITING
the auditors of the business. Auditor has to obtain proper knowledge of entity, that helps it to
carry proper procedure in entity books of accounts. The above principle helps the
organization to maintain proper policy in the business which helps the entity to minimise the
risk in their business (Babalola and Abiola 2013). The above principle helps the organization
to know the formulation of different strategy that can implement upon the company business.
Principle 7 of the ASX Governance regulation deal with effective risk management of a
business and the principle requires a business to either establish a proper risk committee that
minimize the risks associated in entity operations. It can also carry a proper framework to
ascertain the risk in entity operations.
Woolworth is having proper risk committee which ensure that the entity is having less
amount of risk in their activities. It is governed by independent director so this show that the
company risk committee is working properly in the business. Entity having less amount of
risk insure that the business financial report is free from materiality in company business.
Therefore, it can be said that the recommendations which are provided by ASX Council helps
in managing the risks which are associated with a business organization and thereby also help
in the assessment of risks of a business.
Audit Approach
It is the risk analysis which emphasis upon the client business activities. Auditor has
to ascertain the approach which it will carry upon the entity financial report to know the risk
associated in the organization accounting records (Bumgarner and Vasarhelyi 2018). Auditor
has to analysis the client business; it's working environment which helps the auditor to know
the materiality involve in entity activities. The audit approach which the auditor considers
initiates at the planning process of audit and it is imperative that the auditor identifies the
planning materiality and performance materiality for judging the risks and also the areas from
where the auditor would be collecting audit evidences. As per the principles of corporate

12
AUDITING
governance, the internal control of a business can be strengthened if the structure of the board
and different committees which are established are operating in an efficient manner. In such a
situation, the auditor can rely on the internal control and also consider management
representation as an important audit evidence for the business case. Therefore, it can be
appropriately said that the audit approach which is followed by an auditor has become more
structured after the amendments in corporate governance requirements have been made by
the ASX.
The principle mentioned above helps the company to formulate proper strategy in the
business. These will help them to gather a decent number of customers in the business. The
principle helps the company to formulate different committee that can ensure a proper
presentation of entity books of accounts. Auditor can carry proper procedure in the
organization financial report which help it to collect proper audit evidence that help the
auditor to form an independent opinion upon the entity financial report. It also helps the
auditor to look for corroborative audit evidences from within the company.
Audit Strategy
Auditor has to make proper audit strategy which helps it to carry proper audit
procedure in their business. It assists the auditor to set the timing, direction and scope of the
audit. The strategy which is to be applied by an auditor in an auditing process must be set out
in the planning period of the audit. The corporate governance principles if are properly
implemented a business makes the work of an auditor much easier in framing an appropriate
audit strategy for the business. The strategy is devised for the purpose of collection of
appropriate audit evidences that assist auditor to give opinion upon the entity financial report.
The presence of an appropriate framework and different types of committee somewhat
reduces the skeptic nature of the auditor and encourages him to put more reliance on
management systems in search of evidences. The above-mentioned points help the auditor to

13
AUDITING
analysis the company performance more quickly as if the company has not followed the rules
mentioned above it can have material misstatement in their books of accounts. Woolworth is
having proper financial statement which shows that the auditor has carried proper amount of
audit strategy which helps them to form a proper audit plan in their business activities. The
company of Woolworth ltd have effectively followed all the recommendations which are set
out by ASX and thereby it can be said that the same would be helping the auditor in the audit
procedures which will be applied by him. Entity should have proper financial report which
assists the investors to take proper decision about the organization financial statement.
Audit Evidence
It is to be noted that the audit evidences are the main aspects which helps the auditor
to give proper opinion on the financial books which is prepared by management. In order to
collect audit evidences, the auditor relies on both internal and external sources. The internal
sources of audit evidences would only be considered to be relevant if the corporate
governance of the business is appropriate. Therefore, it can be said that governance of an
entity also has its impact on the audit evidences which are collected by an auditor.
The auditor checks the entity financial report to ensure that all the norms in the
preparation of company books of accounts (Christensen, Glover and Wood 2013). These are
the information which is considered to be very important in the process of audit. The
information regarding the framework which is followed by a business is also reviewed by the
audit committee and this ensures that the management of the company follows an appropriate
reporting framework which is consistent with the AASB regulations. The above principle of
corporate governance helps the entity to carry its business process properly and also help it to
prepare proper financial report. Audit evidence helps the auditor to form proper opinion upon
the organization financial report. As the organization is having unqualified report which
denotes that the entity is having proper books of account in business. Therefore, it can be said

14
AUDITING
that good corporate governance pays off for a business as the auditor relies on the internal
sources of evidences and the same reflects that the business has conducted its operations in an
efficient and ethical manner and the reporting framework utilised is also consistent.
Conclusion
On a conclusive note, it state about the auditing process which carried in organization
financial report. The report shows the corporate governance and the eight principles which
should be followed by the entity in the preparation of books of account. It is based upon the
company Woolworth which is an Australian based entity and carry its operation in
supermarket. Lastly the report shows the different audit issue faced by the company and how
the company can overcome those issue with the help of the corporate governance principles.

