Audit Assurance and Compliance Report for Aristocrat Leisure

This report provides a comprehensive analysis of the audit assurance and compliance practices of Aristocrat Leisure Limited. It begins with an executive summary and an overview of the company's adherence to the eight ASX Corporate Governance Principles. The report then delves into risk assessment, including ratio analysis, common-size income statements, and balance sheets. Several audit risks are identified, followed by suggested mitigation strategies. The report concludes with a reference list, providing a detailed examination of Aristocrat Leisure's financial health, compliance with regulatory standards, and potential areas for improvement in audit practices, making it a valuable resource for understanding the company's financial standing and risk management approach.

Running head: AUDIT ASSURANCE AND COMPLIANCE
Audit Assurance and Compliance
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Table of Contents
Executive Summary.........................................................................................................................2
ASX Corporate Governance Principles...........................................................................................2
Risk Assessment..............................................................................................................................5
Nature of Aristocrat Leisure Limited..............................................................................................5
Overview of the market...................................................................................................................5
Regulatory Authority.......................................................................................................................6
Ratio Analysis..................................................................................................................................6
Common-size Income Statement.....................................................................................................7
Common-size Balance Sheet...........................................................................................................8
Audit Risks faced by Aristocrat Leisure Limited............................................................................8
Ways to mitigate audit risks identified at Aristocrat Leisure Limited.............................................9
Reference List................................................................................................................................10

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Executive Summary
In this assignment, proper emphasis has been given on understanding the 8 ASX corporate
Governance Principles adopted or followed by Aristocrat Leisure Limited. This company is
listed in Australian Stock Exchange and belong to the sector of consume discretionary. It can be
understood by this report on how well Aristocrat Leisure Limited follows as well as implements
ASX Corporate Governance Principles in order to deal with daily operations in the company. In
the next segment, the report highlights about the risk assessment criteria by calculating ratio
analysis, common-size income statement and common-size balance sheet. Several risks had been
identified from the calculated ratio and then suggestions had made to the company on how to
mitigate the risks and be a part of smooth functioning of its operations.
ASX Corporate Governance Principles
There are in total 8 Corporate Governance Principles and each of them had been listed
below with proper justification to make the reader understand whether Aristocrat Leisure
Limited follows and implements all of them.
 The First Corporate Governance Principles is laying solid foundations for the
management and even overseeing for the same (Yu et al., 2015). This means the Board of
Aristocrat Leisure Limited need to mention clearly about the functions. The functions
that need to be managed by the board or by the management. The CEO of Aristocrat
Leisure Limited has to look after the daily operations and undertake strategic decisions
on behalf of the company. The Secretary of Aristocrat Leisure Limited is accountable as
they has to look after the corporate governance policies of the business and even look

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after the management in the most appropriate way. As far as Aristocrat Leisure Limited is
concerned, they believe in following strict so that they are able to abide by this corporate
governance principle in an effective way.
 The second Corporate Governance Principles is structuring the Board so that they can
and value to the operational factors (Arens et al., 2016). The Board of Directors of
Aristocrat Leisure Limited is made up of both Executive as well as Non-Executive
Directors. After looking at the Non-executive Directors composition, it is noted that 50%
of it are women. The Board of Aristocrat Leisure Limited ha eventually set up different
committee who will look after the company such as Audit Committee, Regulatory
Committee and Nomination Committee (William Jr, Glover & Prawitt, 2016).
 The third Corporate Governance Principles is acting ethically as well as responsibly at
the same time. The company aims at providing its employees with a safe working
environment and act ethically while working (Sookhak et al., 2017). Aristocrat Leisure
Limited ha even developed a code of conduct that is applicable to all the personnel as
well as directors and managers. Therefore, the code of conduct has been developed to
make sure that there is proper preparation of financial statements by the company that has
lot of integrity in it.
 The fourth Corporate Governance Principles is safeguarding integrity in corporate
reporting (Cannon & Bedard, 2016). It is necessary for the company to present their
financial statement effectively. This can be done by setting up Audit Committee who is
accountable to look at the financial statements and even provide suggestions about
accounting policies as well as risk management practices in business enterprise.
Therefore, the management of Aristocrat Leisure Limited had eventually given power so

