Financial Statement Analysis of Amani Gold Limited

Running head: AUDITING
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Table of Contents
Introduction................................................................................................................................2
Nature of the company and the industry....................................................................................2
Analytical procedures of financial statement.............................................................................3
Calculation of materiality...........................................................................................................5
Relevant financial report assertions...........................................................................................7
Comprehensive set for audit work steps....................................................................................9
Conclusion................................................................................................................................11
Reference list............................................................................................................................12
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Introduction
The main objective of the report is to focus on the financial statement analysis of
ASX listed company Amani Gold Limited. For the purpose of analysis the performance of
the company over the last 3 years period will be taken into consideration. The report will also
focus on the company’s business operation, industry overview, investing as well as financing
activities of the company. After analysing the financial statement of the company various
ratios like current ratio, debt equity ratio, asset turnover ratio and net profit margin for the last
3 years period will be calculated. The ratios will be calculated to measure the performances
of the company and changes in the performance level over the 3 years period. The report will
also evaluate the materiality of different account balances and the assertions associated with
them. Finally, based on the materiality and assertions comprehensive work steps for audit
will be recommended to minimize the assertion level (Amanigold.com, 2018).
Nature of the company and the industry
ASX listed company Amani Gold Limited was formed as Amani Gold Limited in the
year 2016 and carries on its operation from Milton, Australia. It is engaged in exploration,
development and acquisition of the mineral interests for precious energy and metals in
Democratic Republic of Congo. Primarily, the entity explores the gold deposits. Further, it
holds shares in Giro project for gold with 2 permits of exploration that covers more than 497
kilometres and is located in the north-east of Democratic Republic of Congo. The company
falls under the precious metal mining industry (Hofmann & McSwain, 2013). Gold has
significant role in Australian and major gold production of Australia generated from the
open-cut mines. However, the major argument against the gold investment is that gold does
not yield any interest even if it is held for long term and therefore, it leads to low interest rate.
However, on the contrary, if the investor holds bank deposits or government bonds then also
the interest rate is not very high. In fact, the interest rate on government bond sometimes
become negative that signifies that the investor is actually paying the government as a
privilege to hold its bonds.
The company’s investing activities includes payments towards equipment and plant
amounting to $98,732, payments towards development and exploration expenses amounting
to $ 83,81,797 and option payment for acquiring projects amounting to $ 326,798. Further,
the financing activities of the company includes the receipts from issuance of the securities
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amounted to $ 11,825,542, expenses towards share issuance amounted to $ 661,431,
repayment of the loan amounted to $ 239,916 and fund receipts through borrowing amounted
to $ 91,081.
The financial statement of the company is prepared based on the Australian
Accounting Standards and the authoritative pronouncement of AASB (Australian Accounting
Standard Board) and the interpretations of Corporation Act 2001. Further, the company
prepares its financial reporting on going concern basis that considers that company will
recognise the liabilities and assets under normal business course at the same value that is
stated under the financial report (Almeida, Hsu & Li, 2013). At the end of each year the
company reviews all the relevant revised and new interpretations and standards released by
AASB and apply them accordingly. The consolidated financial statements and associated
notes are are complied with the IFRS (International Financial Reporting Standards) as
released by IASB (International Accounting Standards Board). The financial statements of
the company include 4 statements. Those are – consolidated statement of the comprehensive
income, consolidated statement of financial position, consolidated statement for changes in
equity and consolidated statement of cash flows. Further, the details regarding the items
included in the financial statement are presented through notes to the financial statements.
Analytical procedures of financial statement
Ratio Formula 2017 2016 2015
Short-term solvency
Current ratio Current assets/current liabilities 2.62 0.98 0.90
Long term solvency
Debt equity ratio Total liabilities/shareholder's equity 1.90 4.19 5.33
Asset utilization ratio
Asset turnover ratio Net sales/total assets 0.38 0.08 0.10
Profitability ratio
Net profit ratio Net profit/net sales *100 262.02 -90872.05 -6764.40
Analysis –
Ratio Analysis
Current ratio Current ratio is the liquidity ratio used for measuring the ability of the company
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