Analyzing the Collapse of Dick Smith: A Study of Breach of Accounting Standards and Unmodified Audit Report

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
Name of the Student
Name of the University
Author note

1AUDITING THEORY AND PRACTICE
Table of Contents
Introduction:...............................................................................................................................3
Brief History and Collapse:........................................................................................................3
Breach of Australian Accounting Standards:.............................................................................5
Breach by Directors:..............................................................................................................5
Brief Analysis of the Annual Report:.........................................................................................6
Signs of Going Concern problem:..............................................................................................8
Cause of Unmodified Audit Report:..........................................................................................9
Liability of Auditor towards third parties:...........................................................................10
Some related observations:..................................................................................................10
Conclusion:..............................................................................................................................11
References:...............................................................................................................................12

2AUDITING THEORY AND PRACTICE
Executive Summary:
Dick Smith was one of the most recognisable electronic retail companies of Australia.
During the initial phase of the company, it had garnered an enormous fan following and had
already become a household name in Australian household. Although due to a series of
financial manipulations and mal practices, the company suffered, which led to its untimely
dissolution. In this report, an analytical approach has been adopted for looking into this
matter. This report has been divided into various sections, including a Brief History and
Collapse, Breach of Australian Accounting Standards, including an enquiry into the causes of
the unmodified report by the auditors.

3AUDITING THEORY AND PRACTICE
Introduction:
Dick Smith is one of the most reputed electronics companies, to have ever been come
out of Australia. Of late it had been entangled itself in a series of financial problems, which
proved too much for the company. These problems led to the eventual downfall of the
company, and the company had finally found itself liquidated in the year 2016. These had
some large scale implications, even putting the work of is chief auditor Deloitte in question.
The financial malpractices and manipulations had been called into some serious questioning,
which led to the preparation of this report, where a detailed and analytical view has been
adopted for the purpose of looking into this delicate matter, which had caused a major uproar
in the Australian retail market.
Brief History and Collapse:
DSHE Holding Limited, which was earlier known by the name of Dick Smith
Holding Limited, was an Australian retailer of consumer electronic products and services. It
was one of the most popular chains of retail stores based company, which used to sell
electronic goods, electronic components and project kits. Australia’s success had led to the
creation of New Zealand. This electronic based company was founded in the year 1968 by Mr
Dick Smith, and was also owned by him and his wife (Www.DickSmith.com, 2018). The
company had primarily two different segments, for ensuring convenient operations; one was
the Dick Smith Australia and Dick Smith New Zealand. The company used to connect and
communicate with its large number of customers mainly with the help of the four physical
mediums, namely the Dick Smith, Move, David Jones Electronics Powered by Dick Smith
itself and MOVE by Dick Smith Sydney International Airport. The company boasted of a
strong network of roughly around three ninety three stores spanning across Australia and
New Zealand. This vast network of stores included at least three fifty one Dick Smith Stores,