Audit and Assurance

The report is about the analytical procedure an auditor shall follow. On the base of a case study of Cloud 9 Pty.Ltd business risk assignment is assessed as well overall materiality is concluded. In the other part of the report analytical procedure is discussed. The last part of the report discusses about the remuneration of executives of the companies that are listed in the ASX. For this the company selected is from the retail industry Wesfarmers, Woolworth and Caltex. ltd

Running head: AUDIT AND AASURANCE
Audit and Assurance
Name of the Student:
Name of the University:
Author Note:

1AUDIT AND ASSURANCE
Table of Contents
Introduction................................................................................................................................3
Part A.........................................................................................................................................4
Materiality..................................................................................................................................4
Determining the overall materiality.......................................................................................4
Overall Materiality.................................................................................................................5
Part B..........................................................................................................................................6
Analytical Procedure..............................................................................................................6
Key Business Risk..................................................................................................................6
Part C..........................................................................................................................................8
Conclusion..................................................................................................................................9
Reference..................................................................................................................................10
Appendix:.................................................................................................................................10

2AUDIT AND ASSURANCE
Executive Summary:
The report is about the analytical procedure an auditor shall follow. On the base of a case
study of Cloud 9 Pty.Ltd business risk assignment is assessed as well overall materiality is
concluded. In the other part of the report analytical procedure is discussed. The last part of
the report discusses about the remuneration of executives of the companies that are listed in
the ASX. For this the company selected is from the retail industry Wesfarmers, Woolworth
and Caltex. ltd
Introduction
Auditing is a prearranged form of examination and confirmation of bookkeeping
proceedings and reports, in command to appraise and evaluate the genuineness of the
proceedings and accounts. Auditing is a perception, which is designed on the source of
bookkeeping and spins from place to place the thought of inspection of books of financial
records and declarations, in command to assess whether these declarations and accounts
portray a true and fair image of an administration’s books of justification. Auditing is usually
assumed to evaluate the profit and loss declaration as well as appraise the image portrayed by
the balance sheet of a society. The determination of auditing is accompanying an inspection
and examination on the genuineness and the precision of the material represented by the
accounts of financial records of a group.

3AUDIT AND ASSURANCE
Part A
Materiality
As per International Accounting Standard Board an information is considered as
material when an omission or misstatement is present. It manipulates the judgement
regarding the economic decision that the user take on the base of monetary statements.
Materiality size is depended on the size of the article or fault that is been pointed in the
particular situations due its omission as well as misstatement. There is threshold point
provided by the materiality slightly than actuality being of qualitative feature that the data is
useful. At the time of preparing the financial report the company should conclude the
materiality in order to be sure that the financial statement are correct in case of materiality.
(Australia.gov.au. 2019).
Determining the overall materiality
The materiality for financial report is been set by the auditors on overall basis during
the planning stage. The foremost reason for setting out the materiality during planning the
audit is just for recognizing the materiality performance so that an auditor can plan the
procedure for auditing. This include an evidently unimportant threshold for collecting
misstatements. This approach is not mandatory to follow. The three key steps for calculating
the overall materiality is-
 Selection of appropriate benchmark
 Determine certain level of percentage of benchmark.
 Explaining the choice.

4AUDIT AND ASSURANCE
In this area auditor shall be concern and shall wisely select the options as he need to set
specific level of materiality in case of particular balances, groups of transactions as well
as disclosure even the short as well as long times of accounts.
Overall Materiality
The vital sum of data that is omitted, wrongly recorded, or that is not even disclosed
that contains information that effects the decision of the user of financial report or the release
of answerability by organisation or those stimulating with domination. While determining the
overall materiality the auditor shall keep in mind about the things such that user of fiscal
report, information that affects or is a base of decision, in adding to measureable sums, what
qualitative features might influence upon the operators fiscal recording supplies as they relate
to materiality. The audit team engage in auditing should use the template of materiality at the
time of conducting the audit. The below table shows the benchmark level of the materiality
misstatement.
Figure1: Materiality Template
(Source: Icac.nsw.gov.au. 2019).
There are several methods of calculating the materiality. The materiality calculated for Cloud
9 Pty. Ltd by W&S Partners is $ 1,49,02,552.50 (Appendix-1) as to perform the audit

