Comprehensive Audit Report and Analysis: Aristocrat Leisure Ltd

This report conducts an audit framework analysis of Aristocrat Leisure Ltd., examining the company's activities, financial aspects, and associated risks. It delves into the inherent risks, control risks, and detection risks within the audit process, emphasizing potential material misstatements. The report reviews the company's financial statements over three years, analyzing the impact of accounting standards like AASB 9, AASB 15, and AASB 16. It assesses business risks, including competitive, economic, legal, and foreign-exchange risks. The study also explores the impact of the control environment on audit planning and examines the composition of the company's equity, debt structure, income tax figures, and asset valuation. The analysis provides insights into the company's financial health and highlights key considerations for auditors and stakeholders.

Running Head: AUDITING
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Name of the Student
Name of the University
Author Note

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Executive Summary
The purpose of this paper is to do audit framework of Aristocrat Leisure Ltd. The study is
supported by reviewing the annual reports of the three financial year of the company. It was
found that, various audit risks have been involved in the company audit process that has led
to misstatement of the company’s financial statement.

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Table of Contents
Introduction................................................................................................................................3
Nature of Aristocrat Activities...................................................................................................3
Analytical Review of the Aristocrat Leisure Ltd.......................................................................3
Audit Risks.............................................................................................................................5
Business Risks........................................................................................................................6
Impact of Control Environment on Audit Planning...................................................................7
Composition of Company Equity...............................................................................................8
Conclusions..............................................................................................................................10
References................................................................................................................................11
Appendix..................................................................................................................................14

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Introduction
This report provides the basic information’s related to auditing process of Aristocrat
limited. The first part of the paper has discussed on, the various risks associated with the
audit process of Aristocrat Leisure. The next part has viewed on the financial aspects of the
business on the basis of three financial year. The intense of this report is to do audit
frameworks associated with the Aristocrat Leisure.
Nature of Aristocrat Activities
Aristocrat Leisure is a leading producer of gaming related products. Most of the
products includes; gaming machines, digital games, casino management systems. The
company has more than 300 licensed business operations over 90 countries. The company is
a publicly traded company, listed in Australian Stock Exchange (Venkatadri et al., 2018).
VGT is an Aristocrat Company, which is a leading developer and manufacturer of casino
games in parts of Northern America. It has nearly 140 distributer locations in the country.
Aristocrat Leisure is head quartered in Sydney city of Australia. It also has a development
and marketing offices in South Africa and United States. The company is currently listed in
second position in manufacturing of slot machines of gaming technology. Trevor Croker is
the Chief Executive Officer of the Aristocrat group since, 2017. In the year 2017, the
company has entered in providing technologies for mobile gaming and acquired with big fish
Games, which is a largest mobile game developer. Plarium is the mobile gaming technology
that has gained a dedicated fan based reputation in terms of providing exceptional values.
Analytical Review of the Aristocrat Leisure Ltd
Risk Assessment

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Risk Assessment of a company is done, by evaluating the inherent risk and control
risks associated by the business activity. This can be done by understanding the business and
its environment.
Regulatory Frameworks of Aristocrat Leisure Ltd
Aristocrat Leisure follows the statutory requirements of Australian Accounting
Standard rules, AASB 2 for reporting their share growth and remuneration on the basis of
shares to the shareholders (Thottoli, Thomas & Ahmed 2019). The financial Statements is
prepared according to the International Financial Reporting Standards (IFRS), International
Accounting Standards (IASB) and corporations Act 2001. The financial report is presented
on historical cost basis and the cost of assets & liabilities are measured on fair value. Certain
policies have been applied during the preparations. The overall accounting reporting is done
by following the ASSB 9, AASB 15, AASB 16 standards of Australian Accounting Standards
Boards.
 AASB 9- This is an Australian accounting standards for the financial instruments.
This standard involves the measurements and recognition of the assets and liabilities
of the company. This involves the reformed approach for doing hedge accounting.
Aristocrat has reviewed this standard of accounting, to find the impact of new
expected loss model.
 AASB 15- This is an accounting standard for finding the revenue generated from the
contracts with the customers. It is based on the principle that, revenue is only
recognised, if the goods & services are moved to the customers (Moorthy et al.,
2011). This accounting principle has replaced the standards of ASSB 118 and AASB
111 of the revenue and construction contracts. Aristocrat leisure group has mainly
focused on the revenue streams to identify the impact of this standard and develop a

