Auditing and Assurance Assignment on Woolworths Company

WOolworthS Company
Auditing and Assurance
Assignment -D
Name of the Author

Table of Contents
INTRODUCTION.................................................................................................................................1
PART 1 AND 2.....................................................................................................................................1
ASA 315: UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND ASSESSING
THE RISK OF MATERIAL MISSTATEMENT..............................................................................1
PART 3..................................................................................................................................................5

INTRODUCTION
A company that operates in a society and is publicly traded is required to get its
accounts scrutinised periodically from time to time as required by the owners. For this
purpose, an auditor is appointed by the owners, i.e. shareholders, to audit and report on the
working of the company and tells about the true and fair state of affairs of financial position
and financial performance. Auditing is the process of independent examination and
evaluation of books of accounts, vouchers, entity’s control environment etc by an unbiased
person with a view to give an opinion over its truthfulness and fairness. In the ongoing report,
the company chosen is Woolworths Group. The company is a retail business giant and carries
on business throughout Australia and New Zealand. Their mission is to deliver the best
experience and quality to its customers. They have served successful business partners to
thousands of manufacturers and farmers.
PART 1 AND 2
ASA 315: UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT AND
ASSESSING THE RISK OF MATERIAL MISSTATEMENT
As per this auditing standard the auditor, before commencing any audit, is required to
understand the entity’s internal environment, which enables him to asses the level of risk of
material misstatement existent in entity (Woolworths Group Limited 2018). The main
responsibilities of the auditor apart from assessing the environment includes, discussing with
engagement team the susceptibility of material misstatement in entity’s financial reports,
understanding entity’s internal control components, identifying areas where substantive
procedures alone won’t be sufficient, communicating with those charged with governance the
observed weaknesses in internal control and outlining the documentation requirements
(Vîlsănoiua, and Buzenche (Matei), 2014).
Key assertions are another name given to audit assertions. These are basically the
implied or unambiguous claims and depictions that are being made by the management, who
are in case of every entity responsible for preparation and presentation of financial
statements. Through these claims, management tries to convince readers with the
appropriateness of different financial transactions, assets, liabilities and equity balances. The
assertions can be regarding presentations and disclosures also (Woolworths Group 2016).

Substantive test of detail: the case of applying substantive procedure arises when the auditor
doubts the internal control environment of an entity. These are done in order to eliminate the
risk that auditor suspects about certain assets or transactions or other areas. They may involve
analytical procedures and test of details. Analytical procedures involve forming relationships
and comparisons among different kind of financial and/or non-financial information of the
same and/or different entities. Whereas, the test of details includes performing tasks full of
efforts to gather audit evidence like, observation, reperformance, inspection, external
confirmations (The Institute of Chartered Accountants in England and Wales 2013).
1.
Asset
Account
2(a).
Explanation of why
the account is at
risk
2(b).
Key Assertion
2(c).
Substantive test of
detail
1. INVENTORIES:
AUD 4080.4 million
The inventory is said
to be valued at lower
of cost and net
realisable value.
There is a risk as to
whether the same
process had been
followed or not.
There are chances
that the value of
inventory may not
match with the
physical count of
inventory. There
may lie
overvaluation or
VALUATION: This
key assertion deals
with the value of
assets, liabilities and
equity balances. By
value, it refers to the
appropriateness of
the valuation done.
E.g. in this case the
inventory is valued
at cost, being lower
of cost and net
realisable value.
This valuation is as
per the Australian
accounting standard
AASB 102,
OBSERVATION:
this tool involves,
direct approach of an
auditor, wherein he
himself witnesses
the physical count of
inventory being
made. Therein he
perceives the kind of
documentation done
by the concern’s
employees of the
count made by them
and matches it with
the records
maintained by the
entity in its books of
account. By this he