Auditing and Assurance in Australia: A Comprehensive Report

This report delves into the auditing and assurance practices within the context of Dulux Group, a major player in the Australian market. It begins with an overview of the company's environment and the knowledge gained about its operations. The report then identifies and assesses the business ris...Read More

AUDITING AND ASSURANCE IN AUSTRALIA

Contents
Question 1: Report on the knowledge gained of this entity and its environment.......................................3
Question 2: Identify and assess its business risk.........................................................................................4
Question 3:..................................................................................................................................................5
REFERENCES............................................................................................................................................9

Question 1: Report on the knowledge gained of this entity and its environment
Dulux Group is a manufacturer and marketer of the products and services which helps in
maintaining and enhancing the spaces and the places in which people available in the market
live. Dulux is an international brand which is dealing in the market of making over the houses
and the spaces of living. In Australia Dulux works as an independent company and do not prefer
to go with ICI. Dulux Group was created in 1918 and started its journey from Sydney, Australia
("Dulux Australia, New Zealand and Papua New Guinea", 2017). Presently company has owned
its name in the market and is working on the international level. For the company like Dulux it
has become important that it should work towards to manage its market activities and should try
to manage the things in a better way. Competition is increasing day by day in the market
therefore; it has become necessary that Dulux should work towards to evaluate all the factors and
strategies which could help it in attaining success and competitive advantage in the market.
DuluxGroup is the group which is recognized for its commitment to the sustainable management
of the financial environment and social impacts which is fundamental to the success and
wellbeing of both the businesses it is handling (Dupré & Perluss, 2016). DuluxGroup insures that
it should take care of all the stakeholders in a proper way and should work towards to manage
the needs and requirements they have with the company. DuluxGroup ensures that it could
deliver on its safety and sustainability vision. The sustainability vision created by the company is
“A Future Without Harm” and the company is trying its level best to ensure that the vision which
is being targeted could be obtained as soon as possible (Camillus, 2016). DuluxGroup also
ensures that it should work towards to manage all the financial track records in a proper way and
take the initiatives so as to keep eye on all the risk factors which could have a huge impact on the
progress of the company. Such type of activities of the group helps it in ensuring that it could
move on the path of success and sustainability and could obtain all the targeted visions and
missions developed for the welfare of the society as well as stakeholders attached with the
company. Hence, it could be said that DuluxGroup is the groups which works towards positive
aspects and ensures that it could lead the market by doing good and helping the people attached
with the company (Mohamed, 2015).

Question 2: Identify and assess its business risk
Dulux Group holds a big name in the market and for such a big name goodwill remains at the
utmost priority. So as to maintain goodwill in the market it becomes important for the
organisation that it should take all the risk factors under consideration which could have a huge
impact on the goodwill and position of the company in the market (Camillus, 2016). DuluxGroup
have a set way of assessing the risk in which it evaluate the risk depending upon two variables
which are assessing the risk on financial report level and assessing the risk at assertion level.
At financial level pervasive risks which potentially affect many of the financial reporting areas
are taken into consideration on the other hand at assertion level the risks which are specific in
nature are taken into consideration (Posthuma, 2012). These are the risk factors which have a
limited number of the specific balances.
Inherent risk is the risk in which susceptibility of the account balance or class of the transaction
to the material misstatement is given. It is a risk at which misstatement in the financial reports of
the company is done which has a huge impact on the progress of the company (Xie, 2011).
Misstatement in the accounts of the business is done by the financial department, therefore to
remain informed and to reduce the chances of the occurrence of inherent risk it is necessary that
regular auditing should be done this will help in managing the work and reducing the chances of
misstatements in the financial books.
IT risk is another risk which is attached with DuluxGroup (Dupré & Perluss, 2016). IT risks
again have a huge impact on the progress of the organisation. Companies are going online and
there are huge numbers of aspects which are related with the information technology. In this
situation any loop in the IT section could have a huge impact on the progress of the company.
Threat of hackers is another risk which is attached with the IT department of the company
(Wood, et. al, 2013). Hence, it is necessary that IT department of DuluxGroup should apply
proper set of firewalls and should use up to date technology. Doing so will provide a relevant set
of support and will help the company in reducing the risk of future uncertainties and will help in
processing the work in a smooth and subtle way (Campisi & Caprioni, 2016).

