Audit and Assurance Service Report: Graincorp Limited Audit Planning

This report provides a comprehensive analysis of audit and assurance services for Graincorp Limited, an Australian publicly listed company in the agri-business sector. The report begins with an introduction to Graincorp, outlining its business operations, vision, and strategies. It then delves into the crucial phase of audit planning, emphasizing the importance of understanding the client's business, industry, and internal controls. The report details the steps involved in audit planning, including client acceptance, business understanding, risk assessment, and preliminary analytical procedures. It highlights the importance of considering the specific risks associated with the agri-business industry and the need for a strategic approach to risk management. Furthermore, the report presents an analysis of Graincorp's financial performance using profitability, liquidity, and leverage ratios. The analysis reveals insights into the company's financial health, identifying areas of concern and suggesting the application of analytical test approaches for audit procedures. The report concludes by recommending analytical test approaches and providing a detailed overview of the audit process.

Running head: AUDIT AND ASSURANCE SERVICE
Audit and assurance service
Name of the student
Name of the university
Author report
Student number
Student ID Page 1 of 8

AUDIT AND ASSURANCE SERVICE
Table of Contents
Introduction................................................................................................................................3
Audit planning............................................................................................................................3
1. Make acceptance of the client and performing the planning for the initial audit...........3
2. Understanding the business process as well as the business industry of the client.........4
3. Analysing the client’s business risk................................................................................5
4. Performance of preliminary analytical procedure...........................................................5
Audit test....................................................................................................................................6
References..................................................................................................................................8

AUDIT AND ASSURANCE SERVICE
Graincorp Limited
Introduction
Graincorp is a publically listed company under ASX (Australian Stock Exchange) and
the major business of the company is to receive and store the commodities related to grains.
The company also offers the logistics and also carries out the marketing of these products.
Their vision statement represents what they want and their strategies represent how to
achieve those targets. The main objective is to get the identification and become the leader in
the world in delivering various retail goods and services in the fast growing retail sector and
generating value for the company’s shareholders at the same time through providing better
working environment and asking the local people in which the company operates to take
active part in the business. The strategy of the company is to focus on strengthening the core
business of the company. These involve pursuing for the growth opportunities and delivering
the return on the capital investment as well as expanding their business with improvement of
the efficiency (Graincorp.com.au, 2016).
Audit planning
Audit planning involves establishment of overall strategies of audit for developing
and engaging the audit plan. In particular, the audit plan includes the planning for the risk
assessment process and planning the responses for the risk associated with material
misstatement. Planning of audit is not the separate phase of the audit rather it is an iterative
and continuous process under audit (Chou, 2015). It starts with the previous audit and goes
on till the conclusion of the current audit. The audit planning is a process that is carried out
through steps and under the planning the internal control and the financial aspects of the
client are reviewed. It is recognized that preparing the audit plant by NY audit firm for their
client Harvey Norman will require careful and in-depth observation. Different stages are
there under the audit planning aspects. They are –
1. Make acceptance of the client and performing the planning for the initial audit
As the business process and operating environment of each company is different, the
planning of the audit must be different and specific for each company. It is observed that the
business procedure and circumstances of Graincorp Limited is different as it included under
the agri-business. Therefore, the agri-business industry shall be analysed before planning the

AUDIT AND ASSURANCE SERVICE
audit for Graincorp Limited. It is identified that the previous year’s audit was performed by
Price Water House Coopers, NY audit firm shall go through the previous year’s audit report
issued by PWC and may contact the auditor before carrying out the audit of the company, if it
is permitted by the company (Plumlee, Rixom & Rosman, 2014). Further, the various
companies that are associated with Graincorp Limited may be contacted to get any specific
information regarding the client. Further, the following tasks must be carried out before
proceeding for the audit plan –
 Selecting the employees those will be engaged for the purpose of audit
 Recognizing the reasons behind the requirement of the client for audit
 Forming a understanding level with the client company
The auditor will arrange a meeting with the Graincorp Limited’s executive to discuss
regarding the staffs those will be engaged for the audit, areas that will be covered and
analysed under the audit engagement and the availability of the information required for the
purpose of audit.
It is recognized from the business process and business environment of Graincorp that
they need the audit to assess the internal control effectiveness of the company. Further, they
require the audit to review the true and fairness aspect of the company with regard to the
financial statements of the company. The audit is further required to comment on the the
conceptual framework and the accounting standards followed by the company while
preparing their financial statement.
2. Understanding the business process as well as the business industry of the client
Before proceeding for the audit plan and audit, the audit firm NY must search about
the industry that is the agri-business industry, in which the business of the client relates.
Moreover, the auditor shall gather information regarding the business operation processes and
treatment of intangible assets of the client to suggest the best available option to the
company. For this purpose, the auditor mast collect information regarding the client’s –
 External as well as the internal environment related to the business
 Business operations and the procedures
 Governing regulations and management aspect
 Objectives and the business approaches of the client
 Performance measurement of the client

