Audit of Angel Seafood Holdings Pty Ltd

Running Head: Auditing
AUDITING – HA3032
Audit of Angel Seafood Holdings Pty Ltd
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Author’s Note:

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Auditing
Executive Summary:
For the assignment, we have been allocated the Audit process of Angel Seafood Holdings Pty
Ltd. In this assignment there shall be recognition of the industries nature that the company
belongs to. The areas related to the misstatements of material have been analyzed that can be
found in the financial statements and reports of the company.

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Auditing
Table of Contents
Introduction – Angel Seafood Holdings Pty Ltd.:..........................................................................................................3
Identification of Key Business Risks:.............................................................................................................................4
Audit Risk Model............................................................................................................................................................6
Analytical Procedures:....................................................................................................................................................9
Material Account Balances...........................................................................................................................................11
Selection of Top 10 Material Accounts and Financial Assertions:...............................................................................12
Audit Steps: 14
Audit Sampling 16
Conclusion 18
References 19

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Auditing
Introduction – Angel Seafood Holdings Pty Ltd.:
Angel Seafood Holdings Pty Ltd was initially a family operated business in South Australia. Over the
years, has been developed from the oyster-growing traditional business to a pioneering and organically
certified finest Coffin Bay Oysters producer. Incorporated on September 26, 2016 as a proprietary
company, Angel Seafood turned into an unlisted company on 21 April 2017.
Angel Seafood Holdings (ASH) currently operates out of Haslam& Cowell, Coffin Bay and Smoky Bay. It
sells organic and sustainable oysters domestically as well as globally. The company possesses or leases
41.08 hectares of oyster creation licenses or leases in South Australia. (Eleftheriou,Komarev and
Klumpes 2018)
Angel Seafood is a recently listed company on the ASX. It was listed in February 2018. It runs with a
vision to become the largest oyster producer in Australia. It plans to pull off its pristine farming milieu over
time and expand seafood offerings in the market place. It is recognised by the National Association for
Sustainable Agriculture, Australia (NASAA). It is also sustainably qualifiedwith the ‘Friends of The Sea’
organisation.
The company can hold up to 20 million oysters in its waters of the three regions. Once the oysters
mature, they are funnelled to Coffin Bay. Here, their final growing stage takes place after which they are
marketed to the customers. The company sells the oysters both in the domestic markets as well as
processes for export from its purpose built and completely AQIS accredited export site which is in Port
Lincoln.

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Auditing
Identification of Key Business Risks:
On studying the Annual Reports of the company, Angel Seafood Holding Pty Ltd., we came across the
following risks highlighted by the auditors and management.
 Operational Risk: The Company has a great deal of operational risks. The cultivation of oysters
could be challenging in the long run considering the enormous extractions.(Yoon,Hoogduin and
Zhang 2015) Moreover, there are other operational challenges like threat of changes in
Government policies, environmental hazards etc. which at the end affect the operations. (Nigrini
2017)
 Competition Risk: The industry is pertinent in competitions across both the domestic and global
markets. Despite taking due diligence in all its corporate decisions and the operations, the
company does not have any control over the actionsof its competitors. The actions of competitors
may impact Angel Seafood’s business positively or negatively. The impact could be on the
financial or operational performance of the company.Any increase in supplies from competitors or
any new alternative seafood production could hamper the company’s business and its operations.
Moreover, there is a high degree of risk in the access to spat on which the company relies heavily
to replenish its stocks. (Mohan 2018)
 Legal Risk: All the licenses required and owned by the company are issued through the PIRSA
(Primary Industries and Regions South Australia) managed by the South Australian state
government. There are a lot of regulations which the company needs to abide by failing which
there could be legal repercussions during renewals. (Mališ and Novak 2016)
 Environmental Risks: There are high chances of the company’s operations being affected by
environmental challenges or incidents. Any new environmental regulation would add to the costs
of the company wherein the company would have to comply with the respective law. Besides,
risks of climate change and global warming are amongst the uncontrollable environmental risks.
(Askary, Arnaout and Abughazaleh 2018)

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Auditing
 Disease Risk: There are risks of diseases outbreaks impacting the health of oyster stocks. One
such disease is the Pacific Oyster Mortality Syndrome (POMS) affecting infantile Pacific Oysters.
Although POMS has not befallen in the regions where Angel Seafood Holdings operate, there is
no certainty of it not affecting the coffin bay oysters. Although these have been controlled by way
of various measures, these along with other diseases may affect the health and welfare of the
oysters. (Huang, Lin, et al. 2017)
 Economic Risks:Economic Risks are general risks including inflation, currency fluctuations,
industrial disputations, interest rates and growth rate. These may impact the future earnings of
the company disturbing its ability to meet forecasts. (Vovchenko, Holina, et al. 2017)
These are the general risks the company may face as a whole. Besides these, there are various financial
risks which needs to be considered.
The financial risks include:
 Huge Capital Investments: The Company is a new company which have raised funds from
issue of shares. For the year ending 2017, the share proceeds were $ 5.8 million and for the year
ending 2018, the proceeds were $ 8 million. Although considering the fact that the company is a
new one, it has not been able to convert is operations into profit making yet. (Mock, Srivastava
and Wright 2017)
 Risk of losses: With the kind of volatile industry, the risk of loss making is very high. Moreover,
the costs in legal agreements further add to the outflows. Although the losses have reduced from
2017 to 2018, it does not end the risk of losses. (Childress, Hagi and Turnham2018)
 Negative operational and investing cash flows: The Company has been incurring losses since
its inception. The cash flows from operations and investments are all negative. To combat this the
company has issued further shares in the form of new share capital. (Comunale, Barragato and
Buhrau 2019)
 Risk of valuation of biological assets: The valuation of oysters is another challenge the
company may face. The valuation is further used to determine various ratios and analyse growth