Investigative Report on Collapse of Dick Smith: Breach of Accounting Standards and Role of Directors

Running Head: AUDITING THEORY AND PRACTICE
AUDITING THEORY AND PRACTICE
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1AUDITING THEORY AND PRACTICE
Executive Summary:
Dick Smith was one of the most reputable electronic retail companies coming out
from Australia. During the preliminary phase of the company, it had gained a gigantic fan
following and had it had already become a family name in Australian household. Although
due to long range of financial manipulations and mal practices, the company suffered, which
led to its unfortunate termination. In this report, an investigative and logical approach has
been taken into account 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.

2AUDITING THEORY AND PRACTICE
Table of Contents
Introduction:...............................................................................................................................3
Brief History of Dick Smith and collapse:.................................................................................3
Breach of the Accounting standards of Australia:.....................................................................6
Role of the directors in the breach:........................................................................................6
Concise Analysis of the Annual Report:....................................................................................7
Different Signs of the Going Concern problem:........................................................................8
Liability of Auditor towards third parties:...........................................................................10
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

3AUDITING THEORY AND PRACTICE
Introduction:
A business can fail in a variety of ways. Some of these causes are beyond the control
of the particular business or concern and sometimes, the company has complete control over
its own fate and situation. In the former cases, the concerned organisation collapses due to
various external; threats such as recessions, levy of high taxation by the government, or
failure to comply with the government’s policies. Through this report, a similar case of
collapse of a reputed electronic company has been made, which goes by the name of Dick
Smith. In this case, it is the company to blame for its own collapse. There have been various
kinds of financial manipulations which at various levels of the organisation, which has
brought the company, in its current state of affairs, where it had to suspend its operations on a
permanent basis. This report lends a comprehensive and analytical view into the collapse of
one of the well-known electronic accessories companies of Australia.
Brief History of Dick Smith and collapse:
The company which goes by the name of Dick Smith was one of the most well-known
electronics brand, to have ever come out of the Australian sub-continent. It later came to be
known as the DSHE Holdings Limited (dicksmith.co.nz, 2018). The company primarily
engaged in the sale of electronics goods, electronic components and project kits of various
kinds. This company, had its own share of humble beginnings, with the company being
founded in the year 1968, by Mr Dick Smith, after whom the company has been named,
along with his wife. During its initial years, the company had operated through two different
segments of its electronic business, in the form of catering to the demand of both its
Australian as well as the New Zealand market. Steadily the company was growing through
the 1970s and the 1980s. by that time the company, had expanded its business horizons by
opening a network, which eventually had reach an impressive network of 20 stores. In the