AUDIT AND ASSURANCE SERVICE
It is recognized from the research of agribusiness that the agribusiness and food
industry in Australia is one of the major part of the Australian economy and they contribute a
significant part to the regional economy areas through providing service, business and
employment opportunities (Pike et al., 2016). Further, the competitiveness agenda and
industry innovation of Australian Government identified the agribusiness and food industry
as an area of the competitive strength for the country and it prioritizes is as the growth
industry through the growth centre of agri-business and food industry.
3. Analysing the client’s business risk
While preparing the audit planning, the auditor shall apply strategic approaches to assess the
risks associated with the business of the client and find out the basis for evaluating the error,
fraud and material misstatement associated with the client’s business, if any. Further, the
following aspects must be confirmed by the management of Graincorp Limited that –
 They communicated with the audit committee as well as with the auditor about the
significant lack in the internal control system and the material weakness, if any.
 The disclosure process of the financial statement and the internal controls are in place
to assure regarding the major business risk.
It is recognized that the agribusiness sector in Australia is loaded with various risks
and to maintain sustainability of Graincorp Limited, the risk management approach
specifically for dealing with the investment risk and improving the opportunities towards
asset acquisition and improvement in investment access play major role as it will support the
rural communities and enhance the growth of agribusiness sector in international as well as
domestic markets (Costan & Popa, 2017). Apart from this, Graincorp is also exposed to the
fluctuation threat with regard to income loss for the primary producers; the expected impact
on the trading loss on the economy of Australia is a serious issue that require more attention
from the management who are responsible for preparing the policies for international as well
as national level of business.
4. Performance of preliminary analytical procedure
Under the analytical procedure the financial performance of the client company is
measured through various ratios and is compared with the industry average. The performance
will then be compared with the previous year’s performance of the company to analyse the
performance trend.

AUDIT AND ASSURANCE SERVICE
Ratio calculation –
Ratio Formula Result
2016 2015
Profitability ratios
Net profit ratio Net profit / sales 0.74% 0.79%
Return on equity Net income / shareholder's equity 1.77% 1.76%
Liquidity ratio
Current ratio Current assets / current liabilities 1.56 1.72
Liquid ratio Liquid assets / Current liabilities 0.99 1.08
Leverage ratio
Debt ratio Total liabilities / total assets 0.51 0.50
Debt to equity ratio Total liabilities / total equity 1.05 1.02
Analysis of financial performance –
It is identified from the above ratios that the net profit ratio of Graincorp Limited is
only 0.74% in 2016 as compared to 0.79% in 2015. Further, the return on the shareholder’s
equity of the company is only 1.76% and 1.77% respectively. Therefore, the profitability
position of the company is under risk and the reason behind this must be found out.
Considering the liquidity ratio of the company it is identified that the company is in a good
position to pay off their short term liabilities with the available current assets (Gurov &
Milgunova, 2016). However, it must be analysed that whether the company is using its
working capital efficiently or not. Looking into the leverage ratio of the company it is found
that the creditor and the investor almost has the equal right on the asset of the company.
Therefore, it indicates that Graincorp Limited is highly leveraged and the auditor must look
into these areas and shall include the fact under audit planning.
Audit test
Considering the business processes and operating environment of Graincorp Limited,
it is suggested that the auditor shall apply the Analytical test approach for carrying out the
audit of Graincorp Limited (Jans, Alles & Vasarhelyi, 2014). Under the analytical test, the
performance of the company for the current year will be analysed through various ratios like
profitability ratio, leverage ratio and liquidity ratio and the performance will be compared
with the company’s previous year’s performance. Moreover, under this approach the

AUDIT AND ASSURANCE SERVICE
revenues as well as the expenses of the companies for the current year will be analysed and
will be compared with that of the previous year (Arens et al., 2016).

AUDIT AND ASSURANCE SERVICE
References
Arens, A. A., Elder, R. J., Beasley, M. S., & Hogan, C. E. (2016). Auditing and assurance
services. Pearson.
Chou, D. C. (2015). Cloud computing risk and audit issues. Computer Standards &
Interfaces, 42, 137-142.
Costan, L., & Popa, S. (2017, May). The Company's Internal Audit Seen as a Piece of a
Complex System. In Control Systems and Computer Science (CSCS), 2017 21st
International Conference on (pp. 371-374). IEEE.
Graincorp.com.au. (2016). Reports. [online] Available at:
http://www.wesfarmers.com.au/investor-centre/company-performance-news/reports
[Accessed 11 Sept. 2017].
Gurov, V., & Milgunova, I. (2016). Improving of assessment methodology of the audited
organizations performance at the stage of audit planning. Економічний часопис-ХХІ,
(157), 115-118
Jans, M., Alles, M. G., & Vasarhelyi, M. A. (2014). A field study on the use of process
mining of event logs as an analytical procedure in auditing. The Accounting
Review, 89(5), 1751-1773.
Pike, B. J., Chui, L., Martin, K. A., & Olvera, R. M. (2016). External Auditors' Involvement
in the Internal Audit Function's Work Plan and Subsequent Reliance Before and After
a Negative Audit Discovery. Auditing: A Journal of Practice & Theory, 35(4), 159-
173.
Plumlee, R. D., Rixom, B. A., & Rosman, A. J. (2014). Training auditors to perform
analytical procedures using metacognitive skills. The Accounting Review, 90(1), 351-
369.