Audit Procedures for Materiality Level of Financial Statements of Met Cash Limited

Running head: COMPANY ACCOUNTS
Company Accounts
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Author’s Note

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COMPANY ACCOUNTS
Table of Contents
Section 1..........................................................................................................................................2
Materiality and Scope of Audit....................................................................................................2
Key Disclosures and Draft Notes................................................................................................3
Section 2..........................................................................................................................................4
Analytical Review of the Financial statements...........................................................................4
Section 3..........................................................................................................................................9
Analysis of Cash Flow Statement................................................................................................9
Review of the Auditor’s Report.................................................................................................11
Reference.......................................................................................................................................12

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COMPANY ACCOUNTS
Section 1
Materiality and Scope of Audit
The objectives of this assignment is to conduct audit procedures for the purpose of
ascertaining the materiality level of the financial statements of a company in order to review
whether the financial statements are free from misstatements. The materiality concept is
fundamental to the scope of audit as the auditors determine whether the financial statements are
showing true and fair view on the basis of judgement of the auditor. The company which is
considered for this assessment is Met Cash Limited (Mars-metcdn-com., 2018).
The concept of materiality states that the auditor needs to considers items which forms a
major part of the financial statements and also affects the decision-making capabilities of the
investors. In order to estimate materiality of an item of a financial statement, the auditor needs to
apply his expertise skills and judgements. Materiality is determined on the basis of qualitative
and quantitative aspects of financial statements (Legoria, Melendrez & Reynolds, 2013). The
auditor considers qualitative aspects such as net profits, changes in accounting principles, assets
of the business. As per quantitative aspect of materiality, the auditor considers a percentage
which is used for the purpose of computing the materiality of the business. Normally this is done
at the planning stage for the audit process and planning materiality is computed (Vîlsănoiu &
Buzenche, 2014). Generally qualitative materiality for an item is considered for items which has
a significance in the business or the items which are complex in nature.
During the planning stage of audit, planning materiality and performance materiality is to
be computed. In the calculation of planning materiality, a particular base is considered which is
an item present in the financial statements of the company (Elder et al., 2013). It is normally the

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COMPANY ACCOUNTS
policy of most of the auditing firms to take the item which has the highest value for the
computation of planning materiality of a business (Eilifsen & Messier Jr, 2014). On the basis of
planning materiality, performance materiality of a business is computed.
The annual report of Metcash ltd shows the financial performance of the business for the
year 2018. The figure of total assets which is shown in the balance sheet of the company is
shown to be $ 3,719 million which is considered for the purpose of calculating the planning
materiality of a business. In addition to this, the calculations of planning materiality require the
auditor to assume a percentage on the basis of which the planning materiality figure is to be
derived. The computation of planning materiality is shown below:
Planning Materiality =Total Assets of the Business × Percentage considered
¿ $ 3,719 million ×5 %
¿ $ 185.95 million
The planning materiality comes to about $ 185.95 million which will be used by the
auditor to identify performance materiality which is ultimately used for ascertaining if there are
any material misstatements in the financial statements of the company (Jacoby & Levy, 2016).
Key Disclosures and Draft Notes
The key disclosures which are shown in the annual reports of Met Cash ltd which can
affect the audit process are listed below in details:
 Commitment, Contingencies and other financial exposures: The operating lease
commitments of the business which is related to warehouses and retail stores is shown to
have decreased significantly from $ 1491.7 million to about $ 1373.1 million in 2018.