ACCT20075 Auditing Report: Financial Analysis of Crown Resorts Company

This report analyzes the audit of Crown Resorts, an Australian gaming company. It begins with an introduction to auditing and its importance, followed by an overview of the company. The report is divided into three sections. Section 1 focuses on materiality in the audit, including planning materiality calculations and the review of disclosures. Section 2 provides an analytical review of the company, including liquidity, profitability, efficiency, and leverage ratios. Section 3 analyzes the cash flow statement, discusses the going concern assumption, and analyzes the auditor's report, focusing on key audit matters. The report concludes with a summary of findings and references.

Running head: AUDITING
AUDITING
Name of the Student
Name of the University
Author Note

1
AUDITING
Table of Contents
Introduction................................................................................................................................3
Section 1.....................................................................................................................................3
Materiality in Audit................................................................................................................3
Review of Disclosures............................................................................................................5
Section 2.....................................................................................................................................5
Analytical Review of Company.............................................................................................5
Section 3...................................................................................................................................10
Analysis of Cash Flow Statement........................................................................................10
Going Concern.....................................................................................................................10
Analysis of Auditor Report..................................................................................................11
Key Audit Matter.................................................................................................................11
Conclusion................................................................................................................................11
Reference and Bibliography.....................................................................................................13

2
AUDITING
Introduction
Auditor should audit financial statement so it can gain proper information, so this help
the financial user to know various activity in the business. Company has to get its financial
statement audit so this will help them to ensure that the company is able to follow all the rules
in the preparation of financial statement (Coppage & Shastri 2014). Auditor has to ensure that
it able to follow the norms while preparing the financial statement so it have to carry many
different procedure which will help the auditor to know about the company financial
statement and on that basic auditor will able to give its opinion upon the company financial
statement. It have to check the internal control of the company, which help the auditor to
know how the company is able to manage the business risk and able to carry its business
operation easily in the market (DeFond & Zhang 2014). The report deal with a company
name Crown Resort which is an Australian Gaming company and business operation in
Australia. The company is the largest gaming company in the country and its was founded in
31st May 2007. The report is divided into three section as first section show about the
materiality in the business, the second section shows about the analytical procedure in the
company and last section show the analysis of company annual report.
Section 1
Materiality in Audit
This section deal with the materiality and scope of audit that is involve in company
financial report. Each company has to maintain many operation in order to carry its business
activities which lead to overall increase in company error and omission so this will directly
affect the company financial statement (Eilifsen & Messier Jr 2014). It show the materiality
which is involve in the company and how the auditor is able to address the same while
carrying its audit procedures in the company financial statement. Auditor has to give its

3
AUDITING
opinion upon the company financial statement so to know the proper detail of company
financial statement it have to ascertain the amount of materiality which is involve in the
company business as this will help the auditor to know the amount of risk which the company
is having in their financial statement.
Auditor have to ascertain the amount of materiality in the business at the planning
stage so that it will able to know the procedure which has to be followed in the auditing of
company financial report. The assumption and estimation which the company is able to take
should be disclose properly to the auditor which will help it to know the amount of risk in the
business. It have to calculate the planning materiality which will help them to know about
the company more details and help them to give proper opinion in the company business
(Elder et al., 2013). The planning materiality is calculated while taking into consideration the
total sales, total asset and equity. Auditor usually take the amount which the largest one so
this give them a proper planning materiality so as per the calculation of planning materiality
is concern, the total asset is been taken as base and the calculation is shown below:
Planning Materiality=Total Asset∗5 %
¿ $ 8171700
¿ 5 %
¿ $ 408585
The above figure shows the planning materiality which is involve in the business so the
auditor have to carry the audit procedure properly while taking this into consideration so this
will help it to give proper opinion in company financial statement and able to give an
independent opinion on the company business activities.

4
AUDITING
Review of Disclosures
Company is having so many business activities and to carry them it have to maintain
many accounting policy so this increase the lack of clarity in concern of financial report so it
is the management duty to show all the related information properly in the annual report
disclosure so that the company financial user is able to ascertain the company performance
easily and take their decision of investment in the company or not (Crownresorts.com.au.
2019). The company ensures that it is complying with the disclosure requirements of the
ASX Listing Rule in their financial report which will help them to provide all the information
properly and effectively in company business (Louwers et al.,2015). Auditor has to check
whether the company is able to provide all the required information properly in their financial
statement or not as this will help it to ascertain the amount of fraud which can be there in
company business. The details of the policy process for the adherence of market information
that could have reputation or issues with material regulatory or involve risk that gets
communicated to the respective Disclosure Officer or be sensitive to the market (Jacoby and
Levy, 2016). The Disclosure Committee and the Board does assessment of the information
whenever required and disclose the material information in the market. They also do a broad
publication of the information to the analysts, investors and media.
Section 2
Analytical Review of Company
Company is having so many items in annual report so this process help the auditor to
ascertain the risk that is associated in company financial statement, the process carry with the
analysis of company financial ratio which will show many aspects of company and able to
provide proper information to auditor so it can carry the process properly in the business.

