Audit Assurance and Compliance for Newcrest Mining

The report discusses the implementation of ASX CGC principles for Newcrest Mining, risk assessment, computation of income statement and balance sheet ratio, and development of common-size financial statements. The company follows Corporate governance as published by the Australian Securities Exchange (ASX) Corporate Governance Council and regularly reviews the governance and compliance practices. The risk assessment has been further able to state that Foreign currency risk, Liquidity risk, Interest rate risk, credit risk, Commodity and other price risks. The efficiency ratio of the company has been computed with inventory turnover ratio and Total Asset Turnover Ratio.

Running head: AUDIT ASSURANCE AND COMPLIANCE
Audit Assurance and Compliance
Name of Student:
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Author’s Note:

1AUDIT ASSURANCE AND COMPLIANCE
Executive Summary
The study aims to address the implication of ASX Corporate Governance Principles for
Newcrest Mining. Some of the various types of scope of discussion has been seen to be based on
relevant audit risk and potential steps to reduce risk. The latter part of the report has further
computed the income statement and balance sheet ratio, and Development of common-size
financial statements and suggested the potential steps to reduce the overall risk in audit. The
main findings have been able to state that the company follows “Corporate governance as
published by the Australian Securities Exchange (ASX) Corporate Governance Council (3rd
edition ASX Principles and Recommendations)” and observed to regularly review the
“governance and compliance practices”. The risk assessment has been further able to state that
“Foreign currency risk, Liquidity risk, Interest rate risk, credit risk, Commodity and other price
risks”. Furthermore, the audit risk paradigms have been segregated as per the Internal Control
Framework, External Audit, internal Audit and management assurance. Despite of the decreased
profit in the 2017, the company has been able to improve itself in term of the increasing sales
and minimising the risk in terms of current assists, debt to equity ratio and increased efficiency.
Some of the major initiatives taken by Newcrest Mining to reduce risk is recognised with “sound
management” and oversight of matters of key audit responsibility. Newcrest has been able to
detail the internal control framework which is seen to be regularly reviewed by the Board. The
internal control framework risks are mitigated by following an n “integrated, robust planning and
budgeting process” thereby delivering a detailed two-year budget. The company’s current
external auditor is identified to be EY and “reappointment of the external auditor” is seen to be
reviewed annually. The EY’s Audit and risk committee is seen to acknowledge in the “areas of
knowledge, quality of team, coverage ability, industry knowledge, cost and audit methodology,”
which the company believes to be critical for the service delivery.

2AUDIT ASSURANCE AND COMPLIANCE
Table of Contents
Introduction......................................................................................................................................3
Implementation of ASX CGC principles for Newcrest Mining......................................................3
Risk Assessment..............................................................................................................................5
Computation of income statement and balance sheet ratio, and Development of common-size
financial statements.........................................................................................................................6
Potential steps to reduce risk.........................................................................................................15
Conclusion.....................................................................................................................................16
References......................................................................................................................................17

3AUDIT ASSURANCE AND COMPLIANCE
Introduction
Newcrest is recognised as one of the “world’s largest gold mining companies” operating
in four countries. The company is “headquartered in Melbourne”, Australia and among the top
50 companies listed in the Australian securities exchange. The mines of the company are seen to
be in “Australia, Papua New Guinea (PNG), Indonesia, and Côte d’Ivoire”. The company’s main
emphasis is seen with three key value drivers: “maintaining low costs, growing reserves and
production and using capital efficiently”. The main mission of the company has been further
identified with delivering “superior returns from finding, developing and operating gold/copper
mines”. The vision of the company has been further identified with providing “safe, responsible,
efficient and profitable mining” (Newcrest Mining Limited 2018).
Discovery of the new ore bodies is identified as the main strategy of the company and
Newcrest possess a successful exploration track record in this aspect.
The main discussions of the report have been seen to with addressing the implication of
ASX Corporate Governance Principles for Newcrest Mining. Some of the various types of the
other scope of discussion has been seen to be based on relevant audit risk and potential steps to
reduce risk. The latter part of the report has further computed the income statement and balance
sheet ratio, and Development of common-size financial statements and suggested the potential
steps to reduce the overall risk in audit.
Implementation of ASX CGC principles for Newcrest Mining
The company has been recognised with the maximum standard of maintaining CG which
is critical to the vision. The company has been identified to following the effective procedure of
“Corporate governance as published by the Australian Securities Exchange (ASX) Corporate
Governance Council (3rd edition ASX Principles and Recommendations)” and observed to
regularly review the governance and compliance practices. The board of directors is seen to
consist of ten directors. The board has determined all “Non-Executive Directors including the
Chairman are considered independent” as per the “Board’s Independence Policy”. The main
purpose of the board have been further set out with the Board charter. The charters of each board
have been able to set out the responsibilities as per the board charter. In addition to this, the

