Corporate Auditing: Financial Statement Analysis, Audit Committee, and Risk Assessment

Running head: CORPORATE AUDITING
Corporate Auditing
Introduction
The assessment consists of two parts which are section 1 and section 2. The main purpose
of this section 1 is to analyze the financial statements of Brambles Ltd for the year 2017. Section
1 will be dealing with critical aspects of auditor’s report and audit committee of Brambles ltd.
The second part of the assessment which is Section 2 is further subdivided into two parts for
which a different case study is provided (Brambles Corporate Site. 2018). The requirements of
the section 2 will be solved considering the case study which is provided in each part of Section
2.
Section 1
Financial Statement Analysis
The company which is considered for this part of the assessment is Brambles Ltd is a
supply and logistic chain management which is engaged in the business of unit load equipment
and associated services (Simnett & Huggins 2014, pp.719-747). As per the annual report which
is formulated by the management of Brambles ltd, the financial year end of the business is shown
to be 30th June 2017. The auditor of Brambles Ltd is shown to be Pricewater House Coopers
(PwC) Australia.
Audit Committee
The audit committee of the business is responsible for looking after the audit process of
the business. The audit committee comprises of David Gosnell, Carolyn Kay, Scott Perkins and

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Brian Long who is the chairmen of the Audit committee of the business. As per the annual report
of the business, all the members of the audit committee which is mentioned above are
independent members of the business and forms a part of the audit committee of the business.
As per the corporate governance statement of the business, provision for non-audit
services of the business is covered in the charter of Audit Independence, states the requirements
which are to be followed before auditor can perform any non-audit work (Zadek, Evans &
Pruzan 2013). The charter classifies the work in three categories which is related to non-audit
services which is provided by the auditor which are works which are to be approved by the Chief
financial Officer of the business, work which is needed to be approved by the audit committee
and the works which the auditor is prohibited to perform (Bruynseels & Cardinaels 2013,
pp.113-145). The charter also makes it clear that prior consultation and approval of Chief
Financial Officer and Audit Committee is required in order to undertake non-audit services of the
client (Sun, Lan & Liu 2014, pp.153-172). In addition to this, auditors are prohibited from
carrying out internal accounting services, valuation services and internal auditing services for the
client’s business (Brambles Corporate Site. 2018). The charter therefore makes it clear that the
auditor is not allowed to offer non-audit services to its clients unless the Chief financial officer of
the company or the audit committee advise for the same.
Analysis of Auditor’s Report
As per the annual report of Brambles ltd for the year 2017, the auditor of the company
which is PwC Australia has considered the consolidated balance sheet, consolidated income
statement, consolidated cash flow statement, notes to accounts forming part of the financial
statements and Director’s declaration for the purpose of audit and forming an opinion for the

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same. In addition to this, the management considered certain significant items which had
influence on the audit opinion formed by the auditor which are covered in the key audit matters
of the business.
The accounting process which the company followed for pooling equipment assets of the
business which includes pooled pallets, Reusable plastic crates for which the auditor considers
the useful life and the amount which is charged as depreciation for the asset and also the
valuation for the same. Other components on which the auditor’s opinion was based on includes
recoverability of equity investments, deferred tax balances and also assets which are held for
sales by company. All these components have significant impacts on the decisions which is taken
by the auditor and thereby on the overall audit report which is shown in the annual reports of the
business.
The auditor of the company as stated in the annual reports of the company is PwC which
is one of the big four auditing firms. The partner who has signed the auditor report for Brambles
ltd for the year 2017 is Susan Horlin. In addition to this, it is also shown in the auditor’s report
which is attached to the annual reports of the business that the auditor report was signed on 21st
August 2017.
As per the auditor’s report which is shown in the annual reports of the company for the
year 2017 shows that the same is effectively prepared (Stanisic et al. 2014). The auditor has
provided the company with an unqualified report which is shown when the auditor’s opinion
states that the financial statements are free from any material misstatement and the same are truly
and fairly represented in the financial statements of the business (Blay & Geiger 2013, pp.579-
606). In addition to this, the company has followed all the relevant rules and regulations and

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accounts standards which are applicable to the company in the accounting process framework
which is followed by the company. The financial statements are showing true and fair view and
are in compliance with all the relevant standards which are applicable to the business and
therefore, the auditor has issued an unqualified audit report during the year.
Section 2
Question 2.1
Inherent Risks
Inherent risks are those risk in financial audit which can occur due to some error or
omission in the financial statements which is not due to failure in control of the management. In
normal circumstances inherent risks takes place when there is a degree of complexity in the
transactions of the business or estimate in the financial statement requires the judgement of the
auditor (Knechel &Salterio 2016). As per the case which is provided, Wicked Wrist Watch ltd
(WWW) is engaged in manufacturing of high quality of wrist watches which are made with the
use of precious stones. The business faces certain inherent risks which are identified and
explained below:
 As per the case study which is provided, there are two major watch makers for the
company who are approaching retirement stage. This can be regarded as an inherent risk
of the business as the retirement of the two experienced watch makers will affect the
quality of products and moreover, it is noticed that the younger generation are not much
interested in learning the trade, therefore the number of watch makers who are present
and have skills are lesser in numbers. Therefore, there is a risk of fall in the operations of
the business once the experienced watch makers retire.