15
AUDITING
Reference and Bibliography
Appelbaum, D., Kogan, A. and Vasarhelyi, M.A., 2017. Big Data and analytics in modern
audit engagement: Research needs. Auditing: A Journal of Practice & Theory, 36(4), pp.1-27.
Asic.gov.au (2019). ASIC Home | ASIC - Australian Securities and Investments Commission.
[online] Asic.gov.au. Available at: https://asic.gov.au [Accessed 19 Sep. 2019].
Asx.com.au (2019). [online] Asx.com.au. Available at:
https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-
fourth-edn.pdf [Accessed 17 Sep. 2019].
Babalola, Y.A. and Abiola, F.R., 2013. Financial ratio analysis of firms: A tool for decision
making. International journal of management sciences, 1(4), pp.132-137.
Bumgarner, N. and Vasarhelyi, M.A., 2018. Continuous auditing—a new view.
In Continuous Auditing: Theory and Application (pp. 7-51). Emerald Publishing Limited.
Christensen, B.E., Glover, S.M. and Wood, D.A., 2013. Extreme estimation uncertainty and
audit assurance. Current issues in auditing, 7(1), pp.P36-P42.
Christensen, B.E., Olson, A.J. and Omer, T.C., 2014. The role of audit firm expertise and
knowledge spillover in mitigating earnings management through the tax accounts. The
Journal of the American Taxation Association, 37(1), pp.3-36.
Corporate Finance Institute. (2019). Audit Risk - Understanding How The Audit Risk Model
Works. [online] Available at:
https://corporatefinanceinstitute.com/resources/knowledge/accounting/audit-risk/ [Accessed
17 September 2019].
Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios:
A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.

16
AUDITING
Eilifsen, A. and Messier Jr, W.F., 2014. Materiality guidance of the major public accounting
firms. Auditing: A Journal of Practice & Theory, 34(2), pp.3-26.
Elder, R.J., Akresh, A.D., Glover, S.M., Higgs, J.L. and Liljegren, J., 2013. Audit sampling
research: A synthesis and implications for future research. Auditing: A Journal of Practice &
Theory, 32(sp1), pp.99-129.
Gay and Simnett, 2017 Auditing and Assurance Services in Australia, McGraw Hill
Education 6th Edn
Johnstone, K., Gramling, A. and Rittenberg, L.E., 2013. Auditing: a risk-based approach to
conducting a quality audit. Cengage learning.
Jones, P., 2017. Statistical sampling and risk analysis in auditing. Routledge.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.
Kumar, R. and Sharma, V., 2015. Auditing: Principles and practice. PHI Learning Pvt. Ltd..
Omar, N., Koya, R.K., Sanusi, Z.M. and Shafie, N.A., 2014. Financial statement fraud: A
case examination using Beneish model and ratio analysis. International Journal of Trade,
Economics and Finance, 5(2), p.184.
Ruhnke, K. and Schmidt, M., 2014. Misstatements in financial statements: The relationship
between inherent and control risk factors and audit adjustments. Auditing: A Journal of
Practice & Theory, 33(4), pp.247-269.
Sin, F.Y., Moroney, R. and Strydom, M., 2015. Principles‐based versus rules‐based auditing
standards: The effect of the transition from AS2 to AS5. International Journal of
Auditing, 19(3), pp.282-294.

17
AUDITING
Titera, W.R., 2013. Updating audit standard—Enabling audit data analysis. Journal of
Information Systems, 27(1), pp.325-331.
Toy, A. and Hay, D.C., 2014. Privacy auditing standards. Auditing: A Journal of Practice &
Theory, 34(3), pp.181-199.
Vîlsănoiu, D. and Buzenche, S., 2014. Determining Audit Materiality in the Banking
Industry–A Knowledge Based Approach. Procedia Economics and Finance, 15, pp.935-942.
William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and assurance services: A
systematic approach. McGraw-Hill Education.
www.cpaaustralia.com (2019). [online] www.cpaaustralia.com. Available at:
https://www.cpaaustralia.com.au/podcast/contemporary-perspectives-on-
corporategovernance [Accessed 19 Sep. 2019].