4AUDIT ASSURANCE AND COMPLIANCE
charters of each “Board Committee” set out the “roles and responsibilities for the committees”
(Bryce, Ali and Mather 2015).
The company has been further seen to recognises to fully market the “company’s
activities and stakeholder communication in a timely, transparent and balanced style”.
Furthermore, the board has adopted the “Market Disclosure Policy” for ensuring that the
company adheres to the continuous disclosure requirements as stated by the ASX. The board of
Newcrest is seen to be supported by the “Disclosure Committee: Disclosure Committee Charter”.
The employees are encouraged to be the “long-term holders of Newcrest's” shares. It has been
seen to be necessary for the company to take the necessary decisions on “acquisition or disposal
of those shares or securities in any company in which the person may possess inside
information”. The “Securities Dealing Policy” has included the blackout period when the
employees are not allowed to deal in the securities of the company (Martinov-Bennie, Soh and
Tweedie 2015).
It has been further seen ta the company has been seen to be adopting the “Code of
Conduct” pertinent to all directors, employees and officers. In conjunction with the “Code of
Conduct” the company has a “Speak Out Standard and Service” which is kept confidential,
independent and anonymous. The various types of the employees, suppliers and contractors are
seen to be encouraged for raising the concerns of unethical or inappropriate behaviour which are
seen to be in good faith for receiving security from negative consequences. The “Anti-Bribery
and Corruption Policy” and “code of conduct” are associated to the policies which prohibits the
activities such as “bribery, corruption, unauthorised payments or exercising improper influence
by all employees and contractors”. In addition to this, the workforce diversity and organisational
diversity is led by board in driven by the recognition of the diverse workforce which is supported
by high performance. The “Diversity and Inclusion Policy” depicts the way “Newcrest supports”
a diverse and inclusive workforce. The oversight of the risk management practices and internal
controls are identified as the key accountability of the board. The company has been able to
detail the risk management and the “internal control framework policies and procedures” which
sets out the various types of the “roles, responsibilities and guidelines” for the identification and
managing of material business risks. The effectiveness of the framework is reviewed regularly by

5AUDIT ASSURANCE AND COMPLIANCE
the “Board with the support of the Audit and Risk Committee” (Boritz, Kochetova-Kozloski and
Robinson 2015).
Risk Assessment
The different facets of the risk assessment are seen with those aspects which may
adversely affect Newcrest’s “financial assets, liabilities or future cash flows”. Some of these
risks factors are mainly identified with “Foreign currency risk, Liquidity risk, Interest rate risk,
credit risk, Commodity and other price risks”. The various types of the commodity and other
price risks are identified with the copper production which are sold into the global market. The
market price of the gold and copper act as the key driver to generate cash flow for Newcrest’s
overall capacity. The company has been identified as mainly an unhedged producer which
provides its shareholders exposed to various risks pertaining to “changes in the market price of
gold and copper”. In addition to this, the Foreign currency risk are considered with the different
types of the fluctuations in the exchange rate. The revenue of the group is seen to be primarily
dominated by the “US dollars whereas a material proportion of costs (including capital
expenditure) are collectively in Australian dollars and PNG Kina”. In addition to this, the
Australian entities have AUD functional currencies whereas “non-Australian operating entities
have USD functional currencies” (Ruwanpathirana et al. 2014).
The various types of the risks are seen with the “Group’s Statement of Financial Position
can also be affected materially by movements in the AUD:USD exchange rate”. Moreover, the
audit committee of the company has identified that the different types of the risks pertaining to
the liquidity has been considered with the “capital management policies and objectives, which
utilise debt as a key element of the Group’s capital structure”. The specific exposure to the risk
in this aspect has been seen to be based on the “sufficiency of available unutilised facilities and
the repayment maturity profile of existing financial instruments”. The various types of credit risk
arses from the potential default of the “counterparty to the Group’s financial assets” which
includes the different types of the derivative instruments, trade, cash equivalents and other
receivable’s. The group has been further identified to limit the counterparty credit risk on the
liquid funds and derivative financial instrument is seen with dealings only with banks or
“financial institutions with credit ratings of at least BBB (S&P) equivalent”. Additionally, the

