Auditing and Assurance

This document provides an overview of auditing and assurance, including the importance of conducting an analytical review on financial statements, the role of audit committees in corporate governance, and the recommended procedures for ensuring the effectiveness of financial statements. The document also includes financial data and ratios for Woolworths Group.

Running head: AUDITING AND ASSURANCE
AUDITING AND ASSURANCE
Name of the Student
Name of the university
Author Note

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Table of Contents
Part A...............................................................................................................................................2
Question 1........................................................................................................................................2
Question 2........................................................................................................................................3
Part 2................................................................................................................................................4
Question 1........................................................................................................................................4
Question 2........................................................................................................................................4
Question 3........................................................................................................................................5
References........................................................................................................................................7
Appendix..........................................................................................................................................8

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Part A
Question 1
In order to ensure that the statement of accounts have been prepared in the right manner
and to assure that the overall procedures and proceedings which are adopted by the firm are
appropriate in nature, it can be considered to be relatively important for the auditors to conduct
an analytical review on the financial statements in the planning phase (Arens, Elder and Mark
2012). The analytical review makes use of the audit technique which is then used to assess the
reasonable figures and balances as mentioned in the financial statements. Hence, in the given
section, the financial statements of Woolworths will be undertaken to understand the accuracy of
its statements.
Ratio Analysis
It can be largely understood that over the last few years, the group has been performing
considerably well. This can be understood largely through the metrics of Average Inventory
days, which was at a measure of 36.4 in the year 2013 and this increased to 38.3 in the year
2014. The average days can be stated to be at its maximum back in 2016 where the figure was
40.8 and in the year 2016, this came down to 36.6 which can be considered to be a decline which
was driven by the Australian and New Zealand food endeavours (Woolworthsgroup.com.au
2019). Moreover, in line of the revenue has gone a considerable change whereby it has increased
to 36,371$ in 2016 from $34798$. In the year 2018, the sales growth from the continued
operations can be largely understood to be 3.4% and the EBIT has increased by 9.5%
irrespective of the future benefits. There has also been a considerable increase in the dividend
trends of the firm which have now become 93 cents. The increase in the inventory can be

3AUDITING AND ASSURANCE
understood to be relatively consistent and in line of this, it has to be understood by the business
that, there have not been major defaults in the formation of the statements and hence, the
statements have been prepared accurately. Refer to Appendix
Question 2
Hence, after the analytical review for the financial statements was carried out, it can be
concluded that, the financial statements are being able to provide a good and fair view of the
overall financial status of the group and that the compliance with the Australian Accounting
Standards can be stated to be carried out effectively.
Hence, in order to ensure the continuity of the effectivity of the statements and the
efficiency of the same, the following procedures are being recommended for the firm:
1. Continue regular financing and identify as well as evaluate the risk of material
misstatement of the financial reports. This will help in the identification of any frauds or
error in the design of the financial statements.
2. They will also be required to conduct an understanding of the internal control which lies
relevant in the procedure of auditing and in line with this, design procedures like review,
which form the basis of data reliability, predictability (Knechel and Salterio 2016).
3. Moreover, continues, trend analysis, ratio analysis and reasonableness analysis are crucial
to conduct.
4. In addition to this, the auditing process will also involve communicating the overall
results of the analysis and related operational tasks to the different directors of the firm as
this will go a long way in ensuring that a firm will successfully able to undertake

4AUDITING AND ASSURANCE
operations which will assist them in the improvement of the same (Kaplan and Atkinson
2015).
5. Moreover, the overall structure of the report needs to be examined and noted down in the
auditor report accordingly.
6. In a timely manner, the auditors would be required to recommend ways to the firm to
improve the overall operations.
Part 2
Question 1
The firm chosen for the analysis is the Woolworths group and in line of this, it can be
rightfully mentioned that, the company forms corporate governance central to the overall
operations of the firm. In line of this, it can also be understood that, the firm engages in corporate
governance to ensure that it is able to maintain long term relationship with the different
shareholders of the firm (Woolworthsgroup.com.au 2019). The Woolworths board of directors as
well as the management involves itself in strict initiatives which helps to meet the highest level
of compliance as well as disclosure. The report which can be referred to for the corporate
governance activity review for the firm can be carried out effectively. The title of the report can
be understood to be the Corporate Governance Statement which helps the shareholders to gain an
understanding of the initiatives of the firm.

