Audit Report: Identifying Business Risks and Material Misstatements in A2 Milk Ltd

Running head: AUDIT
Audit
Name of the Student
Name of the University
Author’s Note

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Executive Summary
This report analyzes the business of A2 Milk Ltd with the aim to find the business risk areas. As
per the findings, the major inherent business risks are risk associated with fair value
measurement, market risk, liquidity risk and customer credit risk. Risk of material misstatements
can be developed from these inherent risks.

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Table of Contents
Introduction......................................................................................................................................3
Business, Operations and Industry..................................................................................................3
Business Operations.....................................................................................................................3
Industry........................................................................................................................................4
Areas of Business Risks...................................................................................................................4
Areas of Risk of Material Misstatements........................................................................................6
Further Risks of Material Misstatements.........................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
Auditing is considered as the process to inspect and examine the financial statements of
the companies with the aim to makes sure that they are free from material misstatements
(Persellin, Schmidt & Wilkins, 2014). At the time to search for the material misstatements in the
financial statements, the need for the auditors is to carefully examine as well as inspect the
inherent business risks of the companies due to the fact that they can lead to material
misstatements in the financial statements. For this reason, the auditors are needed to ensure the
examination of the balances of the doubtful accounts along with the underlying assumptions
associated with them with the aim to identify the material impact of them on the company’s
financial results (Tritschler, 2013). This report undertakes the analysis of the areas of business of
A2 Milk Ltd with inherent risks that can lead to the material misstatements in the company’s
financial statements. After that, this report involves in the identification of the major areas with
the risk of material misstatements in the financial statements.
Business, Operations and Industry
Business Operations
A2 Milk Ltd is considered as a major Australian companies and the name of the company
can be found in ASX. The company was established in the year of 2000 and it is headquartered
at Sydney, Australia (thea2milkcompany.com, 2019). The main business operation of A2 Milk
Ltd can be seen in commercializing the intellectual property associated with A2 Milk and other
products in the same category. It needs to be mentioned that the products of A2 Milk Ltd are
available in the six large supermarkets of Australia. A2 Milk Ltd has a market share of 10 per