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new accounting policy. They have classified all the jackpot liability expenses, in
contra revenues, instead of listing in expenses.
 AASB 16- This is an accounting standard for leases. This standard has removed the
lease classifications in operating and finance lease. The lease is listed in on-balance
liabilities on the balance sheet. Aristocrat Group has assessed the impact of this
accounting standard on the balance sheet (Ma et al., 2019).
Audit Risks
1. Inherent Risk
 Material Misstatement- This is the information that is incorrect and can impact the
business decisions. The total revenue of Aristocrat Group is represented by using
system contracts and machine sales. This system contains multiple arrangements,
which is quiet a complex process. This is due to delayed customer services, delay in
settlements and other contractual arrangements with the customers. There is a risk
involved during the contractual arrangements with the customers and may result in
inventory related risks. This sales is not recognised in the annual financial report of
the company. This can result in material misstatement of the reported revenue in that
financial year. The investors can be triggered while making decisions to buy the
company stock. Cash and cash equivalent reported in the financial statement includes
cash on hand, deposits and bank overdrafts. A very highly liquidable investments,
having a short-term maturity of three months or less than this can readily converted
into cash. There can be a risk of change in the value of cash on hand.
 Going Concern- Aristocrat Leisure has a social sustainability risks related to business
performance. Various risks is tangled in meeting the demands of the changing
preferences of the gaming features, creating a sustainable employee relations,

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maintaining of diversity and inclusion in the work place and corporate governance
(Green, 2016).
2. Control Risk
This type of risk has been raised, when the financial statements are materially
misstated due to failure in the system control. The company has developed a third party
development partners for licensing the games. Their success depends on the reliable
partners on the basis of their existing content (Khattab, 2016). The group faces a risk in
expire during some instances. A new team similar to third party developers can be
developed to mitigate this type of risks. Eve, the data stored in the information technology
systems has the risk of cyber-attacks and security failures. This can result in disclosure of
any confidential information of the company. The above risks can be controlled by
making more and more investments, in the data management practices and cyber security
measures in order to respond towards these type of threats.
3. Detection Risks- The auditors of the Aristocrat Leisure have concluded that, the
financial report presented by the company, is giving a true and fair value of the actual
financial position of the business & is complied with the Australian Accounting
Standards and Corporation Regulation act 2001. They have concluded that, there are
no material misstatement involved in the financial statement. But, there is a managing
detection risk found in the financial statement. Material misstatement was found in
the process. Hence, Aristocrat has detection risks during the audit process. They have
only reviewed on the sample of their business transactions.

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Business Risks
Business risks are the type of risks, which can prevent the Aristocrat Group in
achieving their objectives. The following business risks associated with Aristocrat Leisure
are:
1. Competitive Risk- There is an intensified competition in the gaming industry.
Innovations in products, reliability and price associated with the products, are
tremendously affecting the selling of the company’s products. Frequent product
innovations is necessary to compete with the emerging platforms and the
technologies. The group’s success is depended on the innovations of the new products
and investments in new skills & development process.
2. Economic risks- The demand for the products and services are continuously changing.
The demand depends on the favourable conditions of the gaming industry. There
could be possibility of decline in economic conditions of the Aristocrat Group. The
company can have an inadequate capital to finance their business operations. This can
result in economic risks of the business.
3. Legal Risks- Gaming Industries is subjected to government regulations requirements,
which includes license permission, documentations of various qualifications. There
can be possibility of change in regulations by the government. This could adversely
affect the business strategy and could have a negative impact on the business (Visser
& van Scheers 2018).
4. Foreign-exchange risks- The group operates across the world and could have an
impact on the risks related to currency exposures related to Dollar and Euro. This type
of risks may arise due to the commercial transactions of the debts and assets in the
form of foreign currency.