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that they conduct independent examinations for enhancing effective risk management
standards as well as reporting framework.
 The fifth Corporate Governance Principles is making timely as well as balanced
disclosures. The company aims at developing as well as implementing the policies that
relates to continuous disclosure of significant items. Addition to that, the management of
Aristocrat Leisure Limited needs to understand the timely disclosures of gathering price
sensitive information that is required for conducting effective communication. Therefore,
the Secretary of Aristocrat Leisure Limited as well of CEO has the accountability to look
into activities in an effective way (Rezaee et al., 2018).
 The sixth Corporate Governance Principles is respecting the rights of the shareholders.
Aristocrat Leisure Limited engages in conducting investor programs. In order to conduct
this type of program, Aristocrat Leisure Limited need to engage in regularly briefing on
the interim financial results as well as half-yearly results and other similar documents.
 The seventh Corporate Governance Principles is recognizing as well as managing risks.
Aristocrat Leisure Limited adopts certain risk management policies so that they can
operate and function well (Kogan, Sudit and Vasarhelyi 2018). The Board of Aristocrat
Leisure Limited had conducted sound framework as well as policies so that they can
mitigate the risk.
 The eight Corporate Governance Principles is remunerating fairly as well as responsibly.
The company believes in providing remuneration to all the employees in fair way without
any discrepancy (Knechel & Salterio, 2016).

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Risk Assessment
Nature of Aristocrat Leisure Limited
Aristocrat Leisure Limited is engaged in the manufacturing of products as it is further
used for games as well as other entertainment related products. Moreover, Aristocrat Leisure
Limited is treated as one of the famous brand that deals with production of games as well as
entertainment related products. The company even offers wide range of diverse products that
ranges from electronic gaming decisions that are mostly used by children. Therefore, the
company has its presence both in the online gaming market as well as real markets where these
games are opt for selling purpose (Groomer & Murthy, 2018).
Overview of the market
Aristocrat Leisure Limited is one of the leading brands that operates in Australia and
offers gaming and entertainment related products. In the year 2017, Aristocrat Leisure Limited
had successfully achieved sales growth that shows that the company had developed sales strategy
as well as could able to estimate that the sales would increase in the upcoming financial years.
Therefore, Aristocrat Leisure Limited had involved in acquiring the business of Plarium Global
Limited that highlights that the business is planning for increasing the global presence in the
Australian market (Ghanbari & Sarfia, 2016).

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Regulatory Authority
Aristocrat Leisure Limited is regulated by ASX (Australian Stock Exchange) as well as
follows the required accounting standards at the same time.
Ratio Analysis
Statement Showing Ratios 2016 2017
Particulars
Balance Sheet ratio
Current Ratio 1.59 1.82
Debt equity ratio 1.26 0.96

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Common-size Income Statement
Common-size Income Statement
Particulars
2016 2017
Amount ($
mill)
Percenta
ge
Amount ($
mill)
Percenta
ge
Revenue 12687 100% 11832 100%
Cost of revenue 10001 79% 9346 79%
Gross profit 2686 21% 2485 21%
Operating expenses
Sales, General and administrative 4891 39% 3898 33%
Other operating expenses 12033 95% 11686 99%
Total operating expenses 5458 43% 4455 38%
Operating income -2772 -22% -1969 -17%
Interest Expense 271 2% 259 2%
Other income (expense) 3594 28% 3224 27%
Income before income taxes 551 4% 995 8%
Provision for income taxes 182 1% 197 2%
Minority interest 0 0% 0 0%
Other income -40 0% -22 0%
Net income from continuing
operations 368 3% 798 7%
Net income from discontinuing ops -3188 -25% 111 1%
Other -40 0% -22 0%
Net income 329 3% 776 7%
Net income available to common
shareholders 329 3% 776 7%

