Auditing Theory and Practice

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
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AUDITING THEORY AND PRACTICE
Table of Contents
Question 5:.................................................................................................................................2
Question 6:.................................................................................................................................3
Reference...................................................................................................................................5

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AUDITING THEORY AND PRACTICE
Question 5:
Dick Smith has come a long way from the Woolworth’s subsidiary to become listed with
Australian Stock Exchange. They have listed the company in the year of 2013. Dick Smith was
able to collect a large sum of money from the first day of trading in Australian Stock Exchange.
From there they went on to collect good sum of amount. After collecting a significant profit from
the market During IPO since they have incurred a large sum of money from the market, on this
regard the company went on to grow their business. This also states that the director of the
company has put an enormous amount of pressure on the management and staff to purchase
inventory (Kumar and Sharma 2015).
Due to large growth in Australian Stock Exchange in stock price in 2014 the company has
went to increase the floor stock in the warehouse. The incentive for management had also
increased for a considerable amount. This was also one of the reasons for the intensified financial
condition of the company. Moreover, Dick Smith main business was disposable consumer
electronics, which also a competitive market and it also has low profit margin with very less
short shelf life. Dick Smith has lot of inventory, which had very low sale value. Though the
suppliers of the company had provided lot of rebates and discount to encourage the buyer for the
product and it would aids the marketing structure of the company. This may affect the
company’s cash flow, as their rebate policy to aid marketing structure was not able to handle the
losses incurred (Knechel and Salterio 2016). Aggressive store expansion, buying new inventory,
which is above expenses budget and stained relationship with the suppliers and at the same time
failed to get profit from the market to subdue the expenses incurred for all the above-mentioned
activity. The issues circling against the retailers with gaining favorite credit terms had became