Report: Evaluating Operations for Allegiance Coal Limited Tender

This report provides a detailed evaluation of Allegiance Coal Limited's operations, focusing on its business nature, industry context, and reporting requirements. The analysis includes an examination of the company's compliance with relevant regulations like the JORC Code and British Columbia Mining and Environmental Legislation. The report identifies and discusses significant business risks, such as digital effectiveness, shareholder returns, licensing, and joint venture management. It assesses the company's financial statements, considering potential material misstatements. The conclusion offers a recommendation on whether an audit firm should apply for a tender with Allegiance Coal Limited, based on the evaluation's findings. The report references the company's annual report, ASX guidelines, and relevant industry publications.

Contents
EXECUTIVE SUMMARY.........................................................................................................................2
INTRODUCTION.......................................................................................................................................2
DETAIL OF THE COMPANY...................................................................................................................3
Name.......................................................................................................................................................3
Nature of Business and Industry..............................................................................................................3
REPORTING REQUIREMENTS...............................................................................................................3
SIGNIFICANT BUSINESS RISKS AND MATERIAL MISSTATEMENTS............................................5
EVLAUATION...........................................................................................................................................6
CONCLUSION AND RECOMMENDATION...........................................................................................6
REFERENCES............................................................................................................................................6
EXECUTIVE SUMMARY
Annual report describes and details the overall functioning of the company. Without the annual
report of the company, the actual judgment regarding the results of the company cannot be made.
There are four major aims of this report. The first aim is to analyze the company’s nature of
business and industry and how the company has been operating since its inception. The second
aim is to analyze and discuss as to which laws or statutes governs the company’s operation. The
third major aim is analyze and discuss in case any misstatement or risks exist in the financial
statements of the company. Last and major aim is to detail as to whether the particular
assignment is required to be filed and obtained or not. With these aims and consideration, the
report has been framed.
INTRODUCTION
The title of the report is to evaluate the operations for the tender. The title itself suggests that the
annual report of the company has been analyzed in detail so as to provide the recommendation as

to whether the audit firm shall apply for the tender in the given firm or not. For the purpose of
extending study the company Allegiance Coal Limited has been provided. The tender has been
floated for the purpose of the audit of the company and the applications have been invited for the
purpose of the audit from the audit firm. At first the nature of the operations of the company has
been provided and then the laws or the statutes as applicable from time to time to the company
has been discussed in regard to the reporting requirement of the company as to which type of
reporting is required in case of the company. Thereafter the financial statements of the company
as annexed in the annual report of the company has been analysed with regard to the different
financial ratios and accounting ratios. These have been further analyzed with the identification
and justification of the presence of the material misstatements if any and the degree of risk that it
carries. Then the report has done the evaluation as to whether the company shall apply for the
tender or not. With this the report has then done with the appropriate conclusion and
recommendation.
DETAIL OF THE COMPANY
Name
The company that has been provided for the purpose of this report is the Allegiance Coal
Limited. The company is the listed company and have good track record and listed on the
Australian Stock Exchange.
Nature of Business and Industry
The company is engaged in the business of acquisition and the exploration of the metallurgical
coal. It only works in those countries where there has been the good level of investment record
and the nearly the lower level of the risk in political terms. It is also engaged in the developing of
the cordial and healthy relationships between the company and the party to whom the goods or
services are being supplied or rendered services (Company Official Website, 2017). The main
part on the behalf of the company before proceeding with the particular project is that whether
the capital expenditure if any that the company is required to plough in the project shall not be
restricted and prohibited in any manner.
The industry in which the company is operating is Mining Industry and as per the current
scenario the mining industry is grooming and it has been grooming since the development of

Australia. It’s because of the mining industry in which the company is operating the immigration
to Australia has taken place. Mining Industry is regarded as the major contributor which helps in
developing and maintains the Australian economy. It has been mentioned that approximately
seventy percent of the steel produced is due to the usage of coal and that too metallurgical coal
and the same has been now considered as the important item which helps in the manufacture of
steel.
REPORTING REQUIREMENTS
All the listed companies have to follow the continuous disclosure and full disclosure framework
so as to equip the users of the financial statements of the company with the required data so as to
make the informed and effective decision. Otherwise the disclosure made will be of no use.
Users of the financial statements include the shareholders of the company, employees of the
company, financial institutions and stakeholders of the company. Annual report of the company
along with the nature of the company provides as to what type of disclosure and the in which
manner the disclosure is required to be done. Following disclosures have been made as required
for the mining companies in Australia:
1. Continuous Review of Corporate Governance – First disclosure that is required by the
law is to review the corporate governance matters on the continuous basis. Management
of the company has mentioned in the annual report of the company as due to the mining
nature of the company which is considered as the very high and risky business, there is
the need that the corporate governance of the company shall be reviewed on the regular
basis (Company Official Website, 2017). The Australian Stock Exchange has provided
the listing guidelines under which the corporate governance principles are required to be
complied by all the listed entities. Under the seventh principle of the aforementioned
principle, there is a need to check whether the company is in the process of the
recognition and the management of the risk. Under that major heading, there is the one
sub head which requires the company to report the amount of material exposure to
environmental risks and the means as to how the company is ready to manage those risks.
2. JORC Code - JORC code is referred to as the code developed by Australia regarding the
reporting of the exploration results, mineral resources and ore reserves. The JORC code
is the mandatory code which provides the classification of mineral exploration results,