5AUDIT AND ASSURANCE
procedure of the company. As there is vast fluctuation seen in the balance sheet of Cloud 9
Pty.Ltd. Audit needs to inspect he key areas of report as well as critically annualizing the
records that support the figures those are mentioned in the balance sheet. Total asset amount
is considered for overall materiality as the earnings of revenue is depended on assets mainly.
Part B
Analytical Procedure
The auditing standard in Australia gives number of needs as well as application
towards different responsibilities of auditor. It states the responsibilities of auditor that he or
she is needed to perform during the analysis of financial statement. There are certain
obligations on the part of an auditor at time of reviewing the past records of accounting of the
company. The standards gives the Performa of presenting and recording of financial
statement and the way in which auditor shall express it opinion about the financial statement.
An auditor shall abide the rules stated in the standard. AASB suggest the guidelines that an
auditor complies so that the objective of an audit is meet.The general purposes to be
accomplished by a self-regulating accountant have been placed down in the auditing
standards. The standard put down down in AASB is applicable to the legal, specialised and
supervisory obligations. The morals will improve the level of self-assurance of the auditors.
The context of the auditing standards would determine that if the fiscal report has been
arranged in a reasonable way as well as in accordance by means of the numerous standards of
accounting. The principled necessities have to be satisfied by the auditor in accordance to the
Australian Auditing Standards. The accountant of a company prepares the statement in the
year end. The AASB do not have any legal obligations on the internal managers of the
company so as necessary to prepare the statement by them. The standard is formulated in
such way that is easier on the auditor`s part to frame its opinion on the outcome derived from
the financial statement and discharge his duties unbiasedly (Australia.gov.au. 2019).

6AUDIT AND ASSURANCE
Key Business Risk
 Compliance Risk: This risk applies, at that time when the company is not following
the standard as well as guiding principle laid by the central body. Cloud 9 Pty. Ltd
complies the principles laid in the standard.
 Financial Risk: The risk related by way of the introduction of debt as well as long
term borrowings of the company. The corporation acquaintance to debt along with
long-term borrowing displays the inherited financial risk in the corporation. The risk
associated with Cloud 9 Pty. Ltd is about credit, interest rate and repayment. There
are different measures that is brought in use for observing different type of risk.
(Jones, 2017).
Effective Control Risk Alleviated Test of Control
Environment Sustainability The risk moderated due to
non-sustainability of
atmosphere is the corrupting
reputational as well as
operating risk of the Cloud 9
Pty. Ltd
The test or the current way of
regulatory the identical could
be by improving the skills
and expansion of the
employees in preserving and
confirming sustainability of
the same.
Identifying Material
Information
The evidence assumed by the
corporation would be visibly
free on or after material
misstatement as well as
mistake free otherwise, the
company’s goodwill along
with trustworthiness will be
Internal inspection of
accounts as well as material
been provided by the
employees ought to do the
audit process for the
equivalent. Confirmation of
data including information

7AUDIT AND ASSURANCE
caught up. must be done.
Monitoring The company’s procedures
including financials of the
entity should be well
measured in command to
reduce the business risk of
the corporation.
There must be operative
monitoring processes and
phases laid down in direction
to decrease the business plus
financial risk of the
corporation.
Physical monitoring and
controlling
The internal controller of the
corporation ought to be such
that the risk evaluated in
assets because of robbery,
forfeiture of goods,
impairment are certain of the
internal risk connected with
the company
Verification as well as
journal review of the assets
of the corporation shall be
done in order to escape
manipulation of resources
(Jones, 2017)
Ratio Analysis
Ratio Analysis
Particulars 2016 2015
Current Ratio 4.27 5.78
Quick Ratio 3.34 4.47
Inventory Turnover 0.03 0.02
Gross Loss Margin 0.51 1.36
From the ratios it is concluded that variability of ratios usually used in premeditated
preparation. Altogether of these ratios are subject to influence from side to side unprincipled
bookkeeping put into practise.

8AUDIT AND ASSURANCE
Part C
31%
36%
34%
Salary of Higher Executi ve Employee
Wesfarmers Woolworth Caltex
Figure 3: Salary Remuneration percentage of ASX Listed Company.
(Source: Annual Report)
Executives of all the three companies if retail industry are paid in cash as well as bonus. In
accordance to the section of 300A of the Corporations Act 2001
Woolworth has the highest pay scale. The structure of remuneration of Woolworth is
in the appendix 3. From the structure it is noted that the remuneration as whole is inclusive of
fixed remuneration, travel benefits, STI received in cash dependable on performance of
company and individual. The shareholding calculations have been made on the basis of share
price as on 1st July 2018. That was $ 30.52. When measuring single performance, the Board
analyses ‘what’ the management has realised, that is mostly their involvement to commercial
performance and transfer of planned significances. Where the managerial is realised to have
donated at a Target presentation stage, their STI consequence is usually allied to the
commercial presentation result that was 91.2percent in the financial year 2018
(Woolworthsgroup.com.au. 2019).

