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Audit, Assurance and Compliance

Costa Group Holding Limited
Executive Summary
The performance and the well being of a company are determined through its corporate
governance and risk management approach. To have strong corporate governance it is
essential that the company should follow the eight principles of corporate governance.
Moreover, the auditor should take reasonable steps to ensure that the company is free from
flaws. In this report, Costa Group Holding Limited is selected that is listed on the ASX top
300 and deals in the horticulture sector. In the light of Costa Group Holding Limited, the
principles of corporate governance together with risk management have been studied
exhaustively.
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Costa Group Holding Limited
Contents
Introduction...........................................................................................................................................3
Application of the ASX corporate governance principles.......................................................................3
Risk assessment.....................................................................................................................................6
Ratio Computation................................................................................................................................6
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9
Appendix.............................................................................................................................................10
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Costa Group Holding Limited
Introduction
The company Costa Group Holding Limited deals in the horticulture sectors. The company
usually deals in the production of mushrooms, blueberries, raspberries, glasshouse grown
tomatoes, citrus and much such healthy fruits which are found in Australia. The company
also deals in the marketing and packaging of products in order to export them and it also
provides the facility to store its products in their warehouses which makes it easier for them
to deal in the international markets. It has basically four different product lines which are
berries, mushrooms, glasshouse grown tomatoes, and citrus. The company also produces and
sells avocado and bananas on a national scale. This results in the company to earn profits
from both the national and international markets.
Application of the ASX corporate governance principles
1. The efficient top management structure
The performance of the board was analyzed by the internal review system during the
financial year. The top management structure of the company monitors the directors and
other executive committees with the help of a review system or survey. This review or survey
provides the company information about its working system and also make it aware of any
types of suggestions for improvement and details company analytics. Even after conducting
the internal reviews the firm still initiates an external review through which it intends to find
the state of the business and also checks the performance of the firm. These external reviews
are conducted on a periodical basis of once in every three years (Costa group Holdings Ltd
CG, 2017). Every employee in the Costa Group Holding Limited is being provided with a
specific responsibility and role which the company needs to check if done in a proper manner
or not. The goals and the objective are set at the starting and then at the end of the financial
year, it is evaluated that the objectives of the firm are met or not.
2. Protection of the integrity of financial reporting
The top management structure has set up an internal audit and risk committee which will help
it to analyze the firm’s financial structure in a much-elaborated manner. The committee
generally looks after the social integrity of the firm’s financial structure and also analyzes the
appointments, remuneration, independence, and competence of the firm. They also help the
company to analyze and manage the internal risks that are prevailing in the financial structure
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Costa Group Holding Limited
of the firm. The company is also liable to pay duties and taxes under the legal and regulatory
requirements which are also checked by such auditors. The audit risk committee of the Costa
Group Holding Limited consists of three major non executive directors who help the firm in
the process of decision making.
3. Creating an effective foundation for the management
Costa Group Holding Limited is having a very rigid and informative risk management
system. The management system believes that the controls, principles, systems, methods and
the techniques of the risk management task should be carried out by the committee in a very
soothing manner. These management operations were approved by Costa Group Holding
Limited in earlier years. The change in the interest rate and the value of the curries also affect
the financial position of the firm, hence a safeguard should be used in order to protect the
firm form any of such risks. The Costa Group Holding Limited has divided its board into two
main categories which are divisional board and the board committee (Costa group Holdings
Ltd CG, 2017). These committees play a vital role in performing the risk management task
for the firm by protecting the firm’s identity and the cultural needs. Thus for the protection of
the firm’s environment, the Costa Group Holding Limited has employed a lot of effort in its
risk management strategies.
4. Performing morally and responsibly
The company is obliged to work in an integrated and ethical manner so that the code of
conduct which has been set by the top management structure will be properly maintained.
The code of conduct maintains each and every company’s ethical and political standards. The
firm has also been trying to maintain the whistleblower strategies which will be helpful for
the firm to maintain integrity and honesty (Needles & Powers, 2013). The company has also
maintained a group which deals with the securities and shares of the financial market so that
all the products of the company stay available in the industry (Costa group Holdings Ltd CG,
2017). The company also strives towards adopting the diversity policies which are very
helpful at the time of completion of the tasks in a proper and timely manner. The company
also tries to maintain equality between its employees so that no one would feel different and
thus a peaceful environment will prevail in the firm (Edward & Moutchnik, 2013).