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Impact of Control Environment on Audit Planning
Control Environment is the foundation in which, the internal control of an
organisation is built in order to attain the strategic goal of the organisation (Kljucnikov et al.
2016). Looking into the internal control environment of Aristocrat group, it can be seen that,
the company has adopted Australian accounting standards and principle to do the accounting
process. The business structure and processes have been integrated and coordinated to
maintain the control process of the group (Williams & Hausman 2017). The board of
directors has satisfied in providing the non-audit services, for successful audit process in
compatible to the general standards of auditing. All the non-audit services are viewed by the
entire audit committee of the organisation in order to ensure the objectivity is successfully
achieved. Internal control of business structure has allowed the audit committee to make
decisions on various assignments. The audit process is committed to ethical values of the
society and the business. The company has applied APES 110 code of ethics for professional
accountants for successfully reviewing the audit frameworks and acting within the
management and decision-making capacity of the Company. The company has a charter of
audit independence that specifies that, various non-audit services cannot be performed by the
auditor of the company (Chen et al., 2017). Individual board of directors have individual
responsibilities to ensure that, the company objective is achieved within the corporate
governance. These controlled activities of a business can have a severe impact in the
business.
Composition of Company Equity
Ordinary shares are issued by the company, that has no par value and the shareholders
are allowed to participate in the dividends. The holders of these ordinary shares, are allowed
to vote do one vote on one shares during the company meetings. During the issue of new
shares, incremental costs are directly attributed to the shares and is showed as contributed

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equity in the financial statement (Member.afraccess.com, 2020). This contributed equity
includes the net of tax and all other proceeds. With the reacquire of the equity instruments or
in case of share buy-back, the shares are cancelled.
Total movements in ordinary share capital in the three financial years.
Share Price Differences

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There is a huge fluctuation of share price can been in the last five days. The current market
capitalisation of the share price of Aristocrat Group is 22.56. Which has been raised
according to the previous data.
Debt Structure of the Company
The current liabilities are from derivatives that are used from hedging process, and the
non-current liabilities are from interest rates, that came from swap contracts
(Aristocratleisurelimited.gcs-web.com, 2020). The total debts has been increased in the three
financial years. It was very less in the FY 2017.
Income Tax Figures
The income tax was found to be $135.2 in the financial year 2019. It was $127.1 in
the financial year 2018 and $233 in the financial year 2017.
Fixed Assets
Trade receivables, loan receivables and various other receivables are the non-current
assets of the company. Other fixed assets are financial assets, property, plants and
equipments. The total fixed assets in the FY 2017 is 2,097.9; FY 2018 is 4,494.7 and 4,477.6
in the FY 2019.
Intangible Assets
Intangible Assets are also included in the fixed assets. Intangible assets are goodwill
and software used in the manufacturing process. Intangible assets in the FY 2019 is 3,882.8
and in the FY 2018 $3,898.8. It was $1,687.7 in the FY 2017 (Ir.aristocrat.com, 2020). There
was an increase in the intangible assets of the business. This is very good sign for the
business.

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Conclusions
Therefore, it can be deferred that, the audit process of aristocrat leisure has evolved
into various errors in the financial statement of the business. There were various audit risks
like inherent risks, control risks and defected risks involved in the audit process of the
Aristocrat Group.

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References
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https://aristocratleisurelimited.gcs-web.com/static-files/9527b2df-e411-4c49-8067-
d2f391a0fbe0
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(2018, May). Privacy risks with Facebook's PII-based targeting: Auditing a data

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Appendix
Audit Frameworks
Ratio Analysis
DUPONT

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