6AUDIT ASSURANCE AND COMPLIANCE
credit risks are limited with guaranteeing variation considered with maximum investment limits
are considered with the credit ratings. The customers intending to trade on credit terms or the
financial counterparties are subject to credit risk analysis. The audit risk paradigms have been
segregated as per the Internal Control Framework, External Audit, internal Audit and
management assurance (Pickett 2015).
Computation of income statement and balance sheet ratio, and Development of common-
size financial statements
The comparison of the consolidated income statement it has been seen that despite of the
increasing revenue of the company from 2016 to 2017 there has been significant decrease in the
profit for the period. In addition to this the development of the common size of the financial size
of the financial statement has been depicted with an increased trend in the recent year.
Comparison of Consolidated Income Statements
Particulars
Newcrest
Mining
2017
Newcrest
Mining
2016
Percentage of
the total
income
Revenues 3477 3295 106%
Profit for the
Period 319 335 95%
Comparison of Statement of Financial Position
Particulars
Newcrest
Mining
2017
Newcrest
Mining
2016
Percentage of
the total
income
Total Assets 11583 11191 104%
Capital
Expenditure 7534 7120 106%

7AUDIT ASSURANCE AND COMPLIANCE
Percentage of the total income
90%
92%
94%
96%
98%
100%
102%
104%
106%
108%
106%
95%
Comparison of Income Statements
Revenues Profit for the Period
Percentage of the total income
102%
103%
104%
105%
106%
107%
104%
106%
Comparison of Statement of Financial Position
Total Assets Capital Expenditure

8AUDIT ASSURANCE AND COMPLIANCE
The profitability ratio analysis has been depicted with a slightly decreasing net profit
margin, return on equity and return assets. This has been evident with decreasing net profit
margin of 10.17% in 2016 and 9.17% in 2017. The ROE has reduced from 4.71% in 2016 to
4.23% in 2017. This has been depicted with a profit risk in the years present financial years.
Profitability Ratio Analysis: -
Newcrest Mining
Particulars 2017 2016
Revenue (A) 3477 3295
Net Profit/Loss after Tax (D) 319 335
Ordinary Equity(H) 7534 7120
Total Assets (G) 11583 11191
Net Profit Margin (D/A) 9.17% 10.17%
Return on Equity (A/H)) 4.23% 4.71%
Return on Assets (G/D) 2.75% 2.99%
2017 2016
3.90%
4.00%
4.10%
4.20%
4.30%
4.40%
4.50%
4.60%
4.70%
4.80%
4.23%
4.71%
Return on Equity
Newcrest Mining

9AUDIT ASSURANCE AND COMPLIANCE
2017 2016
8.60%
8.80%
9.00%
9.20%
9.40%
9.60%
9.80%
10.00%
10.20%
10.40%
9.17%
10.17%
Net Profit Margin
Newcrest Mining
2017 2016
2.60%
2.65%
2.70%
2.75%
2.80%
2.85%
2.90%
2.95%
3.00%
3.05%
2.75%
2.99%
Return on Assets
Newcrest Mining

