AUDITING AND ASSURANCE IN AUSTRALIA Auditing and Assurance in

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ASSURANCE IN AUSTRALIA
Table of Contents
Introduction................................................................................................................................2
1. Company’s Operation Overview and Identification of Key Business Risks.........................2
1.1 Company’s Operation Overview......................................................................................2
1.2 Key Business Risks..........................................................................................................3
References..................................................................................................................................5

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Introduction
Auditing is considered as the process of systematic as well as methodical examination
of the financial reports of the clients by the auditors in order to ensure that there is not any
material misstatements1. There are five stages in auditing; they are Selection, Planning,
Execution, Reporting and Follow-up. Audit planning is considered as a crucial stage in the
whole audit which includes deciding the overall audit strategy and development of the audit
plan. Audit planning has major significance and it is primarily occurred at the beginning of
the audit process for ensuring the devotion of required attention in the crucial areas in
financial statements2. The main aim of this report is to undertake the audit procedures used in
the planning stage of audit. More specifically, this report sheds light on the business
operations of Retail Food Group (RFG) while identifying the key business risks. It involves
in applying the analytical procedures in the balance sheet for identifying key account
balances at risk of material misstatements. In addition, this report also discusses about the key
audit assertions. Lastly, it outlines the procedures that would be used for gathering sufficient
and appropriate audit evidence.
1. Company’s Operation Overview and Identification of Key Business Risks
1.1 Company’s Operation Overview
RFG is regarded as a leading global company involved in the foods and beverage
business and is headquartered in Queensland, Australia. In Australia, RFG is considered as
the owner of the largest multi-brand retail food franchise along with the roaster and supplier
of quality coffee products. Operations of RFG can also be seen in foodservice, dairy
1 Botica Redmayne, Nives, "Essentials Of Auditing, Assurance Services & Ethics In Australia: An
Integrated Approach20121essentials Of Auditing, Assurance Services & Ethics In Australia: An
Integrated Approach. Massey: Massey University 1St Ed." (2012) 8(1) Journal of Accounting &
Organizational Change
2 "Two Stage Public Auditing For Shared Data With Efficient User Revocation In The Cloud" (2015)
4(11)

3AUDITING AND ASSURANCE IN AUSTRALIA
processing and sector of wholesale bakery. The business operations of RFG is reinforced by
four drivers of strategic growth; they are Franchise, International, Coffee and Allied
Beverage and Commercial. Modern roasting facilities reinforce the coffee and allied beverage
operations of RFG since it involves in roasting millions of kilogram of coffee each year. RFG
has recently entered into partnership with the leading UAE based businesses for expanding
their business operations3.
1.2 Key Business Risks
RFG is exposed to certain business risks while conducting their business operations
and they are discussed below:
Interest Rate Risk – RFG is exposed to the interest rate risk as a reason of borrowing the
funds at variable rate of interest4. The company undertakes evaluating the hedging activities
in regular basis for ensuring employment of the appropriate hedging strategies. The main
reason behind selecting it as a key business risk because high fluctuations in interest rate can
affect the financial outcomes of the company in material manner.
Foreign Exchange Risk – The business operations of RFG is exposed to foreign exchange
risk because the firm involves in transactions in foreign currencies5. Thus, the operations of
RFG is exposed to foreign exchange rate fluctuations. This is a key business risk since this
fluctuation can materially impact the carrying amounts of the assets and liabilities of RFG.
Credit Risk – RFG is majorly exposed to the credit risk that is referred to the risk that the
counterparty will default in contractual covenant and this risk result to the financial loss for
3 "About Retail Food Group", Retail Food Group (Webpage, 2019) <https://www.rfg.com.au/about/>
4 "2018 Annual Report", Rfg.Com.Au (Webpage, 2019)
<https://www.rfg.com.au/wp-content/uploads/2018/RFGAnnualReport2018.pdf>
5 "2018 Annual Report", Rfg.Com.Au (Webpage, 2019)
<https://www.rfg.com.au/wp-content/uploads/2018/RFGAnnualReport2018.pdf>

4AUDITING AND ASSURANCE IN AUSTRALIA
the company. It is considered as a key business risk for RFG due to the fact that the company
can face major financial losses in case the counterparties fail in repaying the money to RFG.
Liquidity Risk – RFG is exposed to liquidity and this particular risk is raised when the
company fails in maintaining the needed cash reserve and banking facilities for paying off
their current business obligations6. This is considered as a key business risk since the lack of
adequate liquidity can materially affect the financial efficiency as well as financial outcomes.
Increased Competition – It needs to be mentioned that the business operation of RFG is
exposed to the increased competition in the market due to the presence of certain major
competitors. It is needed to consider this as a business risk due to the fact that increased
competition can significantly impact in company’s financial performance as well as financial
outcome7.
Compliance Risk – It is required for RFG to comply with certain regulations, standards and
accounting policy in financial reporting that involves preparation and presentation of the
financial statements. Thus, the company is exposed to the risk of not complying with these
accounting standards and principles which can lead to the errors and misappropriation of the
values in the financial statements and financial outcomes8.
6 "2018 Annual Report", Rfg.Com.Au (Webpage, 2019)
<https://www.rfg.com.au/wp-content/uploads/2018/RFGAnnualReport2018.pdf>
7 Sharma, Rajiv Kumar and Prashant Chauhan, "Investigating Risks Due To Political Environment As
Driver For Other Risks In Offshore Outsourcing" (2017) 9(2) International Journal of Business
Performance and Supply Chain Modelling
8 Tsai, Hsiu-Fen and Chin-Jung Luan, "What Makes Firms Embrace Risks? A Risk-Taking Capability
Perspective" (2016) 19(3) BRQ Business Research Quarterl

5AUDITING AND ASSURANCE IN AUSTRALIA
References
"2018 Annual Report", Rfg.Com.Au (Webpage, 2019)
<https://www.rfg.com.au/wp-content/uploads/2018/RFGAnnualReport2018.pdf>
"About Retail Food Group", Retail Food Group (Webpage, 2019)
<https://www.rfg.com.au/about/>
"Two Stage Public Auditing For Shared Data With Efficient User Revocation In The Cloud"
(2015) 4(11)
Botica Redmayne, Nives, "Essentials Of Auditing, Assurance Services & Ethics In Australia:
An Integrated Approach20121essentials Of Auditing, Assurance Services & Ethics In
Australia: An Integrated Approach. Massey: Massey University 1St Ed." (2012) 8(1) Journal
of Accounting & Organizational Change
Sharma, Rajiv Kumar and Prashant Chauhan, "Investigating Risks Due To Political
Environment As Driver For Other Risks In Offshore Outsourcing" (2017) 9(2) International
Journal of Business Performance and Supply Chain Modelling
Tsai, Hsiu-Fen and Chin-Jung Luan, "What Makes Firms Embrace Risks? A Risk-Taking
Capability Perspective" (2016) 19(3) BRQ Business Research Quarterly