Audit and Ethics: Materiality, Analytical Evaluation, Cash Flow Statement, and Auditor Report of Newcrest Mining Corporation

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

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AUDIT AND ETHICS
Table of Contents
Section 1..........................................................................................................................................2
Materiality and Scope of Audit....................................................................................................2
Review of Draft notes and Disclosures.......................................................................................3
Section 2..........................................................................................................................................4
Analytical evaluation of the financial statements........................................................................4
Section 3..........................................................................................................................................8
Analysis of Cash Flow Statement................................................................................................8
Review of the Auditor Report......................................................................................................9
Reference.......................................................................................................................................10

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AUDIT AND ETHICS
Section 1
Materiality and Scope of Audit
The primary aim of undertaking this assignment on the Newcrest Mining Corporation of
Australia is to carefully scrutinize the different auditing procedures for the purpose of reviewing
the different aspects of the principle of materiality and its adherence by the Newcrest Mining
Corporation. The principle of materiality helps in assessing the true and fairness of the financial
statements (Simnett & Huggins, 2014). The principle of materiality is considered as a prominent
part of the auditing and accounting principles which are considered necessary in the preparation
of the financial statements. Here the major and the minor misstatements are considered after
initial analysis. Thereafter the significant misstatements are carefully considered on the level of
materiality, and how it is going to affect the company’s decision making (Lobo & Zhao, 2013).
For this particular assignment is the Newcrest Mining Corporation, which is based in Australia.
It is engaged in the exploration, mining, development and selling of gold and gold copper
concentrate. It is Australia’s leading company in terms of mining and it operates beyond
Australia and has many international markets.
Materiality is a crucial part of the entire auditing operation and is a significant part of the
auditor as it is his responsibility of ensuring if it is followed by the company management or not.
In the case of materiality, the auditor considers two aspects, the quantitative and the qualitative
aspects (Morningstar.com, 2018). In the quantitative aspect, the auditor scrutinizes the estimated
percentages on the different financial items in the financial statements and in the case of the
qualitative aspect, the auditor looks into the important financial aspects such as inventory, net
profit and various other similar items. The auditor computes the planning of the materiality at the

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AUDIT AND ETHICS
initial stage, and on its basis, approximate performance materiality of different items are
calculated.
Various bases which are accounted for are based on important items which are shown in
the financial statements of the organization. For the Profit and loss account, the net profit before
tax, aggregate sales are taken as bases and in the case of the balance sheet, the aggregate assets
are considered.
The annual report of Newcrest has been analyzed. The revenue has improved from
FY16’. It is the general norm of considering the item having the highest value for estimating
bases. Here the aggregate assets can be considered for considering the planning materiality. For
FY 17, it is $11, 583 and the percentage for calculating planning material is assumed to be at 5%
(Asx.com.au 2018). The calculation of planning materiality is below:
Planning material= (Total assets*5%)
= ($11,583*5%) = $579.15
Review of Draft notes and Disclosures
The draft and disclosures notes contains information about the way of treatment of
certain items, which are very important for the auditors. The most important items under this
head have been provided below:
 Impairment of non-financial assets: The impairment tests for indicating the impairment
of the non-financial assets have been mentioned in this section (Adenergy.com.au, 2018).
The different basis of impairment and the impairment reversal calculations have also
been mentioned.