Audit and Ethics

Running head: AUDIT AND ETHICS
Audit and Ethics
Name of the Student
Name of the University
Author Note

AUDIT AND ETHICS1
Table of Contents
Section: 1....................................................................................................................................2
Concept of Materiality and Scope for Audit..........................................................................2
Review of Draft and Disclosures...........................................................................................3
Section: 2....................................................................................................................................5
Application to Analytical Procedure......................................................................................5
Section: 3....................................................................................................................................8
Analysis of Cash Flow Statement..........................................................................................8
Review of Audit Report.............................................................................................................9
References................................................................................................................................10

AUDIT AND ETHICS2
Section: 1
Concept of Materiality and Scope for Audit
The aim of making this report is to assessing the business through its annual report. It
focuses mainly on the concept of materiality been used and assessed in the business. The
company here chosen for making this audit report is Flight Centre Travel Group. The study of
financial report of the company has critically analyzed to check any material misstatement
reported or not in the financial statement. It is very necessary for the auditor to go through the
material misstatement if any, by the company to take a proper decision against it. If the
auditors sight of such statement then he/she is liable to collect evidences for the same while
going through a specific procedure for it. This report has considered the disclosed items in the
annual report of 2018 of the company Flight Centre Travel Group (FCTG) that is one of the
world’s largest travel agency group, providing travels services in Australia (Flight Centre
Travel Group, 2019).
It becomes one of the most important for the auditors to audit Materiality. The
concept of materiality results in misstatements when the company’s financial statements
includes any omission or irrelevant data that affect the economic decisions of the users Lai,
Melloni & Stacchezzini, 2017). The materiality concept considers both quantitative as well as
qualitative aspect. This concept helps the auditors to determine a true and fair view of the
data provided by the company (Legoria, Melendrez & Reynolds, 2013). The auditor while
assessing the statement of the company has to keep in mind to thoroughly investigate each
items mentioned in the company’s annual report. The first step taken by the auditors is in
quantitative aspect to set a preliminary judgment that includes the planning stage of audit and
a thumb rule to check either the normalized net income or total assets. The planning
materiality considers the highest value mentioned in the total assets of the company in its

AUDIT AND ETHICS3
annual report (Eilifsen & Messier, 2014). Planning materiality is to be computed for the year
2018 on the total asset estimated of the company has shown as $3,405,219,000. It has
represented in the equation as shown below:
Planning materiality=Total Assets∗5 %
¿ $ 3,405,219,000∗5 %
= $ 170,260,950
The above computation results the planning materiality of the business. The
performance materiality of the items shown in the annual report is based on this resulted
planning materiality of $ 170,260,950 only. The above figure used by the auditor to find any
misstatement in materiality stated by the company in their report to take a proper decision
against this matter.
Review of Draft and Disclosures
The annual report of the business shows the drafts and disclosures in the section of
notes to account. The notes of account section contains the relevant treatment that have some
impact on point of materiality. Therefore, the auditor needs to go through this section to find
any misstated figures to the concept of materiality to give a fair view on it (Simnett &
Huggins, 2015). Some significant items that are included in the notes to accounting section
has discussed below accordingly:
Dividends
The financial statement of the Flight Centre Group Ltd. shows that the company has
paid significant dividends during this period (Flight Centre Travel Group, 2019). The
management has considered several factors from the section of notes to accounts to determine
dividend returns to the shareholders of the company. The factors that the management