Risk Assessment

The report is about the analysis of audit procedure and the applicability of accounting standards by the company Bega Cheese. The report provides the overview about the different types of risk associated and the auditor’s opinion.

0RISK ASSESSMENT
Risk Assessment
Name of the Student:
Name of the University:
Author Note:

Running head: RISK ASSESSMENT
Table of Contents
Introduction................................................................................................................................2
Knowing the Company..............................................................................................................2
Significant Business Risk...........................................................................................................2
Analytical Review......................................................................................................................2
Significant Audit Risk (ASA 200).............................................................................................3
Audit Risk Model...................................................................................................................3
Significant Inherent Risks......................................................................................................3
 Inventory:........................................................................................................................4
 Intangibles:......................................................................................................................4
 Fixed Assets:...................................................................................................................4
 Foreign Exchange Transaction........................................................................................5
Control Risk...............................................................................................................................5
Corporate Governance...........................................................................................................5
Impact on Audit Testing.............................................................................................................5
Appendix:...................................................................................................................................7
Reference:................................................................................................................................11

Running head: RISK ASSESSMENT
Executive Summary:
The report is about the analysis of audit procedure and the applicability of accounting
standards by the company Bega Cheese. The report provides the overview about the different
types of risk associated and the auditor’s opinion.

Running head: RISK ASSESSMENT
Introduction
As per ASA 300 para 4 the objective of the auditor for planning audit is to assess the
devoting suitable attention to significant parts of the audit, recognition of problem and
providing effective solution to it on a timely basis, selection of proper audit team and
coordinate the work with team to complete audit in a proper time.
The auditor of Bega Cheese framed the audit in order to give a rational declaration
regarding the fiscal report for stating that it’s free from any material misstatement. This can
arise if fraud or error prevails in the accounting process. For trailing the scope of audit the
auditor team takes into consideration the geographical location as well as the management
structure in which the company is operating. The audit team is skilled, competent about the
industry to audit the multifaceted manufacturing as well as distributing company Bega
Cheese Limited.
Knowing the Company
The company is located in Bega town of New South Wales Australia. Company runs
the business of dairy goods in Australia. In the year 2011 the company was publically listed
in Australia Stock Exchange. Maximum percent of the shares of the company is being hold
by the suppliers of farmers. At the end of year 2016 the value of Bega Cheese crossed AUD
775 million. Capitol Chilled Foods Australia Pty Ltd held twenty five percent stake of Bega
Cheese. The interest was controlled by the multinational company Lion.
As per para A36 in ASA315.11 Bega Chesse belongs to food manufacturing industry
that produces processed cheese and dairy products. It follows AASB for preparing its
financial statement as well as IFRS for preparing consolidated statements. All the business
risk associated with the company is compiled and recorded as per the AASB. The
organization of the business is obligatory to abide the Federal and State Environmental

Running head: RISK ASSESSMENT
Regulations. These comprise broadcasting necessities under the National Greenhouse and
Energy Reporting Act 2007.
Significant Business Risk
As per para 37 and 43 of ASA 315 the purpose of the Audit & Risk Committee is to
emphasis on the fiscal position including the presentation of the combined group of Bega
Cheese Limited this represents Bega Cheese in sustenance of the board of directors. These
accountabilities comprise swotting the efficiency of Bega Cheese’s inner control including
risk management organizations, including inaccuracy of the Governance and Assurance
purpose as well as the Enterprise Wide Risk Management purpose.
Analytical Review
This means assessments of fiscal data through scrutiny of reasonable relationships
between both monetary and non-monetary data. Analytical procedures include such enquiry
as is essential of recognised variations or associations that are unpredictable with other
pertinent evidence or that fluctuate from predictable standards by an important sum.
Significant Audit Risk (ASA 200)
The main key audit risk areas of Bega Cheese Limited are to emphasis mostly on the
fiscal position as well as presentation in combined group of enterprise. It recognises purpose
risk, recognition risk including control risk. It targets at employing Audit as well as Risk
Committee in commercial entities supporting Board of Directors in an overall way. Some of
the significant accountabilities comprise reviewing of the efficiency of Bega Cheese interior
control. It narrates risk management systems as well as inaccuracy in Governance and
Assurance function for the similar. The analytical is the basic need for the audit procedure
and it is conducted for three needs.