9AUDIT AND ASSURANCE
Compensation
There are two major zones subject to corporate governance necessities that is
executive remuneration disclosure as well as the payments at the termination level.
The Corporations Act needs that the yearly director’s statement comprise a
remuneration report, conversed in further part. As per application to the Corporations Act and
related Corporations Regulations 2001, resolution-making termination disbursements are
covered at a sum comparable to twelve months of a manager’s base income, through any
closure compensation more than the cap necessitating stockholder endorsement.
The Corporations Act states that the directors of a business are to be remunerated on the
terms as decided by the resolution. It is mandatory for the company to disclose the
remuneration amount paid when members cast 5 percent of vote in the general meeting or
there are hundred member present in the meeting. In relation to public company other than
reasonable payment of remuneration shareholders permission is needed.
The compensation of Woolworths under self-insurance were regarding the provision
of self-insured risk that is related to the estimation of liability that is related to the workers
including the claims and compensation of liability (Woolworthsgroup.com.au. 2019).
An onerous contract is an agreement in this agreement the inevitable value of meeting
the responsibilities under the agreement exceeding the monetary advantage predictable to be
established under it. The unescapable underneath an agreement replicate the tiniest net charge
of withdrawing from the agreement hat is the subordinate of the price of satisfying it as well
as whichever compensation or consequences rising from disappointment to accomplish it
(Woolworthsgroup.com.au. 2019).

10AUDIT AND ASSURANCE
Conclusion
External audit show business significant character in the commercial world.
Principally in the fast-changing including unbalanced monetary atmosphere, there is a
constant requirement for agreement facilities of the dominance and reliability for
corporation’s fiscal statements, completely in corporations registered on stock exchange.
Development and clearness of the corporation`s communal appearance is enormously
safeguarded by the procedure of exterior audit. While carrying out audit various problem
concerning the inner regulator is predictable and is informed to the organization of the
corporation with the confidence of enhancement within the corporation. At present, the
inspection stays predominantly grounded on the audit risk method accordingly, from the
inspection company’s point of interpretation, it is serious to realize the risk valuation
procedures sufficiently and appropriately in preparation phase because it would decrease the
exertions and prosperity in the following rankings. Basically, audit firm desires to achieve
their deliberate fees to customer in direction to tolerate uncertain in the group. In other words,
further inclusive the inspection risk calculation is, the enhanced the prosperity such as period,
currency and hard work are applied.

11AUDIT AND ASSURANCE
Reference
(2019). Microsites.caltex.com.au. Retrieved 27 January 2019, from
http://microsites.caltex.com.au/annualreports/2017/documents/17168_CALTEX_AS
X.pdf
(2019). Wesfarmers.com.au. Retrieved 27 January 2019, from
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-
annual-report.pdf?sfvrsn=0
(2019). Woolworthsgroup.com.au. Retrieved 27 January 2019, from
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf
Australia.gov.au. (2019). Australian Accounting Standards Board | australia.gov.au. [online]
Available at: https://www.australia.gov.au/directories/australia/aasb [Accessed 26 Jan.
2019].
Houston, R.W., Peters, M.F. & Pratt, J.H., 1999. The audit risk model, business risk and
audit-planning decisions. The Accounting Review, 74(3), pp.281-298.
Icac.nsw.gov.au. (2019). [online] Available at: https://www.icac.nsw.gov.au/images/Ricco
%20Public%20Website/Exhibit%20R97.pdf [Accessed 26 Jan. 2019].
Icaew.com. (2019). [online] Available at:
https://www.icaew.com/-/media/corporate/files/technical/iaa/materiality-in-the-audit-
of-financial-statements.ashx [Accessed 25 Jan. 2019].
Johnstone, K., Gramling, A. & Rittenberg, L.E., 2013. Auditing: a risk-based approach to
conducting a quality audit. Cengage learning.
Knechel, W.R.& Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.