Question 3:
Employee benefit Inventories
Explain why the
account balance is at
significant risk of
material
misstatement.
Since there is huge
risk in employee
benefits as in Dulux
Group, there were
many accidents and
incidents related to
employees. There are
many employees who
are supposed to retire
or superannuate in
coming years,
therefore there is
possibility of material
misstatement is
present in this
account. Also, while
assessing business
risk, it is noted that, in
Dulux Group there is
risk of regulatory
safety. Therefore
employee benefit
account shall be
treated as significant
and shall be examined
thoroughly.
For every business
organisation,
inventories are its life
line or initial stage
that is then converted
into finished goods. In
this case of Dulux
Group Limited,
inventories account is
at significant risk of
material misstatement.
There are various
levels of inventories
i.e. raw material, work
in progress and
finished good. All
these are required to
be properly measured
and reported in the
books of accounts. In
case of Dulux Group
Limited, there is no
control over material
management as there
are various factors
that is small sized or
value raw material
inventories, frequent
changing demand of
customer, changes
taken place in the
market and many
other factors.
Another account that
can be at risk of
significant material
misstatement is
intangible assets that
Dulux Group Limited
holds in their financial
statements. Since
intangible assets does
not have any physical
existence and are only
exists on papers,
therefore it is very
important and crucial
that it may be at risk
of significant material
misstatement. In case
of Dulux Group
Limited, intangible
assets is of significant
nature i.e. it covers
large part of total non-
current assets at the
statement of financial
position (Trompeter &
Wright, 2010).
Intangible assets are
non – monetary assets
but are identifiable in
nature.
Explain the key
assertion at risk of
not being valid.
For employee benefit
account balance there
are 3 assertions i.e.
occurrence and cut-off
and accuracy.
Occurrence assertion
suggests that the
transaction related to
employee benefit shall
In case of inventory at
significant risk of
material misstatement,
there are accuracy and
completeness
assertions that shall be
examined and should
be taken care of. In
case of accuracy
In case of intangible
assets, there are
majorly two assertions
that shall be examined
and checked by
auditor and they are
existence and
valuation. Since,
intangible assets does

actually occur and
should be related to
entity only. There is
possibility that Dulux
Group has not
recorded or recorded
incorrect transaction
related to employee
benefit. Cut-off
assertion suggests that
transaction shall be
recognised in correct
account period. As, in
case of employee
benefit there are long
halting transaction
therefore it should be
checked for cut-off
assertion. Last
assertion that can be
at risk and shall be
examined in detail is
accuracy. In
calculating employee
benefit amount there
are lot of assumptions,
market rates and other
external factors are
involve (Lee, et. al,
2014). Therefore it is
more exposed to risk
of material
misstatement.
assertion, it suggests
that amount of
inventory calculated
shall be free from
mistake of calculation
and all measurements
shall be accurately
done. Amount of raw
material, work in
progress and finished
goods shall be
recorded accurately
(Knechel & Salterio,
2016). On the other
hand, completeness is
the assertion that shall
be analysed and
examined while
auditing. Inventory
items shall be
completed in terms of
its value and quantity
and shall be
recognised in the
financial statements
completely.
not have any physical
existence therefore it
is very difficult for
auditor or
management to
identify intangible
assets and account
them. On the other
hand, valuation
assertion of intangible
asset is at very high
rate of risk. Valuation
of intangible assets
includes various
internal and external
factors that overall
contributes in making
it difficult (Boolaky &
Cooper, 2015).
Another issue is
related to allocation of
intangible assets and
estimates or
assumptions that is
made at the time of
valuation of intangible
assets.
Detail one (1)
relevant substantive
audit procedure to
address the assertion
at risk as identified
in b) above.
In this case, relevant
substantive audit
procedure can to be to
check each and every
document and verify
calculations made for
the amount. In
substantive audit
procedure, auditor
shall verify each and
every interest rate,
amount, nature and
duration of employee
In case of inventory to
accurately accounted
and there shall be
completeness in the
inventory, auditor
shall conduct physical
verification of
inventories kept and
inventory sheet shall
be checked.
(Inventory sheet is the
sheet where receipt,
issue and balance of
In order to manage
intangible assets and
to get them free from
material misstatement,
continuous schedule
shall be prepared and
should be verified at
regular intervals by
management and by
internal auditor.
Another aspect that
shall be managed is
related to depreciation