Running head: RISK ASSESSMENT
As per IAS 315. Risk assessment that is the foremost need of procedure. This is
performed to assess the risk as or so to understand about the business day to day. In assessing
the risk associated along with identifying the material misstatement. This gives the auditor
the idea or scope to plan the audit.
The substantive analytical is done as auditor thinks that the use of this procedure
would help in decreasing the risk regarding the material misstatement at the level of assertion
that is acceptable at very low level.
Last procedure is performed if the any irregularities persists. Then the risk assessment
is being performed by the auditor.
Audit Risk Model
Audit risk is associated with the auditor’s statement that he or she gives if any
inappropriateness persists on the financial statement. Audit risk might be measured as the
product of the numerous risks that might be encountered in the presentation of the review. In
instruction to retain the general audit risk of arrangements below satisfactory limit, the
accountant must measure the level of risk relating to each constituent of audit risk.
Significant Inherent Risks
According to the nature of the business, there are some inherent risk prevailing in the
company. In case of error of omission risk in the fiscal statement inherent risk is involved.
This is for the failure in control. These risks prevails in the statement when involvement of
complex transaction including high degree of decision level for estimating it in books. Bega
Cheese financial statement prevails inherent risk in some case as follow:
 Inventory:
Valuation of inventory attracts the auditor`s time. As the company is in food industry,
inventory regarding period of gestation shall be low. The inventory that are not at using state

Running head: RISK ASSESSMENT
is to be write off. This indicate that there is an existence of inherent risk in the company`s
statement. Further the way for inventory valuation shall take into consideration regarding the
product`s nature for valuing. The impact of this is seen mainly in cost of goods sold including
inventory account. (Ashbolt et al., 2013).
 Intangibles:
The Corporation is a holding enterprise for numerous subsidiaries, therefore in that
situation there might be risk connected to amalgamation of the financial records. The
associated transactions ought to be removed. It is essentials to be measured methodically
by the auditors. In this occasion the financial records that would be compressed is
goodwill along with majorly all the financial records of the corporation.
 Fixed Assets:
During formation of fiscal statements of the business, the organisation of the
corporation is requisite to mark convinced estimations. The auditors in this situation are
requisite to check the base of the approximation that has been completed in the
organisation as well as essential to manuscript those through the support of certain
models. In case of Bega Chesse limited, the organisation founded on their appreciative for
the income tax laws makes assessment for the income tax obligations. The auditors are
compulsory to test the comprehensiveness of the overtax liabilities as well as their
influence be a danger that the income tax sum so calculated by them is not accurate and
might need some amendment. In this case the financial records that will be compressed
will be the inventory, fixed asset as well as tax accounts.
 Foreign Exchange Transaction
The business of the company is expanded all over the world. As they are transacting in
numerous countries there is always a risk associated due to the fluctuation caused in foreign

Running head: RISK ASSESSMENT
currency rate. This affects profits as well as results in a huge inherent risk for administration.
That’s why accounts that are related to foreign transactions are affected. (Keta, 2018).
Key audit risk areas and audit procedures
Audit Risk Area: Inventories
As per the report misstatement mainly affects the balances in the inventory according to the
profits that re reported in the upcoming time. Therefore this requires identification of
inventories so this generates hurdles for the auditor to in viewing the stock. This is result of
misstatement.
Inventories postures scrap in forming measures of account held. It concludes ways for
inventory activities in procedure of inventory calculation as well as wounding off beginning
exactness in any procedure.
Outline of Issue
Bega Cheese Limited mostly expressions subjects with estimate of record in the
adjoining forthcoming. It expressions inventory mislays as well as inventories postures
intangibility that requirements deliberation as far as conceivable. It is problematic in
upholding convinced harvests in advancement stabilities in the near forthcoming.
Key assertion and audit procedure
Bega Cheese Limited would trail events like scheduling, during marking the serials
along with analytical reviews for the similar.
Risk Area:
Bega Cheese Limited aspects delinquent in yearly cover procedure.
Issue

Running head: RISK ASSESSMENT
Bega Cheese Limited faces subjects linking attainment satisfactory interior as well as
exterior material in establishment of interior panels in the most suitable way.
Key assertion and audit procedure
Bega Cheese Limited appraisals conducts for satisfactory incomes in as long as organisation
in implementation vicarious errands in a current way.
Risk Area:
Bega Cheese Limited appearances trouble in picking auctions invoices at the
conclusion of the year in arrangements terms. It bombs to competition auctions invoices in
communication with communication notes in a complete manner.
Issue
Bega Cheese Limited aspects struggle in continuing sales financial records in noticing
cases of irony. It shows in the auctions account in the borrower ledger for informing stock
accounts in the close upcoming time.
Key assertion and audit procedure
Bega Cheese Limited must shadow measures like preparation for consistent sales statements
for footage auctions in anticipated form.
Control Risk
The Audit Committee of Bega Cheese delivered audit opinion, which is original judgement.
(Begacheese.com.au 2017)
Auditor independence circles on view of APES 110 Code of Ethics for specialised
accountants.

