Auditing: Analysis of Woolworths Ltd Financial Statements

Running head: AUDITING
Auditing
Name of the Student:
Name of the University:
Author’s Note

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AUDITING
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Background and Industry Analysis..............................................................................................2
Analysis of Financial Statement of the Business.........................................................................3
Analytical Review of the Business..............................................................................................5
Estimation of Planning Materiality..............................................................................................8
Audit Assertions and Planning........................................................................................................9
Reference.......................................................................................................................................17

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Introduction
The main purpose of the assessment is to analyse the business of Woolworths Ltd which
is engaged in the business of providing different varieties of products in Australia. Woolworths
ltd operates supermarket business in Australia. The assessment would be analysing different
risks which is faced by the business from the perspective of audit. The assessment would be
computing appropriate financial ratios which can show the performance of the business over the
past three years. The assessment would be discussing the materiality of different items which are
presented in the financial statements of the business (Woolworthsgroup.com.au. 2019). In
addition to this, the report would be identifying ten accounts which can be affected by material
misstatement and also provide necessary assertion regarding the same. The assessment would
also be covering a sampling plan for testing each of the accounts which are identified from the
financial statements.
Discussion
Background and Industry Analysis
The company which is selected for this assessment is Woolworths ltd which operates in
chain of supermarket and the same is considered to be the leading supermarket of Australia. As
per the recent market conditions, the supermarket industry is at its growth phase which is evident
from the number of customers which Woolworths is serving on a r weekly basis. The annual
report of the company shows that the business is serving around 29 million customers on a
weekly basis on an average. This shows that the industry is growing one and it is anticipated to
grow even more in future years. The annual report further shows that the earnings of the business

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has grown by 9.5% in 2018 in comparison to previous year. The management of the company
anticipates that the business would be achieving sales at a higher rate in future.
The different types of risks which are faced by the business are listed below:
 Competitive Pressure: The industry of supermarket is competitive in nature as
Woolworth ltd has a close competitor Coles Group which is also performing
appropriately which makes the market divided. This affect the revenue which is
generated by the company and also has an affect on the profitability of the business.
 Liquidity Conditions: This is another major risk which is faced by the business which
relates to the inability of the business to collect necessary funds from the market so as
finance different projects. The nature of the business demands that an appropriate portion
of liquid cash needs to maintained at all times so that any current obligations of the
business can be met effectively.
 Regulation and Government Regulations: The business also faces risks which is
associated with change in regulations of the business. In many cases, the business enters
into tie up agreements with other organization. A change in regulations of the business
would affect such tie up agreement with the business.
Analysis of Financial Statement of the Business
The financial reports of the business for the period 2018 is considered for the purpose of
analysis whether the estimates which are presented in the financial statement are showing true
and fair view or not. The profit and loss statement show that the profits of the business have
slightly increased in comparison to previous year which may be due to increase in the sales
revenue of the business or reduction in costs. However, the financial statement of the business
shows an increase in the both the sales figure and costs of sales. In such a case, the auditor of the