12AUDIT AND ASSURANCE
Appendix:
1. Materiality Calculation
Cloud 9 Pty Ltd.
Materiality Planning
Section Threshold % Amount$ Materiality
Total Asset 0.5 29805105 $ 1,49,02,552.50
2. Salary Chart of Caltex
3. Structure of Woolworth

13AUDIT AND ASSURANCE
4. Compensation
A) Wesfarmers
B) Woolworths

14AUDIT AND ASSURANCE
C) Caltex
PROFIT & LOSS 2016 2015
Sales- Stores
$
27,64,163.00
$
36,49,061.00
Less- COGS-Stores
$
8,05,991.00
$
9,85,922.00
Gross Profit
$
19,58,172.00
$
26,63,139.00
Revenue- wholesale
$
4,55,94,829.00
$
5,62,89,912.00
less cost of goods sold
$
2,06,95,493.00
$
2,53,15,587.00
Gross Profit
$
2,48,99,336.00
$
3,09,74,325.00
Total Gross profit
$
2,68,57,508.00
$
3,36,37,464.00
Expenses
Accountant fees
$
4,00,247.00
$
4,89,598.00
Advertisment- Print
$
22,63,587.00
$
32,09,280.00
Advertisment-tv $ $

15AUDIT AND ASSURANCE
12,00,374.00 14,68,348.00
Advertising-Sponsership
$
20,06,788.00
$
24,54,786.00
Bank interest
$
89,675.00
$
1,06,756.00
salaries
$
63,95,361.00
$
78,23,072.00
rent expense Warehouse
$
37,22,228.00
$
45,53,184.00
rent expense store
$
2,09,368.00
$
2,56,437.00
Distrubition Expense
$
26,01,503.00
$
31,82,266.00
Telephone
$
1,25,202.00
$
1,53,153.00
Trade show
$
4,12,173.00
$
5,04,187.00
Bad Debt Expense
$
95,232.00
$
1,16,492.00
Entertainment
$
3,34,406.00
$
4,09,059.00
Rent & rates
$
3,88,881.00
$
4,75,695.00
Insurance Expense
$
25,71,450.00
$
3,14,55,504.00
Recuritment
$
4,43,303.00
$
5,42,266.00
Depreciation-accumulated
lease
$
3,78,914.00
$
4,07,434.00
Depreciation-accumulated FFE
$
13,48,861.00
$
14,50,388.00
other accured expense
$
38,23,536.00
$
32,25,449.00
Income tax expense
$
6,20,384.00
$
7,58,880.00
Total expenses
$
2,94,31,473.00
$
6,30,42,234.00
NET profit (Net Income)
$ -
25,73,965.00
$ -
2,94,04,770.00
Balance Sheet
Particulars 2016 2015
Asset
Funtiure and Equiptment
$
43,36,035.
00
$
27,60,646.
00
Lease hold $
38,78,843.
$
27,46,460.

16AUDIT AND ASSURANCE
00 00
Deffered tax
$
9,66,938.0
0
$
15,34,822.
00
Total Non-Current Asset
$
91,81,816.
00
$
70,41,928.
00
Current Asset
Cash
$
5,00,501.0
0
$
7,97,964.0
0
Sundry Debtors
$
72,136.00
$
68,053.00
Inventroy
$
53,30,930.
00
$
57,32,182.
00
Deravtive Financial asset
$
9,66,938.0
0
$
15,34,822.
00
Trade Receivables
$
1,67,68,70
7.00
$
1,65,87,97
3.00
Prepaid Expense
$
3,18,117.0
0
$
34,212.00
Prepaid asset
$
5,44,803.0
0
$
5,85,810.0
0
Total Current Asset
$
2,45,02,13
2.00
$
2,53,41,01
6.00
Total Asset
$
3,36,83,94
8.00
$
3,23,82,94
4.00
Current Liabilities
Payables
$
29,80,076.
00
$
36,26,608.
00
Current Tax liabilities
$
22,83,466.
00
$
2,67,421.0
0
Provisions
$
4,77,357.0
0
$
4,91,902.0
0
Total Current liabilities
$
57,40,899.
00
$
43,85,931.
00
Non-Current liabilities
Defered Tax liabilty $
3,52,231.0
$
3,32,293.0

17AUDIT AND ASSURANCE
0 0
Provisions
$
1,10,744.0
0
Total Non Current Liabilities
$
4,62,975.0
0
$
3,32,293.0
0
Total Liabilities
$
62,03,874.
00
$
47,18,224.
00
Net Asset
$
2,74,80,07
4.00
$
2,76,64,72
0.00
Equity
Share Capital
$
54,48,026.
00
$
54,48,026.
00
Reserve
$
5,40,660.0
0
$
4,46,826.0
0
Retained Earnings
$
97,02,043.
00
$
74,61,084.
00
Total Equity
$
1,46,09,40
9.00
$
1,24,62,28
4.00