Running head: RISK ASSESSMENT
Board of Directors deliberated the location in position with Audit along with Risk Committee
aimed at non-audit facilities.
From the independent audit report of Bega Cheese, it has been observed that the enterprise
does not obey with ASA 700 interpreting judgment and recording fiscal report.
Corporate Governance
The Board solemnises with fresh or reread Corporate Governance Principles as well as
Commendations as confined in the third publication of ASX in 2015 (Begacheese.com.au
2017) Bega Cheese is dedicated on the way to attaining and preserving uppermost standard of
responsibility and limpidity in accompanying its commercial processes.(Begacheese.com.au
2017)
Impact on Audit Testing
Implications of Inherent risk for planning
The chief key audit risk areas of Bega Cheese Limited are to emphasis mostly on the
monetary level and presentation in combined group of enterprise it recognises control risk,
intention risk and detection risk for the similar. It objects at employing Audit as well as Risk
Committee in commercial bodies in provision of Board of Directors in a general manner.
The key accountabilities comprise revising of the efficiency of Bega Cheese internal
control. It recounts risk management systems together with misinterpretation in Governance
and Assurance purpose for the similar. It comprises key tasks of Committee in background
out Agreement of the Boarding in swotting on yearly base. (Bhagwat, Haytowitz & Holden,
2014).
Implication of Control Risk for planning

Running head: RISK ASSESSMENT
The company faces the issues regarding controlling the risk as well as internal control.
Operating in risk management that outlines the process for assessing the effectiveness that
includes compliance management for the similar.
Bega Cheese Limited requirements to comprise in giving errands counting
competence of internal control, procedure as well as measures in an overall method.
To understand the risk as well as internal control way that is operated by Bega Cheese
along with the way of assessing the design along with the effectiveness that include for
managing the compliance. To oversee as well as assessing the internal control, the procedure
as well as polices to advice the management deputized duties for the function that include
assessment that internal control along with the polices and procedure. The Group will also
measure whether there are passable incomes providing for management to comprehensive its
surrogate everyday jobs. Display and appraisal at minimum yearly the risk record. Appraisal
the yearly assurance procedure to safeguard that attention is passable.

Running head: RISK ASSESSMENT
Appendix:
BEGA CHEESE LTD INCOME STATEMENT $ $
Fiscal year ends in June. 2016-06 2017-06
Revenue
119596700
0
122666300
0
Cost of revenue
104259500
0
107243600
0
Gross profit 153372000 154227000
Operating expenses
Sales, General and administrative 73114000 246027000
Other operating expenses -123946000 247016000
Total operating expenses -50832000 493043000
Operating income 204204000 -338816000
Interest Expense 3835000 3226000
Other income (expense) -160469000 540080000
Income before taxes 39900000 198038000
Provision for income taxes 11121000 59290000
Net income from continuing operations 28779000 138748000
Net income 28779000 138748000
Net income available to common shareholders 28779000 138748000
Earnings per share
Basic 0.76 3.64
Diluted 0.76 3.63
Weighted average shares outstanding
Basic 38150736 38166415
Diluted 38150736 38201542
EBITDA 66017000 448024000
BEGA CHEESE LTD BALANCE SHEET
Fiscal year ends in June. 2016-06 2017-06
Assets $ $
Current assets
Cash
Cash and cash equivalents 9658000 475533000
Total cash 9658000 475533000
Receivables 133469000 141796000
Inventories 192398000 167898000
Deferred income taxes 4959000
Prepaid expenses 1322000 5389000
Other current assets 9427000 22897000
Total current assets 346274000 818472000

