Analysis of Murray River Organics Group Limited Financial Statement

ASSIGNMENT
BAO3306 AUDITING
REPORT

Semester 2, 2018
1. Executive summary
The main purpose of the report is to analyse the financial statement of Murray River
Organics Group Limited to identify 5 material items from the financial statement of the
company. The report will focus on the background of the company and agreed audit terms of
the auditors with regard to audit engagement. It will compute the level of materiality based on
the publicly available financial information of the entity. Based on the level of materiality
and audit risk model the report will identify various significant accounts associated with audit
risk. The report will further focus on the possible outcome of misstatement regarding
identified accounts. Finally the report will provide the conclusion based on the entire analysis
and interpretation.

2. Introduction
Murray River Organic is the leading producer manufacturer, seller and marketer for
the certified natural, organic and ‘better – for – you’ products of foods. The company survive
healthy, natural and organic food as well as the snacks market all over the world. Basically
the entity’s customers include retail customers like organic food stores, supermarkets, mass
market, convenience stores and e-commerce retailers. On the other hand, the industrial
customers of the entity include bakeries, confectionary manufacturers and cereal
manufacturers. Further, the entity operates in international as well as domestic market all
over 18 countries. The company plants, harvest, grows, packs, processes and supplies the
vine fruits those are dried organically like seedless raisins, sultanas, currants, Muscat raisins
and clusters. Previously the entity was known as Murray River Organics Pty Ltd and was
incorporated in the year 2009. The entity operates as the subsidiary of Murray River Organics
Group Limited. For analysing the materiality and audit risk the report will consider the
publicly issued annual report of the company for the year ended 2017 (Organic Foods | 3175 |
Murray River Organics 2018).

Key information
a) Our understanding of the client
ASA 210 that deals with the responsibilities of the auditor regarding agreeing with the
terms of audit engagement with the management. The objective of the auditors is accepting
the audit engagement if only the basis on which the audit is to be carried out is agreed upon.
One of such basis is audit engagement and audit fee (Legislation.gov.au 2018). As per the
given information it is found that the audit fee for this particular audit is $ 170,000 and the
same is communicated to the audit client through engagement letter. Hence, it can be
assumed that the audit will be carried out by the auditor and they have been agreed upon the
terms of the audit engagement.
The financial statement of the company includes the consolidated profit or loss
statement, consolidated financial statement position statement, and consolidated changes in
equity statement and consolidated cash flow statement. The entity is for-profit entity with
regard to preparation of consolidated financial statement. The accounting standards used
while preparing the financial statements included the AAS (Australian Accounting Standards)
and is complied with the IFRS (International Financial Reporting Standards). Further, the
company used historical cost approach except for the agricultural produce, financial
instruments and some non-current assets (Ryoo et al. 2014).
As per ASA 230 regarding audit documentation the term means record of the audit
procedure carried out, relevant evidence obtained related to audit and the conclusions reached
by the auditor. The auditors are required to prepare the audit documentation on timely
manner. Audit documentation depends on the nature, extent and timing of performed audit
procedures for complying with the AAS (Australian Auditing standards). Further, the audit is
required to document the discussions regarding significant matters discussed with the
management and those who are charged with the governance (Auasb.gov.au 2018). Various
documents those will be documented by the auditor while performing the audit for Murray
River Organic are confirmations from the client, engagement letter, correspondence,
memoranda, audit programs, schedules and representation letter.
AUASB issued ASA 250 for considering the regulation and laws while auditing the
financial report. The regulations and laws to which the company is subject to have direct
impact on its financial report for determining the disclosures and amounts reported. Other
regulations and laws shall be complied by the management. The auditors are responsible to
obtain the reasonable assurance that financial report is free from all types of material
misstatement including errors or frauds. While carrying out the audit the auditor shall
consider the applicable regulatory and legal framework. However, due to inherent limitations
some unavoidable material misstatement risks are there that may not be detected by the
auditor even if audit is performed with proper planning. Hence, the auditor shall analyse the
regulatory and legal framework applicable to the company and the industry under which it
operates (Auasb.gov.au 2018). The auditor shall further evaluate the way in which the
company is company is complying with the required framework. It is identified that the while
preparing the financial statements the company entity prepared those in compliance with the
requirement of Accounting Standards and Interpretations, Corporation Act 2001 and other
laws applicable to the company.