Telstra Audit and Company Efficiency

This assignment requires an analysis of a hypothetical Telstra audit report. The focus is on assessing the auditor's independence, the role and responsibilities of the audit committee, and identifying key recommendations from the report aimed at enhancing Telstra's operational efficiency.

Running head: MASTERS OF PROFESSIONAL ACCOUNTING
Masters of Professional Accounting
Name of the Student:
Name of the University:
Author’s Note:

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MASTERS OF PROFESSIONAL ACCOUNTING
Executive Summary
The primary focus of this report is to project an assessment of the annual report of the chosen
organization in order to evaluate the risks that are related to the firm. This report has been
constructed by BG Partners and mainly has been in the hands of the senior auditor in order to
examine the risks that are related to the new client. Telstra is the new client for BG Partners
and therefore the report would mainly concentrate on the key areas of the business that is an
issue for the company and even recommend processes with the help of which the
management can rectify the issues that are pertinent in these areas.

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MASTERS OF PROFESSIONAL ACCOUNTING
Table of Contents
Introduction................................................................................................................................3
Inherent Risks and Assertions....................................................................................................3
Ratio Analysis............................................................................................................................6
Current Ratio..........................................................................................................................7
Return on Equity....................................................................................................................7
Debt to Equity Ratio...............................................................................................................8
Areas of Problem for Telstra......................................................................................................8
Recommendations....................................................................................................................10
Conclusion................................................................................................................................11
Reference List and Bibliography.............................................................................................12

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MASTERS OF PROFESSIONAL ACCOUNTING
Introduction
The key role of this paper is to evaluate the risks that are related to any company that
functions in the economy. This paper has therefore looked to concentrate on Telstra
Corporations Ltd. Telstra is the new company that has appointed us in order to assess their
risks and their financials that are associated with them. The examination and the evaluation of
the annual report of Telstra Corporations Ltd is helpful in explaining and addressing the risks
of the organization and the actions that can be recommended to them according to the results
obtained from the assessment.
Inherent Risks and Assertions
Risks Details Assertions and
Impacted Accounts of
Business
Audit procedure
The company has
outlaid their
operational
activities that is
beyond their
financial capability
Telstra has their
operational
activities way over
their financial
capacity and they
have been
undertaking
strategies with the
help of which the
company can
expand their
business
The assertions are
inclusive of:
 Accuracy
 Reliability
 Precision
Operational activities of
the company.
Impact on Accounting
books
Cash Account
Account Receivables
Bad Debts Account
The audit process of
the company will
assess the financial
activities of the
company and
thereby understand
the losses that have
been taking place in
various accounts
and thereby keep a
record about it so
that it can be

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MASTERS OF PROFESSIONAL ACCOUNTING
(Telstra.com.au
2018). The revenue
of the company has
not been increasing
significantly but the
actions that have
been taken can lead
to risks and
bankruptcy for the
company.
Revenue Account evaluated.
The fall in the level
of profits due to a
rise in the
collective losses
The annual report
has indicated that
there has been a fall
in the profit of the
organization in the
year 2017 in
accordance to the
previous year and
the level of
collective losses has
been significantly
higher.
Assertions
 Relevance
 Materiality
Impact on the books of
accounts
Bad Debt Account
Profit Account
The process of
auditing is inclusive
of an explained
assessment of the
losses that have
been incurred
which have been
recorded. The
accuracy and the
effectiveness of the
management will
even be reviewed.
Investigation of the
commitments
towards the
Telstra has a huge
amount of expense
that is associated
Assertions
 Materiality
 Accountability
The process of
auditing will
include the

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MASTERS OF PROFESSIONAL ACCOUNTING
expenditure with the
establishment of the
towers with the help
of which there can
be an improvement
of their networks
(Telstra.com.au
2018). This amount
has not been
addressed in the
financial statement.
The amount that has
been invested on the
development of the
network towers is
not highlighted in
the annual report
and this recorded in
the notes to the
account.
 Relevance
Impact on the Books of
Accounts
Expenditure Account
Account Receivable
Sales Account
Statement of Profit and
Loss
evaluation of the
costs of the firm on
these activities and
the characteristics
and contracts of the
activities will even
be ensured (Kend et
al., 2014).
The figure that is
addressed in the
annual report has
importance and
hence the value is
of the network
development
amount and
therefore this
amount has to be
recorded (William
Jr et al., 2016). The
auditor even needs
to make sure that
these activities are
in nature authentic.
Deferred Tax According to the Assertions There has been