10AUDIT ASSURANCE AND COMPLIANCE
The efficiency ratio of the company has been computed with “inventory turnover ratio
and Total Asset Turnover Ratio”. The overall depicts on the risk has stated that the company is in
a better position in terms of the efficiency. This is evident with an increasing efficiency ratio of
2.22 in 2016 to 2.32 in 2017. It has been further seen that the Total Asset Turnover Ratio has
slightly improved from 0.29 in 2016 to 0.30 in 2017.
Efficiency Ratios Analysis
Newcrest Mining
Particulars 2017 2016
Cost of Goods
Sold(A) 2609 2601
Inventory (H) 1125 1170
Revenue (A) 3477 3295
Total Assets
(G) 11583 11191
Inventory
Turnover
Ratio (A/H)) 2.32 2.22
Total Asset
Turnover
Ratio (A/G) 0.30 0.29

11AUDIT ASSURANCE AND COMPLIANCE
2017 2016
0.29
0.30
0.31
0.30
0.29
Total Asset Turnover Ratio
Newcrest Mining
2017 2016
2.16
2.18
2.20
2.22
2.24
2.26
2.28
2.30
2.32
2.34 2.32
2.22
Inventory Turnover Ratio
Newcrest Mining
Despite of the decreasing profitability, the risk of cash available operational activities has
been considerable low in compare to the previous financial years. This has been evident with the
increasing current ratio of 1.20 in 2016 to 1.88 in 2017 and quick ratio of 0.87 in 2017.

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Short-Term Liquidity Ratio Analysis: -
Newcrest Mining
2017 2016
Total Current Assets (A) 1249 803
Receivables (D) 88 134
Cash and equivalents (B) 492 53
Total Current Liabilities (F) 664 670
Current Ratio (A/F) 1.88 1.20
Quick Ratio [(B+D)/F) 0.87 0.28
2017 2016
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00 1.88
1.20
Current Ratio
Newcrest Mining

13AUDIT ASSURANCE AND COMPLIANCE
2017 2016
0.00
0.20
0.40
0.60
0.80
1.00 0.87
0.28
Quick Ratio
Newcrest Mining
The decreasing nature of the debt ratio and debt to total asset ratio has suggest that the
company has lower risk to pay off its credits in the current financial year. This is evident with
increasing Debt-to-total Assets Ratio of 0.36 in 2016 to 0.35 in 2017 and D/E ratio of 0.57in
2016 to 0.54 in 2017.
Debt Equity Ratio
Newcrest Mining
2017 2016
Total Liabilities (A) 4049 4071
Total Assets (B) 11583 11191
Total Equity (C ) 7534 7120
Debt-to-total Assets Ratio (A/B) 0.35 0.36
Debt to Equity Ratio (A/C) 0.54 0.57

14AUDIT ASSURANCE AND COMPLIANCE
2017 2016
0.52
0.53
0.54
0.55
0.56
0.57
0.58
0.54
0.57
Debt Equity Ratio
Newcrest Mining
2017 2016
0.34
0.35
0.36
0.37
0.35
0.36
Debt-to-total Assets Ratio
Newcrest Mining

