Auditing and Assurance in Australia

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and assurance in Australia
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1AUDITING AND ASSURANCE IN AUSTRALIA
NAME of your
Entity >>>
JB Hi-Fi Limited
DISCUSSION
FACTOR According to ASA200.13(n)(i) inherent
risk (IR) is a measure of the
susceptibility of material misstatement
before considering any internal
controls.
LOW MODER
ATE HIGH
Nature of
client’s business
The entity is engaged in retailing of the
home consumer related products through
2 segments – Australia and New
Zealand. It sells consumer electronic
products and the services including
computers, cameras, software, games,
blu-ray discs and compact discs. While
considering the risks involved with the
entity in consideration to ASA 200 it can
be stated that the risks of the company
can be categorised under –
Economic sustainability risk – this
includes the risks associated with the
ability of the entity to continue its
operation at the current level with regard
to the economic production over the
long term period
(Investors.jbhifi.com.au 2019)
Social sustainability risk – it involves
the risk of the entity’s ability to continue
its operation in a way that will meet the
accepted social need and norms for long
term period.
Environmental sustainability risk – it
involves the ability of the entity to
continue its operation in a way that will
not compromised the ecosystem’s health
under which it will operate for long term
Other risks to which the entity is
exposed are risks of regulatory and
monetary policy, government’s fiscal
policy, competition, loss of reputation or
erosion and nature of consumer
spending (Investors.jbhifi.com.au 2019)
(Pg. 12 of annual report 2018)

Results of
previous audits
The audit of the company for both the
period ended on 30th June 2018 as well
as 30th June 2017 has been carried out by
Deloitte Touche Tohmatsu. As per the
auditor’s opinion financial statements
are prepared as per the requirement of
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2AUDITING AND ASSURANCE IN AUSTRALIA
Corporation Act 2001 and complied
with the Australian Standards and
Corporation Regulation 2001. For both
the years the auditors issued unmodified
opinion (Auasb.gov.au 2019).
However, some key audit matters were
mentioned in the audit report as follows
–
 Goodwill generated from acquisition
of The Good Guys has been
allocated to cash generating unit of
the entity
Accounting for the transaction of The Good
Guys acquisition was complex and required
management’s judgment regarding
determination of fair value for identifiable
liabilities and assets and allocation of the
purchase consideration to the intangible
assets separately identifiable
(Investors.jbhifi.com.au 2019) (Pg. 54 -
56 of annual report 2018)
Initial versus
repeat audits
It is found that since the year 2002 the
audit of the entity is carried on by
Deloitte. Only the audit engagement
partners are rotated in each 5 years.
Hence, JB Hi-Fi must follow the
continuance procedure as per ASQC1
s.26-28. However, continuance of same
audit firm for so long will lead to
creation of familiarity threat as per
APES 110 as the auditors will have idea
regarding which area of the financial
report may have been misstated. Hence,
inherent risk is moderate owing to long
term association with the entity
(Auasb.gov.au 2019). (Pg.10 – ‘integrity
of reporting’ of annual report 2018)

Quantity of
non-routine
transactions
Inherent risks with regard to non-routine
transactions are outlined under ASA 315
s.A140-A142 and s.A32. It is observed
from the income statement that the gross
profit of the company is $ 1470.2
million and the net profit attributable to
the shareholders after meeting all the
expenses amounted to $ 233.2 million.
Non-routine transactions like amount
received from changes in fair value of
the cash flow hedges amounted to $ 1.9
million that is not a big amount. Hence,
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