Running head: RISK ASSESSMENT
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 522142000 493760000
Accumulated Depreciation -302198000 -296961000
Net property, plant and equipment 219944000 196799000
Equity and other investments 2224000 2167000
Goodwill
Intangible assets 7903000 22650000
Deferred income taxes 10329000 16172000
Other long-term assets
Total non-current assets 240400000 237788000
Total assets 586674000 1056260000
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 15235000 64000
Capital leases
Accounts payable 134276000 134681000
Deferred income taxes 5056000 63911000
Other current liabilities 54686000 67928000
Total current liabilities 209253000 266584000
Non-current liabilities
Long-term debt 47500000 215280000
Capital leases
Deferred taxes liabilities
Pensions and other benefits 2083000 1722000
Total non-current liabilities 49583000 217002000
Total liabilities 258836000 483586000
Stockholders' equity
Common stock 103942000 224692000
Other Equity 21242000 21735000
Retained earnings 202838000 326326000
Accumulated other comprehensive income -184000 -79000
Total stockholders' equity 327838000 572674000
Total liabilities and stockholders' equity 586674000 1056260000
BEGA CHEESE LTD Statement of CASH FLOW $ $
Fiscal year ends in June. AUD. 2017-06 2016-06
Cash Flows From Operating Activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment -26568000
-
3395600
0

Running head: RISK ASSESSMENT
Property, plant, and equipment reductions
18892100
0 428000
Acquisitions, net
Purchases of investments -992000
Sales/Maturities of investments
Purchases of intangibles -12611000 -5733000
Other investing activities 1515000 619000
Net cash used for investing activities
15125700
0
-
3963400
0
Cash Flows From Financing Activities
Debt issued
19828000
0
1400000
0
Debt repayment -45671000
-
2023800
0
Common stock issued
12019500
0
Dividend paid -15260000
-
1373400
0
Other financing activities
Net cash provided by (used for) financing activities
25754400
0
-
1997200
0
Net change in cash
40880100
0
-
5960600
0
Cash at beginning of period 9658000
1028400
0
Cash at end of period
41845900
0
-
4932200
0
Free Cash Flow
Capital expenditure -39179000
-
3968900
0
Free cash flow 17895000
1929100
0
Ratio Analysis
Particulars 2016 2017
Profitability Ratio
ROCE 1.60 1.36
Net profit Margin 3.34
16.1
4

Running head: RISK ASSESSMENT
Gross Profit Margin
12.8
2
12.5
7
Investors Ratio
EPS 0.75 3.64
ROIC 0.09 0.24
Gearing Ratios
Capital Gearing Ratio 0.20 0.91
Interest Coverage
10.4
0
61.3
9
Ratio Analysis
Particulars 2016 2017
Efficiency Ratio
Debtors(days)
40.7
3
42.1
9
Creditors( Days)
47.0
1
45.8
4
Inventory Turnover 0.01 0.02
Liquid Ratios
Current Ratio 1.65 3.07
Quick Ratio 0.74 2.44

Running head: RISK ASSESSMENT
Reference:
Ashbolt, N. J., Amézquita, A., Backhaus, T., Borriello, P., Brandt, K. K., Collignon, P., ... &
Lawrence, J. R. (2013). Human health risk assessment (HHRA) for environmental
development and transfer of antibiotic resistance. Environmental Health
Perspectives, 121(9), 993-1001.
Begacheese.com.au. (2017). Bega Cheese | Bega. Real Town. Real Cheese. [online]
Available at: https://www.begacheese.com.au [Accessed 13 Jan. 2019].
Bhagwat, S., Haytowitz, D. B., & Holden, J. M. (2014). USDA database for the flavonoid
content of selected foods, Release 3.1. US Department of Agriculture: Beltsville, MD,
USA.
Cameron, J. M., Howell, D. N., White, J. R., Andrenyak, D. M., Layton, M. E., & Roll, J. M.
(2014). Variable and potentially fatal amounts of nicotine in e-cigarette nicotine
solutions. Tobacco control, 23(1), 77-78.
Keta, D. P. (2018). ANALISIS INTERAKSI GENDER DAN LOCUS OF CONTROL
SERTA PENGARUHNYA TERHADAP PROFESSIONAL JUDGMENT (Studi
Empiris Kap Wilayah Kota Padang). Jurnal Akuntansi, 6(1).
Kleinberg, J., Mullainathan, S., & Raghavan, M. (2016). Inherent trade-offs in the fair
determination of risk scores. arXiv preprint arXiv:1609.05807.
Lewis, K. (2013). Platforms for antibiotic discovery. Nature reviews Drug discovery, 12(5),
371.
Rausand, M. (2013). Risk assessment: theory, methods, and applications (Vol. 115). John
Wiley & Sons.

Running head: RISK ASSESSMENT