Auditing and Assurance: Detailed Financial Performance Analysis

This report presents an auditing and assurance analysis focusing on financial performance, utilizing ratio analysis to assess a company's profitability, liquidity, and asset utilization. The analysis reveals potential issues such as declining net profit ratio and challenges in asset turnover, alongside improvements in liquidity. Key performance indicators like earnings per share (EPS) are examined, highlighting potential impacts on investor confidence. The report also discusses business objectives, strategies, and associated financial risks, particularly concerning expansion into emerging economies and potential impacts on financial statements, emphasizing the importance of auditing the company's accounting practices. The analysis underscores the need for improved business operations to enhance profitability and ensure the company's long-term viability.

Auditing and Assurance

TABLE OF CONTENTS
2.7.....................................................................................................................................................3
Preliminary analytical procedure................................................................................................3
2.8.....................................................................................................................................................4
Measurement and review of financial performance....................................................................4
2.9.....................................................................................................................................................5
Objectives, strategies and related business risk..........................................................................5
REFERENCES................................................................................................................................6

2.7
Preliminary analytical procedure
Particular Formula 2019 2020
Net profit ratio NP/ net sales * 100 35% -6%
Net profit 3534 -573
Net sales 10117 10142
Particular Formula 2019 2020
Current ratio CA/ CL 1.55 1.60
Current asset 847669 926418
Current liabilities 548581 579826
Particular Formula 2019 2020
Liquid ratio (CA- inventories)/ CL 1.55 1.60
Current asset 847669 926418
Inventory 0 0
Current liabilities 548581 579826
Particular Formula 2019 2020
Asset turnover ratio Net sales/ average total assets 0.01164 0.01
Net sales 10117 10142
Average total assets 869166 947066
Particular Formula 2019 2020
Return on equity Net income/ shareholder equity 6.81 -1.05
Net income 3534 -573
Shareholder equity 51889 54642
With the above analysis of the various ratio it is clear that company is not performing in
proper and effective manner. The reason pertaining to the fact that company is suffering from the
loss and as a result of this the operation of company is not good. Hence, for this it is very
important for the company to work in such a manner that the loss for the company is being
converted in profits. Further with the analysis of the current ratio it was clear that liquidity of the

company has improved as compared to the last year. The reason pertaining to the fact is that
current ratio increased from 1.55 to 1.60. this simply means that the bank is having 1.60 times
the current asset for one current liability (NGUYEN and NGUYEN, 2020). Hence it is essential
for the company to improve the liquidity a little more so that it can attain the ideal ratio of 2:1
that is twice asset for every current liability. Moreover, with help of the asset turnover ratio it is
clear that company is not able to utilise the assets of business in generating sales. The reason
pertaining to the fact is that company is suffering from loss in the current year and due to this
they are not able to manage the asset for earning sales. On the other side, company is also not
able to provide a good return on equity to the shareholders. The reason pertaining to this fact is
that in the current year that is 2020 the company was suffering loss. Hence, overall it can be
stated that profitability of the company is not good and it need to improve the working in order to
earn profits.
The client need to perform and manage its business on the basis of going concern
concept. The reason pertaining to the fact is that when the business is set up then it need to be
continued for a longer period of time. Hence, because of this reason when there was COVID
situation then also the company did not stop and continued their operations. In the future when
company will operate that is post pandemic then business operation will increase.
2.8
Measurement and review of financial performance
With the help of analysis of annual report of company, it was evaluated that analysing the
performance is very important for the business. the reason underlying this fact is that when the
indicator is set then it is easier for the company to measure its performance. with the analysis of
the annual report of the company it was seen that key performance indicator for National
Australia bank was the earning per share. With the analysis of the data it was evaluated that in
year 2020 the EPS was less as compared to the last year (Ertan,2021). There was a drastic
decline in the earning per share. This might be because of the impact of current pandemic which
has affected the whole country and overall world. along with this another indicator was the full
time equivalent employees (FTE). This has increased from last year and this is good for the
development of the company. thus, this is a good impact for the overall working of the company.

The potential impact of decrease in earnings per share is that new investors will not like
to invest within the company. the reason pertaining to the fact is that when the EPS will be low
then it means that company is providing less income to the shareholders. Hence, for this National
Australia bank need to improve its operations such that profitability increases (Bedford, A and
et.al., 2021.).
2.9
Objectives, strategies and related business risk
With the above evaluation it is clear that National Australia bank need to improve its
business operations so that profitability of company increases. Hence, for this company need to
increase its operation and for this objective of business is “to increase the market share by
entering in emerging economies as well till end of 2021. This is the objective on which now
company will be working as they need to increase the number of location.
The related business risk associated with the expansion of business in emerging
economies is that there might be some financial risk which may affect the expansion (Leung and
et.al., 2019). The reason pertaining to the fact is that it might be possible that when the company
will enter in the new economy then there is possibility that finance cost is high. hence, this will
increase the expense of company in expanding within the other country.
The potential impact of the financial risk which may be identified in the future audit work
is that the due to the changes in the finance cost or the accounting principle there might be some
differences. Hence, this will affect the working and making of the financial statements (Lu,
Simnett and Zhou,2019). Thus, this may be detected and can also develop a need of auditing the
accounting of the company. hence, this is the only impact which may be identified at time of the
future audit work.

REFERENCES
Books and Journals
Bedford, A and et.al., 2021. The quality of other assurance services supplied by accounting
firms: Evidence from independent expert reports. International Journal of Auditing, 25(1),
pp.40-58.
Ertan, Y., 2021. Materiality in Independent Audit and Sustainability Reports Assurance. In
Auditing Ecosystem and Strategic Accounting in the Digital Era (pp. 181-190). Springer,
Cham.
Leung, P and et.al., 2019. Audit and assurance. John Wiley & Sons.
Lu, M., Simnett, R. and Zhou, S., 2019. Using the same provider for financial statement audit
and assurance of extended external reports: Choices and consequences. Available at SSRN
3361616.
NGUYEN, H. T. and NGUYEN, A. H., 2020. Audit expectation gap: Empirical evidence from
Vietnam. The Journal of Asian Finance, Economics, and Business, 7(5), pp.51-60.
Online
Annual financial report 2020. 2020. [Online]. Available through:
<https://www.nab.com.au/content/dam/nabrwd/documents/reports/corporate/2020-annual-
financial-report-pdf.pdf>