benefit and most
importantly timing of
transaction related to
employee benefit has
occurred.
inventories are
recorded). Here
inventory means, raw
material inventory,
work in progress
inventory and finished
goods inventory
(Rachchh, et. al,
2015).
on intangible assets.
This aspect is
managed through
proper documentation
and verification of
intangible calculations
(Whitehouse, 2013).
Detail one (1)
relevant practical
internal control that
would mitigate the
risk in relation to the
assertion at risk as
identified in b)
above.
In case of employee
benefits, internal
control shall be strong
and include process of
checking and
verifying amounts at
the initial stage.
Employee benefit
amount shall be cross
checked by two clerks
and then shall be
approved by finance
manager and internal
auditor on regular
intervals.
In order to mitigate
the risk of material
misstatement from the
inventory account,
internal control
system shall be
examined and shall be
strong enough to
identify
misstatements. In
order to mitigate
accuracy assertion,
inventory valuation
shall be checked and
verified by inventory
manager on daily
basis and same shall
be verified and
checked by the
internal auditor
(Hanim, et. al, 2005).
Inventory valuation
shall be one of the key
points of internal
audit report. In order
to mitigate
completeness
assertions, physical
verification shall be
conducted at regular
intervals.
Completeness of
inventories shall be
examined through
physical counting,
recording of same and
verified by inventory
Internal control
procedure to manage
or mitigate significant
risk of material
misstatement is to
make schedule of
intangible asset,
which should contain
information related to
nature of intangible
asset, value of
intangible assets,
adjustments in
intangible assets,
nature of adjustments
and many other
information shall be
recorded (Wong,
2007).

manager.
REFERENCES
Boolaky, P. and Cooper, B. (2015). Comparing the Strength of Auditing and Reporting
Standards and Investigating their Predictors in Europe and Asia. Australian Accounting
Review, 25(3), 292-308.
Camillus, J. (2016). The wicked challenge of the business environment. International Journal Of
Business Environment, 8(1), 19.
Campisi, J., & Caprioni, E. (2016). Social and Political Risks: Factors Affecting FDI in China's
Mining Sector. Thunderbird International Business Review, 1-5.
Dulux Australia, New Zealand and Papua New Guinea. (2017). duluxgroup. Retrieved 13
September 2017, from http://www.duluxgroup.com.au/Our-Businesses/Dulux-ANZ-and-
PNG/Dulux-ANZ-and-PNG/default.aspx
Dupré, D., & Perluss, P. (2016). Mastering risks: An illusion. Research In International Business
And Finance, 37, 620-628.
Hanim Fadzil, F., Haron, H., & Jantan, M. (2005). Internal auditing practices and internal control
system. Managerial Auditing Journal, 20(8), 844-866.
Knechel, W. R. & Salterio, . . E., 2016. Auditing: Assurance and Risk. s.l.: Taylor & Francis.
Copyright. .
Lee, J., Kang, M., Oh, Y., & Pyo, G. (2014). Does continuous auditing enhance the quality of
financial reporting? Korean evidence. Asia-Pacific Journal of Accounting & Economics,
1-24.
Mohamed, A. (2015). The international business environment: a proposed analytical
framework. International Journal Of Business Environment, 7(2), 168.
Posthuma, R. (2012). Will your workers sue you? State-by-State risks and strategic
responses. Business Horizons, 55(1), 65-79.

Rachchh, M., Gadade , S. T. & Gunvantrai, 2015. Introduction to Auditing. s.l.:Vikas Publishing
House.
Trompeter, G., & Wright, A. (2010). The World Has Changed—Have Analytical Procedure
Practices? Contemporary Accounting Research, 27(2), 350.
Whitehouse, Tammy. (2013). Examining permanent reinvestment assertions.(ACCOUNTING &
AUDITING). Compliance Week, 10(108), 29,65.
Wong, J. (2007). Auditing and assurance handbook 2007. Melbourne, Victoria: Pearson
Education Australia.
Wood, J., Brown, W., & Howe, H. (2013). IT Auditing and Application Controls for Small and
Mid-Sized Enterprises Revenue, Expenditure, Inventory, Payroll, and More (Wiley
Corporate F&A). Hoboken: Wiley.
Xie, C. (2011). Economic Transition And Business Risks In Chinese Private Firms:
Disentangling Organizational And Project Risks. International Business & Economics
Research Journal (IBER), 10(2), 67-78.