Auditing and Assurance Report: Areas at Risk - Myer Holding Ltd

This report focuses on the areas at risk of material misstatement within the financial statements of Myer Holding Ltd. The analysis, conducted through analytical review, examines cash and cash equivalents, trade and other payables, and inventories. The report highlights the inherent risks associated with each account, such as the potential for overstatement or understatement, errors in valuation, and the impact of improper cut-offs. It draws attention to specific assertions like existence and valuation and discusses the potential for fraud or misreporting in these areas. References include Myer's investor relations and financial reports, as well as auditing and assurance textbooks. The report aims to provide a comprehensive understanding of the key areas auditors should scrutinize to ensure the accuracy and reliability of financial statements.

Running head: AUDITING AND ASSURANCE
Auditing and assurance
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Table of Contents
Part c – Areas at risk of material misstatement..........................................................................2
Reference....................................................................................................................................4

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Part c – Areas at risk of material misstatement
Analytical review is applied by the auditors for analysing reasonableness of the
account balances reported in the financial statement of the entity. This is performed through
comparing the changes in context of account balances over the specific time period and
comparing the associated accounts (Knechel & Salterio, 2016). Going through the account
balances as reported by Myer Holding Ltd in its financial report for the year ended 28th July
2018 following accounts are considered to be at the risk of material misstatement –
 Cash and cash equivalent – irrespective of the changes in amount cash balance is
regarded as material by its nature as it is most liquid form of asset and can be theft or
embezzled easily. Reported cash balance of the entity amounted to $ 41,793,000 in
2018 against $ 30,591,000 in 2017. It was found from the cash statement of the entity
that major source of cash is receipts from the customers whereas major payments are
made towards employees and suppliers (Myer.com.au, 2019). Hence, likelihood is
there that payments made to suppliers are understated and cash receipts from
customers have been overstated to show higher amount of cash balance. Further, Cash
balance is considered at risk as the notable assertion associated with it is the existence
that is the reported cash balance is actually in existence. Further, cash can be
overstated to present the balance sheet in healthier way. Various other risk associated
with cash balance are that cash can be misstated owing to improper cut-off, errors in
bank reconciliation and not recording all the cash transactions in the general ledger
(Investor.myer.com.au, 2019).
 Trade and other payable – Reported amount for trade and other payables are
amounted to $ 391,156,000 in 2018 against $ 379,140,000 in 2017. This account
balance represents the obligation towards goods and services delivered to the entity

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before closing of the financial year (Myer.com.au, 2019). Amount due towards this
account is unsecured and generally the payment is made within 30 to 90 days. Major
risk associated with this account is that the payments are not made within the credit
period allowed or the transaction for which payments already made are still appeared
under payables. Further, there is probability that the purchases made with cash are
reported as credit purchase (Investor.myer.com.au, 2019).
 Inventories – Reported amount for trade inventories are amounted to $ 366,839,000
in 2018 against $ 372,374,000 in 2017. Major risk associated with the inventories is
its valuation. Though the entity values the inventories at lower of net realisable value
or cost. However, estimates and judgments are required in measuring the net
realisable value (Myer.com.au, 2019). If this judgement as well as assumptions goes
wrong the entity will have to be exposed towards additional write-downs for
inventories in the future period. Further, probability is also there that the inventories
are overstated or understated or all the transaction related to inventories has not been
taken into account while the amount for the same has been reported in the balance
sheet (Investor.myer.com.au, 2019).

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Reference
Investor.myer.com.au. (2019). Myer Investor Relations. Retrieved 15 September 2019, from
http://investor.myer.com.au/Reports/?page=Annual-Reports
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.
Myer.com.au. (2019). MYER | Shop Fashion, Homewares, Beauty, Toys & More. Retrieved
15 September 2019, from https://www.myer.com.au/