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MASTERS OF PROFESSIONAL ACCOUNTING
annual report, the
company deferred
tax assets are
utilized in order to
write off for the
deferred tax
liabilities
(Telstra.com.au
2018).
 Write off
 Timing
 Accuracy
 Segmentation
Impact on the Books of
Account
Balance Sheet
Income Statement
estimation that the
judgment that has
been confronted by
the management
that is associated to
the projection of the
taxable profit of the
firm along with
assessment of the
processes and the
mechanisms that is
utilized by the
management for the
estimation of the
computation.
Ratio Analysis
Particulars Ratio kind 2017 2016 Difference Risk
Financial
Ratio
Current Ratio 0.86 1.02 -0.16 Low
Quick Ratio 0.70 0.91 -0.21 Low

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MASTERS OF PROFESSIONAL ACCOUNTING
Profitability
Ratio
Return on
Equity
25.59 38.57 -12.98 High
Solvency
Ratio
Debt to
Equity Ratio
1.02 0.92 0.1 Low
Current Ratio
The current ratio of Telstra Corporations Ltd for the current year indicates that it has
not been able to take care of the liquidity needs effectively. The fall in the current ratio
indicates that the company has been unable to reduce their current liability and the fall in the
quick ratio addresses the same thing. The current ratio in certain cases becomes the quick
ratio if there is unavailability of stock in the balance sheet of the organization. The quick ratio
of Telstra addresses that the firm has been unable to satisfy the requirement of liquidity and
has even been unable to handle their operating costs and operations effectively. The suitable
current ratio for any organization is 1:1 which indicates that there exists an equivalency in the
current asset and liabilities (Kend, & Basioudis 2017).
Return on Equity
The figures of return on equity have indicated that Telstra has been able to pay their
dividends to the shareholders during the year 2016 and 2017. However, the amount of
dividend has fallen in the year 2017 in accordance to the previous year. The organization has
faced losses in 2017, which has been reflected in the balance sheet of the organization. The

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MASTERS OF PROFESSIONAL ACCOUNTING
loss of Telstra has increased from the last year and this is the main cause for the return on
falling by a significant margin. The issue cannot be developed from the mindset of the firm as
in such cases the company would be facing problems in the coming time. The risk factor for
the organization is high if the return on equity is regarded as a standard of performance with
the aspect of the shareholders (Waldron, 2016).
Debt to Equity Ratio
The risk factor for debt to equity is low and the figure has increased in 2017 from
2016. It indicates that the capital framework of Telstra is more debt based than equity. This
indicates that the company is reliant on leverage. The capital structure of Telstra comprises
mainly of debts and this has been indicated in the balance sheet of the firm in the annual
report.
Areas of Problem for Telstra
Identified areas of
concern
Explanations Impacts on the
books of accounts
Audit Procedure
Current Ratio The current ratio of
Telstra is not too
effective even though
the company has a
proper liquidity
scenario and Telstra
has the ability to
satisfy the need for
liquidity. The key
factor has been due
 Cash and its
equivalent
 Prepaid
expenses
 Accounts
Receivable
 Accounts
Payable
 Interest
payable
The company records
need to be examined
in order record any
kind of discrepancies
from the
management
(Knechel, & Salterio
2016). The cash
records are required
to be assessed

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MASTERS OF PROFESSIONAL ACCOUNTING
to the fact that the
company has been
able to minimize
their current
liabilities from the
last year. It is known
that the effective
current ratio of a firm
is 1:1.
 Income Tax
that is payable
effectively.
Return on Equity The amount of
dividend the
company has paid
has fallen with
respect to the
previous year and
therefore has not
been able to satisfy
the outlook of the
shareholders with
respect to the amount
of dividends. Telstra
has been incurring
losses and this is
indicated in the
balance sheet.
 Sales Account
 Asset
 Balance Sheet
It is the duty of the
auditor is to examine
the timings and the
dates of each and
every transaction of
the firm and making
sure that effective
examinations have
been made (Shah et
al., 2017).

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MASTERS OF PROFESSIONAL ACCOUNTING
Debt to equity ratio The debt to equity
has increased in this
year from the
previous year and
this is indicates that
the capital structure
of Telstra is more
debt based that
equity. This explains
that the company
does rely on the
leverage.
Revenue
Payables
Provisions
It is the duty of the
auditor to examine
the records of the
provisions and
payables and the
relevancy of the
same.
Recommendations
The suggestions that can be given to Telstra Corporations Ltd in order to develop their
business framework include constructing an effective internal control mechanism so that the
management can monitor and manage the internal processes of the business. Telstra even
needs to maintain a record of the costs for the development of the network towers in the
books of accounts as this can have an influence on the decisions of the investors. Telstra can
even undertake a frequent assessment of the inventories and even the tower construction sites
so that the operations can be examined (Ihendinihu, & Robert 2014). Telstra even has to
undertake an effective knowledge about the framework of the deferred tax and the process
with the help of which it can be written off and needs to be declared in the annual report.