5
AUDITING
Liquidity Ratio
The liquidity aspects of business is shown with the help of these types of ratio as this
help them to know about the payment the current liability in business (Furnham & Gunter
2015). Company having proper amount of liquidity show that they are able to carry its
business operation properly and effectively in the business. This can be classified as Current
and Quick Ratio.
Current Ratio
This ratio denotes the relationship between the current asset and short term liability as
how the concern can pay its short term liability from its current asset as if concern has good
liquidity in business, it denotes that the company is able to carry its business operation
properly and effectively in the business. The relationship between the components can be
seen by the ratio that has been calculated as 2.46 for the year 2018 due to the massive
increase in the current asset of the company.
Table No – 1
Source – Author
Interpretation – This ratio show that the company liquidity position is good or not as it is
been consider that company having more than 2 current ratio is good liquidity position as per
the company it is having 2.46 as current ratio in current year which is a very good sign. This
signify company is can maintain its current strategy for long time purpose.

6
AUDITING
Quick Ratio
It is also an more advance version of current ratio, it only take into consider the asset
that converted into cash by the company so that the concern is able to pay their short term
debt easily in the business (Goh, Krishnan & Li 2013). It does not take into consideration of
inventory in the business as this item is not able to be converted into cash easily. The Quick
Ratio calculated for Crown Resort has been increasing over the years from 0.79 to 2.44 by
2018.
Table No – 2
Source – Author
Interpretation – The above ratio denote the liquidity position, as it should be more than 2
which will be consider as a good position for the company. The company is having 2.44
which is a good sign that the company can maintain the quick ratio properly and effectively
in business, this show company is having proper liquidity in the business.
Profitability Ratio
This kind of ratio show the profit aspects as how the concern earn from the business
activity, it show the amount which the company is able to share with the shareholders of the
company (Griffiths 2016). The Profitability Ratio of 16% shows an improvement in the net
profit of the company with a slight increase of its sales value. The Net profit show the amount
of share which concern is able to earn for the shareholder, as this the amount of money which
is shared with the shareholders.

7
AUDITING
Table No -3
Source – Author
Interpretation – The ratio show about the company profitability in the business as per the
above table company is having a high reduction in the profit so this signify that the company
is not able to earn proper amount of revenue in the business. This show that the company is
not getting proper amount of market share in the business so it should change its strategies
which will help them to increase the overall profit of the company.
Efficiency Ratio
The ratio show about the proper utilization of company asset, it should have proper control on
debtor so that it will able to manage the collection period more easily in the business so that it
will able to have proper working capital cycle. The Average Collection Period has become
half over the years. Earlier it was 39.56 and it has now become 18.00.
Table No - 4
Source – Author
Interpretation – This ratio shows about the company collection policy with the customers,
as per the table company is having a decrease in collection period which signify it have
increased their working capital movement and able to generate more revenue in the business.

8
AUDITING
Leverage Ratio
This ratio shows the composition of company capital as this help them to know how
the company is able to finance its business activity, the business operation easily and
effectively in the business. The ratio is been classified into two parts Debt Ratio and Debt-
Equity Ratio.
Debt Ratio
This ratio shows how the company is able to finance the total asset of the company so
the company is able to carry its business activities. It should have proper composition of asset
in the business. The Debt Ratio has decreased marginally from 0.46 to 0.37 from 2015 to
2018.
Table No – 5
Source – Author
Interpretation – It show that the reduction in the ratio is due to increase in debt or decrease
in total asset of concern, company should able to manage this properly so that it will able to
improve the ratio in future period.
Debt-Equity Ratio
This ratio show the relation of debt and equity in the business as how the company is
able to finance their business activity with the help of debt or equity. The ratio has seen a
decrease due a decrease in its long term debt which was 2883955 in 2015 and has now
reached 2170200 as on 2018.

9
AUDITING
Table No – 6
Source – Author
Interpretation – Company is having an decrease in overall ratio which signify it has increase
the use of debt in the business so company should able to manage the debt and equity
composition properly in the business.
Some assertion on the above discussion:
 Completeness in the company financial statement, as the company should record all
the transaction properly in the business. Auditor have to carry test of control as it have
to vouch and verify transaction so it will able to know the completeness in the
company.
 It have to check the accuracy which the company has taken while carrying it business
operation, and to check that the auditor has to match the same with different industry
norms so it can get proper idea of the company.
Section 3
Analysis of Cash Flow Statement
The company is able to get major amount of cashflow from cash from operating
activities. The highest amount of cash outflow is from cash from financing activities.
The company is having the highest amount of cash inflow from cash received from
customers and the outflow is from Payment to suppliers of the company (Vogel, 2014). The
company is not having any non- cash financial and investing activities in the business.

