Audit Risk Factors in Planning the Audit Engagement

AUDITING

Audit
Executive Summary
The report aims at assessing and evaluating the risk factors in the process of planning the
audit engagement from the viewpoint of the auditor. For this analysis, we have selected a
company listed in the ASX namely Southern Cross Media Group Limited. The company is a
pioneer in media companies in Australia which deals in free-to-air commercial radio,
television and online services all over Australia. The company has various broadcast channels
and media platforms including online and mobile platforms and thus operates in a very
competitive environment.
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Audit
Contents
Introduction...........................................................................................................................................2
Audit Planning.......................................................................................................................................2
 Impairment of Intangibles and Investments-.................................................................................2
 Financial Market Risks...................................................................................................................3
 Employee share entitlements........................................................................................................4
Key Parameters.....................................................................................................................................5
 Technology & its use:.....................................................................................................................6
 Material risks.................................................................................................................................7
Financial factors:...................................................................................................................................8
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11
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Audit
Introduction
In planning an Audit procedure, every auditor is at risk that the financial statements on which
he is providing his opinion might be materially misstated or have omitted financial
statements. This risk is called audit risk. There are various factors that contribute to audit risk.
One of such factors is business risk despite the difference in nature of both the risks, as
business risk is related to the company and its stakeholders, unlike audit risk. But the
detection of audit risks can be done by detecting the inherent business risks also (Livne,
2015). We shall analyze the Annual Report of the company Southern Cross Media Group
Limited for the year ended 30th June 2018 for assessing the audit risks at the planning stage.
The Audit risk is composed of Inherent risks, control risks, and detection risks. Inherent risk
is the risk that is created by an error or omission due to reasons other than the control failure.
When the transactions are complex, the case of inherent risk is likely to occur. On the other
hand, the control risk can be defined as the probability that material misstatement will happen
in the financial statements due to the system control failure utilized by the business.
The detection risk can be defined as the possibility that the auditor will fail to trace the
material misstatement that is present in the financial statement. For detection of such risk it
is important that the auditor should make use of the audit procedures.
The Audit planning can be performed in the following manner:
 Performance of the initial audit planning
 Understanding the business of Southern group and the industry in which it performs
 Assessment of the risk of business
 Understanding the internal control together with the control risk
 Gathering information to evaluate fraud
The detailed audit planning is defined in the further part of the report and deals
exclusively for Southern Cross Media Group Limited
Audit planning
As studied from the Annual Report of Southern Cross Media Group Limited for the year
ended 30th June 2018, following are some of the risk factors that an auditor needs to consider
while planning the audit engagement:
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