5. Management of the risks
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Costa Group Holding Limited
In order to evaluate the risk trends of the firm and take effective measures, Costa Group
Holding Limited transfers all its risks to the reinsurers and external insurers. Each of the
system maintained by the company is managed by a proper planning system. This makes it
important for the firm to have a proper SWOT analysis and a pre-planned system to prevail
within the firm. The company tries to maintain the peace by having a proper risk managing
system (Costa group Holdings Ltd CG, 2017). The company gets all the information relating
to the risk with the help of the risk committee and thus stays protected from it. The audit
processes also help the stakeholders to be protected as because of the disclosure principle
followed by the company.
6. Facilitation of the balanced and timely disclosure.
The company has been following the principle of disclosure which states that nothing should
be kept hidden from the customers or the government. The company agrees with all the
announcements and thus makes a factual decision. The company is also required to maintain
the ASX corporate governance principles. The disclosure principle is very important for the
stakeholders because the principle stats that all the financial operation which have been made
by the firm needs to be stated in the charter which can be assessed by the shareholders to
make decisions regarding the investments they will be making in the firm (Fraser, 2011).
7. Remunerating responsibility and fairly
The company human resources department assists and advises the board in making several
important decisions. The company is always helped in accordance with the management of
the advising board committee. The remuneration committee consists of three nonexecutive
managers who are having independent nature of functioning and they have been serving the
company for very long which makes them reliable.
8. Respecting the rights of the shareholders
The company believes to maintain good relationships with its shareholders. All the major
announcements and the changes are being made aware by the firm to the shareholders
because the firm states that nothing should be kept hidden from the customers of the firm.
The entire audit and the financial data are being provided to the shareholders as they can
analyze the information to make the decision whether it should make investments in the
company or not (Geoffrey, 2016). The company sends the annual or quarterly reports to the
customers so that they can analyze it. Shareholders can receive the information through the
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Costa Group Holding Limited
electronic communications or they can receive booklets containing all the necessary
information of the firm (Leo, 2011).
Risk assessment
There are various risks like the social, legal, financial, strategic, operational, etc. that may be
undertaken by the firm during the time of performing business operations. The financial risks
of the firm relate to the lack of the capital funds, liquidity, change in the currency values and
the insolvency. These risks can only avoid by setting up the internal statutory auditors and
also many other field experts so that the objective of the business will be achieved
successfully (Gay & Simnet, 2015). The company should also try to adopt new and improved
technological measures which may prove to be very profitable as the new software helps to
keep the record in a particular manner and also the risk of losing the data is removed. The
financial records assessed by the auditors should be correct and also the auditor should keep
in mind that his opinions and data are not neglected (Elder et. al, 2010). The auditors in order
to make accurate decisions can use the ratios present in the financial statements and also he
can take a look at the operating expenses and the revenue generated by the firm. During the
analysis of business risks, the company seeks to evaluate all the possible events that may
cause a change in the environment of the firm, or the business may be affected by the use of
such events (Laux, 2014). The company uses the risk management tool in an adequate and
integral way and thus the management and the governance of the principles are done in a
pleasant manner. The auditor can have an assessment of the financial ratios and provide a
judgement on the financial performance of the company. Moreover, the risk impending
towards the organization can be known with the help of ratio assessment (Goodstein, 2011).
From the ratios it is observed that the company is evenly balanced as the profitability is
balanced and liquidity can help the business to meet the obligations.
Ratio Computation
Income Statement ratio 2016 2017
GP margin = Gross profit/ net sales*100 62.65207 63.62637
Net profit margin = Net profit./sales *100 3.041363 6.373626
ROE = NP/ Avg equity shareholder 0.075301 0.154461
7
Balance sheet ratios 2016 2017
Current ratio =
current assets/ current liabilities 1.356436 1.375
Quick ratio=
Quick asset / CL 1.178218 1.242647
debt equity
= total debt/ total equity 0.580556 0.644501

Costa Group Holding Limited
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Costa Group Holding Limited
Conclusion
From the overall analysis and report, it can be commented that the company has adhered to
all the principles of corporate governance. In addition, all the details are available in the
corporate governance statement leading to a proper disclosure. Further, the risk assessment of
the company denotes that the auditor can play a major role in the risk assessment. The ratios
can be referred to provide a valid decision on the performance of the company.
