Analysis of Audit for Medibank Private Ltd

Running head: AUDIT
Audit
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
Introduction...............................................................................................................................2
Discussion..................................................................................................................................2
Materiality Concept...............................................................................................................2
Draft Notes and Disclosures..................................................................................................3
Application of Analytical Procedures...................................................................................4
Analysis of the Cash Flow Statement....................................................................................6
Analysis of the Auditor’s Report...........................................................................................8
Conclusion.................................................................................................................................9
Reference.................................................................................................................................10

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Introduction
The main purpose of the assessment is to analyze the business of Medibank Private Ltd
which is engaged in the business of providing insurance products to the customers of Australia.
The assessment would be considering the financial statements of the business from the
perspective of audit and assess what level of materiality is considered by the management of the
company (Asx.com.au., 2019). The assessment would also be assessing the notes and disclosures
which are presented in the annual reports of the business. The analysis would also be showing
key financial ratios of the business for the period of three years. The analysis of ratios would be
identifying certain areas of performance of the business. The analysis would also be assessing
the audit opinion which provided by the auditor of the business.
Discussion
Materiality Concept
The concept of materiality states that the auditor of a business must considers items
which are of significance to the users of the financial statements. The materiality of an item is on
the judgement of the auditor of the business and it is on the basis of this judgment that the
auditor decides how much audit procedures is to be applied to an item for collecting sufficient
and appropriate audit evidences (Kumar & Sharma, 2015). The items which are significant for a
business is considered to be material in nature. Similarly, items which are complex in nature are
also considered to be material in some respect and also items which are shown to be of high
value as demonstrated in the financial statements of the company.
In order to assess the items which are presented in the annual reports of the business, the
concept of planning materiality is considered. In order to arrive at the estimate of planning

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materiality, the auditor takes the highest value which is presented in the annual reports of the
business and which according to the auditor will make an efficient base for computing planning
materiality of the business (Krishnan & Wang, 2014). The figure of sales is considered for the
business of Medibank Private Ltd. The percentage which is considered by the auditor of the
business is 2% for estimating the planning materiality of the business. The computation of
planning materiality of the business is shown in the equation below:
Planning Materiality=Total Assets of the Company × Percentage estimated
¿ $ 6319.5 million ×2 %
¿ $ 126.39 millions
The planning materiality of the business which is computed is shown to be $ 126.39% on the
basis of which performance materiality of the business would be computed. The performance
materiality of different items is estimated considering planning materiality of the business.
Draft Notes and Disclosures
The notes to accounts of a business also forms a part of the financial statements of the
business and contains explanation and disclosures regarding treatments and transactions of the
business. The management of Medibank ltd has paid special attention while preparing the notes
to accounts of the business and the significant disclosures which are provided in the annual
reports of the business are discussed below in details:
 Deferred Acquisition Costs: These are the costs which are incurred in obtaining health
insurance contracts which are deferred and recognize assets which can be effectively
measured by the management. These types of costs are systematically amortized over the