resources of minerals and the reserves for ores and that too in accordance with the
confidence level that has been gained the geological area and the considerations made in
the public report regarding the technical and economical matters (Ausimm, 2017). The
reports which are prepared in accordance with the JORC code are the reports prepared for
the purpose of the investors and the stakeholders. Earlier JORC code was the separate but
now it has become the part of listing rules. It has been mentioned in the director’s report
of the company that the company is not in compliant with the code of JORC 2012 and
company has stated to complete that in due course (Company Official Website, 2017).
3. British Columbia Mining and Environmental Legislation – As per these legislation, the
company is required to comply with requirements of different branches of the legislation
which includes the Environmental Assessment Act, Mines Act and Environmental
Management Act and so on. The company has considered the same while deciding and
discussing regarding the project feasibility study of the project which is located in the
western side of the British Columbia (Hutomo, 2016). The company has managed to
provide 250000 tons per annum so as to have quicker permission from the British
Columbia and thus has conducted the pre feasibility study (Company Official Website,
2017).
4. Sustainability Reporting – It provides the company to reports about the environmental,
social and political factors that are being considered by the company for the effective and
efficient functioning of the company.
SIGNIFICANT BUSINESS RISKS AND MATERIAL MISSTATEMENTS
Although the mining industry have been facing many type of business risks nut in the given case,
there are major four business risks which the company shall consider and take the steps to
mitigate the same:
1. Digital Effectiveness – This is number one business risk which is being faced by the
company engaged in mining and exploration. The company shall make an endeavor as to
how the digital technology shall be employed. In the beginning there has been used the
phrase as “no regrets” by the company. It is because of the mix of experiences both bad

and good has been received by the companies. But still in the current scenario they have
not adopted the digital technologies for carrying out their operations smoothly and
effectively.
2. Competitive shareholder returns – As per the current scenario, the companies in the
mining sector has not performed well in the distribution of dividends which shall
otherwise be good as it is because of the shareholder money only the company has been
able to operate their functions. Thus, the company shall engage in the maximum
allocation of capital as dividend instead of capitalizing the profits for the year (Mitchell,
2017).
3. License to Operate – There has been the cases where many companies have been failed
due to the non obtainment of the license to operate. Similarly in the given case the
company has not complied with the JORC code 2012 and also have kept the extraction
rate at the minimum because to have the license to operate very easily (ASX, 2012).
4. Managing Joint Ventures – Managing the joint venture project is very difficult and at
times it affects the reputation of the company due to the non compliance of the rules and
regulation mentioned therein.
EVLAUATION
On the basis of the above factors, although the company has not complied with the JORC Code
2012 but still it is maintaining and complying with the applicable rules and regulations on one
hand and on the other hand making the full and continuous disclosure.
CONCLUSION AND RECOMMENDATION
In order to conclude the report prepared has been exhaustive and detailed and has been able to
achieve the objective of evaluating the results of the company in much better manner.
It is recommended to apply for the tender for the audit of the company.
REFERENCES

ASX, (2012), “Reserves and Resources disclosure rules for Mining and Oil and Gas
Companies”, available on
https://www.asx.com.au/documents/rules/reserves_resources_disclosure_rules_report_consultati
on_feedback.pdf accessed on 29-04-2018.
Ausimm, (2017), “JORC Code”, available on https://www.ausimm.com.au/content/default.aspx?
ID=118 accessed on 29-04-2018.
Company Official Website, (2017), “Annual report” available on
http://www.allegiancecoal.com.au/irm/content/corporate-overview.aspx?RID=370 accessed on
29-04-2018.
Hutomo S, (2016), “Voluntary Environmental Disclosure by Australian Listed Mineral Mining
Company”, Australian Accounting Review, Vol 105, pp 42 – 95
Mitchell P, (2017), “Top 10 business risks facing Mining”, available on
http://www.ey.com/Publication/vwLUAssets/ey-top-10-business-risks-facing-mining-and-
metals-2017-2018/$FILE/ey-top-10-business-risks-facing-mining-and-metals-2017-2018.pdf
accessed on 29-04-2018.