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Question 2
The Woolworths can be understood to have an Audit, Compliance and Risk Management
committee. The Audit committee can be understood to have 5 members in total. These members
are the members named Gordon Cairns, Jillian Broadbent, Siobhan McKenna, Scott Perkins and
Michael Ullmer. The head of this committee is Scott Perkins. The Audit committee can be stated
to have the correct composition as it comprises of various knowledgeable and experienced
members. In addition to this, the overall charter of the firm can be stated to be formed in a
manner such that all the members of the committee and the firm as a whole benefits. The main
objective of the board is to provide adequate guideline to the firm in regard to the auditing issues
and to maintain considerable relations with the external auditing firm (Furnham and Gunter
2015). The board is responsible for ensuring that, they review the overall performance of the
audit, they maintain a string link between the different internal and external audit and lastly, they
are successfully able to review the scope as well as the terms of the Non Audit Service Policy
which will then assist the board in ensuring long term success (Hope, Langli . and Thomas
2012). Moreover, these were the duties of the external audit and in line of the internal audit, the
committee is responsible to supervise the effectiveness of the audit, prepare the reports in a
timely manner and lastly, provide the recommendations to the board in this manner (Griffiths
2016).
Question 3
According to me, there have been various scandals in the past which have then
questioned the importance of Corporate Governance in a firm and with respect to this, it needs to
be rightfully understood that, in order to ensure the long term success of a firm, it is important
that the firm forms an audit committee (Drury 2013). The importance of an audit committee

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cannot be overlooked because, it plays a major role in corporate governance and is highly
responsible for the overall direction, control as well as the accountability of the firm. The audit
committee is not only involved in the internal audit of the firm but also the external audit of the
firm. Not only is the committee good at finding effective means which reduce the fraudulent
activities but also look out for the overall shareholder equity and interests (Brigham and Houston
2012).
In addition to assisting the audit firm in ensuring that, they are able to gain the right
amount of assistance for their tasks, the audit committee is also able to ensure that it is
successfully able to provide the right information to the public which is correct, accurate as well
as reliable in nature (Hall 2015). Moreover, it can also be mentioned that, the audit committee is
largely useful to the organization as well as it helps them during any litigation and related
counselling.

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References
Arens, A.A., Elder, R.J. and Mark, B., 2012. Auditing and assurance services: an integrated
approach. Boston: Prentice Hall.
Brigham, E.F. and Houston, J.F., 2012. Fundamentals of financial management. Cengage
Learning.
Drury, C.M., 2013. Management and cost accounting. Springer.
Furnham, A. and Gunter, B., 2015. Corporate Assessment (Routledge Revivals): Auditing a
Company's Personality. Routledge.
Griffiths, P., 2016. Risk-based auditing. Routledge.
Hall, J.A., 2015. Information technology auditing. Cengage Learning.
Hope, O.K., Langli, J.C. and Thomas, W.B., 2012. Agency conflicts and auditing in private
firms. Accounting, Organizations and Society, 37(7), pp.500-517.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Knapp, M.C., 2012. Contemporary auditing. Nelson Education.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.
Woolworthsgroup.com.au 2019. Annual report. [online]. Available
at:https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf (Retrieved
on: 18 May. 2019).

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Appendix
Profitability
Gross margin 29.31% 27.19%
Gross Margin 28.17% 26.84%
Operating margin 4.45% -0.51%
Operating margin 4.79% 6.2%
Pretax margin 4.2% -0.9%
Pretax margin 4.41% 5.72%
Net Profit margin 2.94% -1.83%
Net Profit margin 3.04% 4.02%
Per Share Data
Revenue/Share 43.94 46.06
Basic EPS 1.23 1.61
Diluted EPS 1.23 1.61
Book Value/Share 8.26 6.87
Tangible Book Value/Share 3.31 2.11
Cash/Share 1.27 0.85
Cash Flow/Share 2.17 -0.05
Management Effectiveness
Return on Equity 15.55% -1.72%
Return on Equity 19.79% 24.37%

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Return on Assets 6.96% -4.97%
Return on Assets 7.3% 9.81%
Return on Investment 11.87% -8.08%
Return on Investment 11.61% 15.02%
Growth
EPS(MRQ) vs Qtr. 1 Yr. Ago 0.95% -169.3%
EPS(TTM) vs TTM 1 Yr. Ago 5.61% -110.29%
5 Year EPS Growth -7.42% 0.81%
Sales (MRQ) vs Qtr. 1 Yr. Ago 2.27% -0.02%
Sales (TTM) vs TTM 1 Yr. Ago 2.7% -0.64%
5 Year Sales Growth -0.59% 3.37%
5 Year Capital Spending Growth -1.27% 3.65%
Financial Strength
Financial Strength
Quick Ratio 0.33 0.3
Current Ratio 0.81 0.81
LT Debt to Equity 21.28% 37.66%
Total Debt to Equity 26.38% 50.73%

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Efficiency
Asset Turnover 2.37 2.44
Inventory Turnover 8.75 9.14
Revenue/Employee 285.28K 375.55K
Net Income/Employee 8.39K -8.27K
Receivable Turnover 69.51 59.25
Dividend
Dividend Yield 2.72% 5.27%
Dividend Yield 5 Year Avg. 3.81% 4.46%
Dividend Growth Rate -12.54% 2.12%
Pay-out Ratio 85.09 97.37