10
AUDITING
The concern is having positive cash so this signify it able to carry its business
operation properly and effectively in the business so this show company is not having any
problem in the going concern concept as a result the auditor should carry all the audit process
to ascertain the true and fair view in the business (Williams & Dobelman, 2017).
Going Concern
This is the principle which state that the company is able to run for long term so the
investors can able to invest properly in the company as they will able to gain the return on
investment easily in the business, the company is not having any kind of risk which can affect
the principle of going concern in the business (Sundgren & Svanström, 2014).
Some points which can affect the principle of going concern is:
 Company is not able to pay the finance cost in the business
 It is having decrease in overall profit of the company
 There is increase in the sale of company fixed asset
 Company is increasing the debt funding in the business
Analysis of Auditor Report
Auditor of the company is Ernst and Young, as per the auditor the company can
maintain all the rules and regulation as per the Corporation Act 2001, the auditor has gave the
company an Unqualified Report which signify concern is not having any misstatement in the
business (Crownresorts.com.au. 2019). The auditor is has given the company unqualified
report as the company is able to maintain all the norms in the preparation of its financial
report and the company is having no materiality in their financial statement.

11
AUDITING
Key Audit Matter
These are the matter which are shown by the auditor so that the financial user can
know about the risk associated in company business. The key audit matter shown by auditor
is:
 The auditor found that the company is not having proper recoverable policy for trade
receivables as it able to get extend the credit term of the company. To check this
auditor had tested the valuation of trade receivables with the customer transaction.
 The judgement which the company is able to make in regards of provision of
doubtful debt in the business. Auditor had to evaluate each debtor information so it
can know whether the company is able to take proper amount of judgement in the
business or not.
 The impairment of company involves much amount of complexity as it involves the
modelling of different range and judgement which can also affect the future event of
the company. Auditor had to involve the valuation specialists so that it can give
proper valuation with the help of application of different methodology in company
business.
Conclusion
The report conclude about auditing process in business as it conclude about how the
auditor can carry its operation in the company financial activities. It conclude about the
company Crown Resorts Ltd and show the materiality aspects and the financial analysis of
company. Lastly the report conclude about the analysis of cash flow statement and auditor
report of company.

12
AUDITING
Reference and Bibliography
Coppage, R., & Shastri, T. (2014). Effectively Applying Professional Skepticism to Improve
Audit Quality. The CPA Journal, 84(8), 24.
Crownresorts.com.au. (2019). Retrieved 1 September 2019, from
https://www.crownresorts.com.au/CrownResorts/files/81/817f60e1-b1ef-46e4-b687-
7b60140c0578.pdf
DeFond, M., & Zhang, J. (2014). A review of archival auditing research. Journal of
Accounting and Economics, 58(2-3), 275-326.
Eilifsen, A., & Messier Jr, W. F. (2014). Materiality guidance of the major public accounting
firms. Auditing: A Journal of Practice & Theory, 34(2), 3-26.
Elder, R. J., Akresh, A. D., Glover, S. M., Higgs, J. L., & Liljegren, J. (2013). Audit sampling
research: A synthesis and implications for future research. Auditing: A Journal of
Practice & Theory, 32(sp1), 99-129.
Furnham, A., & Gunter, B. (2015). Corporate Assessment (Routledge Revivals): Auditing a
Company's Personality. Routledge.
Goh, B. W., Krishnan, J., & Li, D. (2013). Auditor reporting under Section 404: The
association between the internal control and going concern audit
opinions. Contemporary Accounting Research, 30(3), 970-995.
Griffiths, P. (2016). Risk-based auditing. Routledge.
Jacoby, J. and Levy, H.B., 2016. The materiality mystery. The CPA Journal, 86(7), p.14.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.

13
AUDITING
Louwers, T. J., Ramsay, R. J., Sinason, D. H., Strawser, J. R., & Thibodeau, J. C.
(2015). Auditing & assurance services. McGraw-Hill Education.
Müller-Burmeister, C., & Velte, P. (2016). Increased materiality judgments in financial
accounting and external audit: a critical comparison between German and
international standard setting. International Journal of Critical Accounting, 8(3-4),
227-245.
Power, M. K., & Gendron, Y. (2015). Qualitative research in auditing: A methodological
roadmap. Auditing: A Journal of Practice & Theory, 34(2), 147-165.
Reid, L. C. (2015). Are auditor and audit committee report changes useful to investors?
Evidence from the United Kingdom.
Sandvig, C., Hamilton, K., Karahalios, K., & Langbort, C. (2014). Auditing algorithms:
Research methods for detecting discrimination on internet platforms. Data and
discrimination: converting critical concerns into productive inquiry, 22.
Sundgren, S., & Svanström, T. (2014). Auditor‐in‐charge characteristics and going‐concern
reporting. Contemporary Accounting Research, 31(2), 531-550.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.
Wang, B., Li, B., & Li, H. (2014). Oruta: Privacy-preserving public auditing for shared data
in the cloud. IEEE transactions on cloud computing, 2(1), 43-56.
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific
Book Chapters, 109-169.