Compliance and Risk Management in Woolworth: An Audit Report

RUNNING HEAD: AUDITING THEORY AND PRACTICE
Compliance and risk management

Auditing theory and practice 1
Executive summary
This report is a brief summary of Australian major retailer Woolworth, dealing with its
compliance to ASX CGC principles and its audit risk assessment. The first part of the report
provides an overview of the ASX listed company followed by the explanation of the corporate
governance principles. The first part also includes the implication of such principles and
Woolworth’s compliance with them. The second part of the report deals with the risk assessment
of the company. It shows the calculation of ratios and identification of relevant audit risk.
Inherent risk is the one which is majorly associated with the company. Measure to reduce such
risk are also discussed in the later part followed by a conclusion that states the findings of the
report.

Auditing theory and practice 2
Contents
Introduction.................................................................................................................................................3
ASX CGC Principles...................................................................................................................................3
Lay solid foundations for management and oversight.............................................................................4
Structure the board to add value..............................................................................................................5
Act ethically and responsibly...................................................................................................................6
Safeguard integrity in corporate reporting...............................................................................................7
Make timely and balanced disclosure......................................................................................................7
Respect the rights of security holders......................................................................................................7
Recognize and manage risk.....................................................................................................................8
Remunerate fairly and responsibly..........................................................................................................8
Risk Assessment..........................................................................................................................................8
Recognizing the nature............................................................................................................................8
Market overview......................................................................................................................................8
Woolworth’s strategy..............................................................................................................................9
Computation of ratios..............................................................................................................................9
Income statement ratios.......................................................................................................................9
Balance sheet ratios...........................................................................................................................10
Relevant audit risk.................................................................................................................................10
Ways to reduce the risk.........................................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12

Auditing theory and practice 3
Introduction
Woolworths Group Limited is a major retailer company operating its business in Australia. It is
ranked second largest in Australia in terms of revenue, after Wesfarmers. The company servers
in the areas include Australia, India and New Zealand. It reported a loss of $1.235 billion in
2016. Woolworths is publicly listed on the ASX and has ticker symbol WOW.AX. The
company totally compliance with the Corporate Governance Principles laid down Australian
Securities Exchange (Woolworthsgroup.com.au. 2017).
ASX CGC Principles
Corporate Governance set down the rules, regulations, processes and systems through which
authorities are controlled and exercised within a corporation. It lay down some principles which
are required to be complied by every ASX listed company. However, there are several impacts
also, if the principles are not complied with and are not followed (Shinewing.com.au. 2015).
They are as follows:
 Woolworth is obliged to show its director’s and management’s roles and responsibilities
in its statement.
 The company has to amend the structure of its board which includes its size, composition,
skills and commitment to fulfill the duties.
 Woolworth must act ethically and responsibly. Its operations must be ethical in nature.
 Safeguarding the integrity in corporate reporting is the responsibility of the company
which is to be fulfilled as per the principle.
 It is compulsory for Woolworths to disclose each and every matter timely with a view
that it may impact company’s securities’ prices and values.