15AUDIT ASSURANCE AND COMPLIANCE
Potential steps to reduce risk
The board has recognised the “risk management” and the internal controls which are
central to sound management and oversight of matters of key audit obligation to the board.
Newcrest has been able to detail the internal control framework which is seen to be regularly
reviewed by the Board. The internal control framework risks are mitigated by following an n
“integrated, robust planning and budgeting process” thereby delivering a detailed two-year
budget. This budget is “subject to the approval of the board against the performance targets”
which are reported against the monthly and supplemented quarterly forecast updates. A
comprehensive way of capital approval is seen with the authorisation of the investments and
capital expenditures. The main capital decision is subject to the commercial and technical review
(Karalapillai et al. 2014).
As discussed by Jiang and Son (2015)Newcrest has been seen to employ “delegated
authorities” which cascades “authority levels for expenditure and commitments from the Board,
to the MD & CEO, and then from the MD & CEO to the rest of the Company”. In addition to
this, the appropriate due diligence procedures are also seen to be employed in place for the
acquisitions and divestments. Additionally, capital strategy documentation prepared annually is
set out with the “capital structure, liquidity and cash flow at risk objectives of the Company”
(Ruhnke and Schmidt 2014). The treasury department of Newcrest has detailed the policies and
systems for the management of the “debt, commodities currency exposures, investment of
surplus cash, and interest rate risk management”. The “financial control processes” ensure the
integrity of the financial reporting. The maintenance of the financial control is further able to
ensure the various types of the data which are seen to be related to ensuring the integrity in the
financial reporting. The system of the financial control maintained by the company processes the
integrity of the financial reporting. In terms of “external audit, the risk committee” is seen to be
accountable for the “selection, evaluation, compensation” and “replacement of the external
auditor subject to approval form the shareholder” (Czerney, Schmidt and Thompson 2014).
The company’s current external auditor is identified to be EY and reelection of the
external auditor is seen to be reviewed annually. The EY’s Audit and risk committee is seen to
acknowledge in the “areas of knowledge, quality of team, coverage ability, industry knowledge,
cost and audit methodology,” which the corporation believes to be critical for the service

16AUDIT ASSURANCE AND COMPLIANCE
delivery. Moreover, the “Audit and Risk Committee” ensures “lead external audit partner and
quality review partner” change their role in “every five years” and in case they have acted with
the capacity for the five out of the last seven successive financial years. It has been further seen
that the “Audit and Risk Committee” sees the “external auditor” throughout the year for
reviewing the adequacy of the “existing external audit arrangements, with particular emphasis on
the effectiveness, performance and independence of the auditor”. It is also seen that the “Audit
and Risk Committee” meets with the external auditor in the absence of management following
most meetings (Chen et al. 2015).
The “internal audit function is managed by the manager” of the internal audit. The
manger of the internal audit is responsible for reporting to the general manager “Finance &
Accounting” and is considered to be having direct access to the “FD & CFO”. The “Manager
Internal Audit” has thee access to the “Audit and Risk Committee and its Chairman” who are in
need of information and explanations. The annual internal audit plan is able to include the risk
for covering the material risks of the operating processes and sites. The status of the report is
further able to include the “Audit and Risk Committee” during most meetings (Guénin-Paracini,
Malsch and Paillé 2014).
Conclusion
The discussions of the study have stated that Newcrest Mining has been recognised with
the highest standard of maintaining CG which is critical to the vision. The company has been
identified to following the effective procedure of “Corporate governance as published by the
Australian Securities Exchange (ASX) Corporate Governance Council (3rd edition ASX
Principles and Recommendations)” and observed to regularly review the governance and
compliance practices. Some of the main findings on the on the risk assessment has been further
able to state that Some of these risks factors are mainly identified with “Foreign currency risk,
Liquidity risk, Interest rate risk, credit risk, Commodity and other price risks”. In addition to this,
the company has been identified as “predominantly an unhedged producer which provides its
shareholders” exposed to various risks pertaining to variations in the market price of gold and
copper. The income statement and balance sheet ratio has been seen with decreasing profit

17AUDIT ASSURANCE AND COMPLIANCE
margin from 2016 to 2017. However, the company has been able to lessen the risk in terms of
current assists, debt to equity ratio and increased efficiency.

18AUDIT ASSURANCE AND COMPLIANCE
References
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more effective than auditors at modifying audit programs in the presence of fraud risk?’, in
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Bryce, M., Ali, M. J. and Mather, P. R. (2015) ‘Accounting quality in the pre-/post-IFRS
adoption periods and the impact on audit committee effectiveness - Evidence from Australia’,
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unqualified audit reports indicate increased financial misstatement risk?’, Accounting Review,
89(6), pp. 2115–2149. doi: 10.2308/accr-50836.
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19AUDIT ASSURANCE AND COMPLIANCE
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