Audit of A2 Milk Ltd: Business Risk Areas and Material Misstatement Risks

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

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Executive Summary
As per the major findings of the study, customer credit, market risk, liquidity and fair value risk
are the four inherent risk areas in the operations of A2 Milk Ltd. The presence of these inherent
risk s can create material impacts on the income statement, balance sheet and other financial
statements of the company. Hence, it is needed for the auditor to consider these risk areas along
with the involved assertions.

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Table of Contents
Introduction......................................................................................................................................3
Business, Operations and Industry of A2 Milk Ltd.........................................................................3
Business and Operations..............................................................................................................3
Industry........................................................................................................................................4
Business Risk Areas........................................................................................................................4
Material Misstatement Risks...........................................................................................................6
Additional Material Misstatement Risks.........................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
Auditing is considered as such a profession where the responsibility of the auditors is to
inspect as well as analyze the accounting records and financial statements of the clients in order
to ascertain whether there is any material misstatements in them or not (Louwers et al., 2015).
While carrying out the audit procedures, the auditors of the companies must ensure the analysis
of the business risk areas as these have the ability to materially misstate the financial statements.
Due to this, it is the utmost responsibility of the auditors to ensure the inspection of the business
areas with severe doubts; specifically, the auditors are needed to ensure the examination of the
specific accounting truncations with correct balances along with the assertions used by the
management so that they can ensure about the presence of material misstatements in the financial
statements due to these (Knechel & Salterio, 2016). The main aim of this report can be found in
analyzing as well as evaluating the major business risks of A2 Milk Ltd with the aim to analyze
the scope of material misstatements. This report also undertakes the analysis of the business
operations and industry of A2 Milk Ltd.
Business, Operations and Industry of A2 Milk Ltd
Business and Operations
A2 Milk Ltd is an Australian company and it is commonly known as A2. The company is
enlisted under Australian Securities Exchange (ASX). A2 Milk Ltd commenced their business
operations in the year of 2000 and the headquarter of the company is at Sydney, Australia
(thea2milkcompany.com, 2019). The primary business operations of A2 Milk Ltd are to
commercialize the intellectual property associated to A2 Milk and other relevant products such