Analysis of Dick Smith Electronics Ltd for Auditing Assignment - ACCT6006

ACCT6006 Auditing1T2017
Assignment

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Audit analysis of Dick Smith Electronics Ltd.................................................................................3
History of Dick Smith Electronics Ltd........................................................................................3
Australian accounting standard....................................................................................................4
Indication of going concern problem in an entity........................................................................5
Brief analysis of the 2014/15 Annual Report..............................................................................6
Unmodified audit opinion by the auditor for the financial year ended 30 June 2015.................7
Auditors’ legal liability................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

INTRODUCTION
The present study is related to the Dick Smith Electronic Ltd, which was collapsed in the year
2016. In this study, the history of the company along with the reason for shutting down is
evaluated. There are some factors which give an indication about the going concern capability of
the organization are also stated. This study also provides the analysis about evidence which leads
to the doubt on the going concern of the company based on the annual report of 2014/15.
Moreover, the legal liability of the auditor is also evaluated in the present case.
AUDIT ANALYSIS OF DICK SMITH ELECTRONICS LTD.
History of Dick Smith Electronics Ltd
Dick Smith Electronics Ltd was founded by the Dick Smith in 1968. The company is one of the
leading retail suppliers who deals in mainly electronic items, parts of the electronic goods,
electronic project kits, and many other things. The company expanded its operations in several
other countries also but did not achieve success (Dick Smith, 2018). However, in Australia, the
company conducted its operation in very well manner as it has around 377 outlets across
Australia and New Zealand.
However, the company was collapsed in the year 2016. The main reason for the shutting down of
the company was lack of proper management. Further, the market of the electronics was very
competitive, and the company was not able to cope up with the changing market trends. The
company has many stores as compared with its competitors; this leads to higher cost of
managing the stores. Since the company did not change its goods as per the demand of the
consumer, therefore, the invested cost was not recovered (Business Insider, 2016). Along with
this, the sales of the company was decreased and due to which the market share of the company
fallen and also the value of the shares got reduced. The strategy regarding the inventory
management of the company was not according to the pattern of consumer behaviour. Moreover,
the company was not able to get the proper credit period from its creditors so that the cost of
finance was very high and also it had affected the stock level and product mix adversely. All the
above reasons lead to the closed down of the company.