Analytical Procedures in Woolworth Audit

ACC302
Auditing & Assurance
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Contents
Introduction......................................................................................................................................3
Part A: Analytical procedure performed during the planning phase of Woolworth audit...............3
Part A.1: Analytical review and impact on the assertions made by the management.................3
Part A.2: Audit procedure required to carry out the areas of concern identified above..............4
Part B...............................................................................................................................................5
Part B.1: Process relating to Corporate Governance within annual report..................................5
Part B.2: Audit Committee and its Composition as stated in the Annual Report of the
Company......................................................................................................................................5
Part B.3: Benefits of the Audit Committees to the Auditor, the Company, the Auditing
Profession and the Society as a whole.........................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................7
Appendix..........................................................................................................................................8
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Introduction
This report is developed for gaining an understanding of the auditing processes and
practices followed by an ASX listed entity. It has carried out an examination of the audited
annual reports of the selected company. This has been carried out by conducting an analytical
examination of the financial statements of the selected company in planning phase and
identifying the concerned areas. This is followed by developing the relevant audit procedures for
responding to the areas of concerns identified. In addition to this, it has also discussed the
importance of audit committee and its presence within the selected company. The company
selected for the analysis purpose is Woolworths Limited, a retail company of Australia, operates
in five segments that are Australian Food, liquor and petrol, supermarkets, merchandise, hotel
and home improvement.
Part A: Analytical procedure performed during the planning phase of Woolworth audit
Part A.1: Analytical review and impact on the assertions made by the management
The process of analytical review has been defined in “Australian Auditing Standard 520:
Analytical Procedures”. Analytical procedures means evaluation of financial information with
the help of financial analysis and finding the possible relationship between the data presented
and analyzed data. Analytical procedure used at all the three phases of audit i.e. planning, testing
and completion. Planning phase of audit is most essential as it helps the auditor to locate any
misstatement and impact of financial analyse on the assertions made by the management in the
annual report. The analytical process performed during the planning help the auditor to identify
the significant matters that requires special consideration during the testing phase of the audit
process. The four major tasks that need to be carried out during the planning phase of audit
report are as follows:
 Understanding of client’s industry and business
 Assessing the going concern of the company
 Critical analysis of possible misstatement
 Reducing the detailed test requirement (CFA Institute, 2013)
In order to perform the analytical review of financial statements of the respective
company at the time of planning phase it is required to carry out the ratio analysis for current
period and compare it past performance and also with industry average. Woolworth belongs to
retail industry and its main business depends upon the sale of merchandise at its store and
through online stores (Audit, Risk Management and Compliance Committee, 2018). Some of
important financial items in income statement and balance sheet that requires review during the
planning phase have been presented below:
Income Statement items:
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