Introduction to Financial Accounting

This document provides an introduction to financial accounting, including information on the audit firm for David Jones Ltd, the audited financial statements, and the independence of the auditors.

Running head: INTRODUCTION TO FINANCIAL ACCOUNTING
Introduction to Financial Accounting
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1INTRODUCTION TO FINANCIAL ACCOUNTING
Table of Contents
Answer to question 6..................................................................................................................2
Answer to A:..........................................................................................................................2
Answer to B:..........................................................................................................................2
Answer to C:..........................................................................................................................3
References..................................................................................................................................4

2INTRODUCTION TO FINANCIAL ACCOUNTING
Answer to question 6
Answer to A:
The audit firm for David Jones Ltd is Ernest and Young Inc.
Answer to B:
Ernest and Young have audited the financial statement of David Jones Ltd that
comprises of the statement of financial position along with the statement of comprehensive
income, statement of equity and cash flow statement for the period of 52 weeks and notes
relating to the financial statements together with the summary of substantial accounting
policies (Woolworthsholdings.co.za 2018). The auditors stated that the consolidated and
separate financial statement provides a fair representation of all the material aspects. The
consolidated financial statements and the separate financial performance along with
consolidated and separate cash flow statement for the year ended is in compliance with the
IFRS framework and meets the requirements of the Companies Act of South Africa.
The auditors also stated that the group is obligatory required to evaluate the
recoverable amount of the goodwill for the yearly basis in accordance with the IAS 36,
impairment of assets. The auditors stated that the process of valuation is difficult and requires
judgement relating to the certain assumptions while concluding regarding the inputs of
computations. The inputs usually comprise of ascertaining appropriate discounts, gross
margins, rate of growth and quantification of collaborations (Hayes, Gortemaker and Wallage
2014). The management assumptions comprise of the market value and economic conditions.
The re-assessment of carrying value of David Jones Goodwill lead to the recognition of
impairment charge that amounted to R6,958 portraying the structural changes and cyclical
downturn impacting the performance across the retail sector of Australia.

3INTRODUCTION TO FINANCIAL ACCOUNTING
The auditors in relation to the David Jones business in Australia stated that the
additional audit effort was necessarily required because of the changes applied by the
business in the current year (De Paula 2016). On basis of the annual review of financial
statement and in accordance with the present financial position as well as current facilities of
borrowing the directors are content that David Jones Ltd is the going concern and has
constantly adapted to the going concern basis while preparing the financial statements.
Answer to C:
The audit committee is content that the Ernest & Young is independent of the group
after taking into the account the following factors;
a. representation that is made by the Ernest & Young to the audit committee is in line
with their internal independence policy.
b. the auditors do not, except as the external auditors or in rendering the permission for
the non-audit services, received any remuneration or other forms of the benefit
received from the group (Louwers et al. 2015).
c. the independence of the auditors was not impaired by any form of consultancy,
advisory or other work that is undertaken by the auditors, and
d. the criteria that is specified for the independence by the independent regulatory board
for Auditors, the South African Institute of Chartered Accountants and International
Regulatory Bodies (Kumar and Sharma 2015).
e. the auditors are independent by adhering with the independent regulatory board for
the Auditors code of professional conduct for the registered auditors.

4INTRODUCTION TO FINANCIAL ACCOUNTING
References:
De Paula, F.R.M., 2016. The principles of auditing a practical manual for students and
practitioners. Isaac Pitman & Sons, Ltd (1919).
Hayes, R.S., Gortemaker, H. and Wallage, P., 2014. Principles of auditing: an introduction
to international standards on auditing. Prentice Hall, Financial Times.
Kumar, R. and Sharma, V., 2015. Auditing: Principles and practice. PHI Learning Pvt. Ltd..
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C.,
2015. Auditing & assurance services. McGraw-Hill Education.