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Costa Group Holding Limited
References
Costa group Holdings Ltd CG. (2017). Costa group 2017 Corporate Governance Statement
2017 [online]. Available from:
http://investors.costagroup.com.au/FormBuilder/_Resource/_module/YfnrttzbYEyUJyNrb86
SEg/file/report/corporate-governance-statement-2017-final.pdf [Accessed 4 May 2018]
Edward F & Moutchnik, A. (2013). Stakeholder management and CSR: questions and
answers. Oxford Press
Elder, J. R, Beasley S. M. and Arens A. A. (2010) Auditing and Assurance Services. Person
Education, New Jersey: USA
Fraser, C (2011). The Oxford Handbook of World Philosophy. Oxford University Press
Gay, G. and Simnet, R. (2015) Auditing and Assurance Services. McGraw Hill
Geoffrey D. B, Joleen K, K. Kelli S. and David A. W. (2016) Attracting Applicants for In-
House and Outsourced Internal Audit Positions: Views from External Auditors. Accounting
Horizons. [online] 30(1), pp. 143-156. Available from https://doi.org/10.2308/acch-51309
[Accessed 4 May 2018]
Goodstein, E. (2011). Ethics and Economics, Economics and the Environment. Wiley
Laux, B. (2014) Discussion of The role of revenue recognition in performance reporting.
Accounting and Business Research. [online]. 44(4), 380-382. Available from
Leo, K. J. (2011). Company Accounting. Boston:McGraw Hill
Needles, B.E. & Powers, M. (2013) Principles of Financial Accounting. Financial
Accounting Series: Cengage Learning.
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Costa Group Holding Limited
Appendix
Income Statement ratio
GP margin 2016 2017
Gross profit 515 579
Net sales 822 910
GP margin = Gross profit/ net sales*100 62.65207 63.62637
Net profit margin 2016 2017
Np margin 25 58
Net sales 822 910
Np margin = Net profit./sales *100 3.041363 6.373626
Return on equity 2016 2017
Net profit 25 58
Average equity shareholder 332 375.5
ROE = NP/ Avg equity shareholder 0.075301 0.154461
Balance sheet ratios
2016 2017
Current assets 137 187
current liabilities 101 136
Current ratio =
current assets/ current liabiltiies 1.356436 1.375
Quick ratio 2016 2017
Current assets 137 187
Stock 18 18
quick asset =
CA- stock 119 169
current liabilities 101 136
Quick ratio=
Quick asset / CL 1.178218 1.242647
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Costa Group Holding Limited
Debt equity ratio 2016 2017
Total debt 209 252
Total equity 360 391
debt equity
= total debt/ total equity 0.580556 0.644501
Income statement
COSTA GROUP HOLDINGS LTD (CGC) INCOME
STATEMENT
Fiscal year ends in June. AUD in millions except per
share data.
2012-
12
2016-
06
2017-
06
Revenue 822 910
Cost of revenue 307 330
Gross profit 515 579
Operating expenses
Sales, General and administrative 338 370
Other operating expenses 68 78
Total operating expenses 406 447
Operating income 109 132
Interest Expense 14 5
Other income (expense) -59 -46
Income before taxes 36 80
Provision for income taxes 10 23
Net income from continuing operations 25 58
Other 0
Net income 25 58
Net income available to common shareholders 25 58
Earnings per share
Basic 0.08 0.18
Diluted 0.08 0.18
Weighted average shares outstanding
Basic 310 319
Diluted 317 320
EBITDA 72 113
COSTA GROUP HOLDINGS LTD (CGC) BALANCE
SHEET
Fiscal year ends in June. AUD in millions except per
share data.
2012-
12
2016-
06
2017-
06
12

Costa Group Holding Limited
Assets
Current assets
Cash
Cash and cash equivalents 4 23
Total cash 4 23
Receivables 66 77
Inventories 18 18
Prepaid expenses 5 13
Other current assets 44 57
Total current assets 137 187
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 398 444
Accumulated Depreciation -149 -162
Net property, plant and equipment 249 282
Equity and other investments 34 33
Goodwill 131 133
Intangible assets 11 10
Deferred income taxes 5 4
Other long-term assets 0 0
Total non-current assets 431 461
Total assets 569 648
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable 37 53
Deferred income taxes 6 18
Other current liabilities 58 65
Total current liabilities 101 136
Non-current liabilities
Long-term debt 104 107
Pensions and other benefits 4 5
Minority interest 5
Other long-term liabilities 0 -1
Total non-current liabilities 108 116
Total liabilities 209 252
Stockholders' equity
Common stock 396 400
Other Equity 21 48
Retained earnings -57 -57
Accumulated other comprehensive income 0
Total stockholders' equity 360 391
Total liabilities and stockholders' equity 569 643
13