Developing an Audit Program for selected publically listed Company

Developing an Audit
Program for a
selected publically
listed Company

EXECUTIVE SUMMARY
A project report has been prepared taking into account one of Australia's publicly
traded firms. It reflects on how an organization is planning for the audit program. It
requires recognition of the test of controls and the implementation of suitable test on
separate transactions and account balances. It indicates that the auditor will adapt the
practical protocols to the particular risks evaluated. It also lists multiple value of assets
and liabilities of balance sheet and refers to their related assertions. The key aim of this
project is to figure out how to be select the most reliable and successful mix of audit
rules to assure that the audit goal is attained. Finally, a sample plan for each of the
material accounts to be checked has also been incorporated. The above descriptions
were expressed in a table format so as to allow for easy interpretation and contrast.

Contents
EXECUTIVE SUMMARY.........................................................................................................................2
INTRODUCTION......................................................................................................................................4
MAIN BODY..............................................................................................................................................4
1. Analysis of nature of industry and key risks..............................................................................4
2. Analysis of financial performance of above company for three years...................................8
3. Discussion of account balances which are consider Material...............................................13
4. Ten different material account balances..................................................................................14
5. Relevant financial report assertions.........................................................................................14
6. Preparation of set of audit work................................................................................................17
7. Sampling plan for each material account.................................................................................19
CONCLUSION........................................................................................................................................20
REFERENCES........................................................................................................................................21

INTRODUCTION
It is important for business entities to apply a suitable and effective audit program
so that financial statements can be prepared in more transparent and accurate manner
(Eulerich, Georgi and Schmidt, 2019). In the aspect of project report an audit program
has been prepared for a publically listed company registered in Australian stock
exchange. The name of company is Bega Cheese limited that is involved in sector of
consumer staples. This company was founded in year 1899, headquartered in Bega,
Australia. This company is Australia’s diversified food company which has its
manufacturing sites at different locations like new south wales, Queensland and
Victoria. The company was formed as a public limited company in year 2011 ( About
Bega cheese limited, 2020). The project report contains information about key risks
faced by chosen company, financial performance and an appropriate audit program in
accordance of ten selected material accounts.
MAIN BODY
1. Analysis of nature of industry and key risks.
Bega cheese limited is an Australian based company which is listed in Australian
stock exchange. The company is known for its cheese as they provide quality
cheese products since 40 years and they dominate the market. Company sells
around 1 million packs of cheese on a daily basis. In year 2017, company
increased their product portfolio by including some other products such as
vegemite, peanut butter, ZoOSh. The company’s products are chosen on priority
in different supermarkets as they produce organic cheese items (About Bega
cheese limited, 2020). The rationale behind maintaining higher quality in food
products is that they buy raw material for production of cheese products directly
from farmers and different farms. This company also follows different types of
regulations such as they try to make limited noise so that neighborhoods cannot
be disturbed along with assurance of proper management of wastage of water is

also considered. So as per this discussion, it can be stated that company is
based in the sector of food manufacturing and they have monopoly in various
cheese products in Australia. Though, there are some competitors too but no one
is able to maintain similar quality in products as Bega cheese limited.
Main business risks- Each business faces number of risks in which some risks
can be controlled and some can’t be. The risks which are under control of a
business, arise due to internal inefficiency. On the other hands, those risks which
are not in control of a company, occur due to any external environment factor.
Underneath some types of risks are mentioned below in such manner:
 Competitive risk- It can be characterized as form of risk which occurs in
businesses due to number of competitive companies are available in
market (Zhaokai and Moffitt, 2019). This types of risk cannot be controlled
by business entities. For instance, the above Bega cheese limited has
number of other competitors such as Nu farm, Sun Rice, Costa group etc.
These all companies may trouble to revenues and existence of above
mentioned company by offering number of substitute products.
 Credit risk- This is defined as a type of risk that occurs in companies due
to inefficiency of debtors in order to pay debt amount. Eventually, big
companies offer credit facility to different clients and if these clients fail to
make payment which they owed than company may face huge loss. Such
as Bega cheese limited can face this risk if their customers do not make
payment for the goods which are sold on credit.
 Liquidity risk- It can be understood as a form of risk that occurs because
of lack of financial resources in order to make payment of short term
debts. In the context of above Bega cheese limited, they may face this risk
if they fail to make projection of financial resources.
Risk of material misstatement- This is known as a type of risk that can occur in
business entities because of intentionally or without intentionally by accountants
in financial statements (Al-Bawab, 2019). In regards to a company, there are

different kinds of accounts in that risk of material misstatement may occur. In
Bega cheese limited, this type of error may happen in annual report including
current, non-current assets and liabilities.
Factors affecting to inherent and control risks:
Inherent risk- It is a type of risk that is occurred by a mistake in financial
statement due to a factor instead of failure of internal control. In the aspect of
financial audit risk, this type of risk has higher possibility to occur when
transactions are complex. In Bega cheese limited, there are various kinds of
factors which can affect this risk such as complication of trades, new accounting
procedures, liquidity position etc. The rating of this risk is too upper because
above mentioned factors have higher possibility of variation that can affect to this
risk.
Control risk- This can be understood as a type of risk which is posed by wrongly
formulation of financial statements due to letdown of techniques for identifying,
stopping and controlling them (Knechel, Thomas and Driskill, 2020). The factors
which affecting this risk in Bega cheese limited are environment in which they
operate, efficiency of controlling and monitoring process etc. The rating of this
risk for above company is moderate. The rationale behind is that there is very low
possibility of changing in these above mentioned factors.
The above mentioned misstatements can be assessed with assistance of audit
risk model that is explained underneath-
Audit risk model- This is defined as a type of model that is applied by auditors in
order to find relation between different kinds of risk raising because of audit
engagement (Neamah and Hassan, 2019).
Formula: [AR = f (IR, CR, DR)]
Elements Inherent
risk
Control risk Amount of evidence
required
Cash and cash equivalents High Low Moderate