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Common-size Balance Sheet
Assets
2016 2017
Amount ($
mill) Percentage Amount ($ mill) Percentage
Current assets 875.1 29% 1195 57%
Non-current assets 2112.6 71% 2097.9 64%
Total assets 2,988 100% 3,293 100%
Liabilities
Current liabilities 549 29% 653 34%
Non-current liabilities 1,363 71% 1,294 66%
Total liabilities 1,912 100% 1,947 100%
Stockholders' equity 1,076 36% 1,346 41%
Total liabilities and Equity 2,988 100% 3,293 100%
Audit Risks faced by Aristocrat Leisure Limited
 Current ratio of the company for the year 2016 and 2017 arrives at 1.59 and 1.82
respectively. The ideal current ratio is 2:1. This means Aristocrat Leisure Limited has to
bring improvement in their liquidity aspects (Chan & Vasarhelyi, 2018).
 There is decrease in debt to equity ratio from 2016 to 2017. This means Aristocrat
Leisure Limited will face audit risk in this situation and must look into the solvency
aspects (DeFond & Zhang, 2014).
 Misrepresentation information will affect the profit of the business and need correction

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Ways to mitigate audit risks identified at Aristocrat Leisure Limited
 Aristocrat Leisure Limited should try to bring more current assets in the business so that
they are in a position to meet short-term obligations in the near future
 Aristocrat Leisure Limited should involve in checking the amount of debts that are
highlighted in the financial statement. It is the responsibility of the auditor to make sure
that the amount of debt is correctly mentioned in the financial statements that include all
payback of debts. At the time of conducting the audit, the auditor need to verify the debt
amount and make sure that all are properly recorded as well as there is no misstatements
included
 It is the responsibility of the auditor to verify the genuineness of a provision as well as
conduct a scenario whether the provision is really needed or not at the time of presenting
the financial information.

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Reference List
Arens, A. A., Elder, R. J., Beasley, M. S., & Hogan, C. E. (2016). Auditing and assurance
services. Pearson.
Cannon, N. H., & Bedard, J. C. (2016). Auditing challenging fair value measurements: Evidence
from the field. The Accounting Review, 92(4), 81-114.
Chan, D. Y., & Vasarhelyi, M. A. (2018). Innovation and practice of continuous auditing.
In Continuous Auditing: Theory and Application (pp. 271-283). Emerald Publishing
Limited.
DeFond, M., & Zhang, J. (2014). A review of archival auditing research. Journal of Accounting
and Economics, 58(2-3), 275-326.
Ghanbari, M., & Sarfia, E. (2016). Journal of Advanced Research In Accounting And
Auditing. Journal of Advanced Research In Accounting And Auditing, 1, 8-15.
Groomer, S. M., & Murthy, U. S. (2018). Continuous auditing of database applications: An
embedded audit module approach. In Continuous Auditing: Theory and Application (pp.
105-124). Emerald Publishing Limited.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Taylor & Francis.
Kogan, A., Sudit, E.F. and Vasarhelyi, M.A., 2018. Continuous online auditing: A program of
research. In Continuous Auditing: Theory and Application (pp. 125-148). Emerald
Publishing Limited.

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Rezaee, Z., Sharbatoghlie, A., Elam, R., & McMickle, P. L. (2018). Continuous auditing:
Building automated auditing capability. In Continuous Auditing: Theory and
Application (pp. 169-190). Emerald Publishing Limited.
Sookhak, M., Gani, A., Khan, M. K., & Buyya, R. (2017). Dynamic remote data auditing for
securing big data storage in cloud computing. Information Sciences, 380, 101-116.
William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic
approach. McGraw-Hill Education.
Yu, Y., Ni, J., Au, M. H., Mu, Y., Wang, B., & Li, H. (2015). Comments on a public auditing
mechanism for shared cloud data service. IEEE Transactions on Services
Computing, 8(6), 998-999.