ACCT20075 Auditing and Ethics: Financial Report Analysis of IGO

This report provides a comprehensive analysis of auditing and ethics principles applied to Independence Group NL, an ASX-listed company involved in copper, nickel, and gold exploration. The report delves into the concept of materiality in auditing, emphasizing its role in audit planning and procedure implementation. It examines the company's internal controls, financial ratios (net profit, current, and debt-equity), and cash flow statement. Key auditing matters, such as the valuation of the Nova mine, are discussed in detail, along with management assertions and potential risks associated with increased borrowing and lower profitability. The analysis incorporates financial data from the last four years, highlighting trends and significant observations related to the company's financial performance and compliance with Australian Accounting Standards. This document is available on Desklib, a platform offering a wide range of study resources for students.

Running head: AUDITING AND ETHICS
Auditing and Ethics
Name of the Student:
Name of the University:
Author Note:

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AUDITING AND ETHICS
Table of Contents
Introduction................................................................................................................................2
Methodology:.............................................................................................................................2
Section 1:....................................................................................................................................2
Section 2:....................................................................................................................................3
Section 3:....................................................................................................................................6
Audit report analysis..................................................................................................................7
Reference List..........................................................................................................................10

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AUDITING AND ETHICS
Introduction
In the given report the discussion will be held on the auditing, and key financial ratios
regarding the balance sheet and the profit and loss statement (Sinha and Arena 2018). Many
auditing procedures have been analysed in the report.The focus of this analysis will be on
materiality. Significance of auditing contingency, audit, and auditing procedures and others
will be discussedfrom the reports of Independence Group NL thatis an ASX listed company.
In addition to that, the discussion will contain the cash flow statement analysis and financial
report reviewing, and audit report analysis. Further, the market and nature of the company
will be discussed to provide an ultimate understanding of the business activities of the
Independence Group.
Methodology:
In the given report, various methods and tools are to be used to make a qualitative and
quantitative analyses of the financial data and auditing procedures, in addition to that the
company’s ratios are calculated for trend analysis (Simnett, Carson and Vanstraelen2016).
Section 1:
Materiality in the auditing procedure means reliability on the statements and the
reports of a company (Samsonova-Taddei and Siddiqui 2016). The materiality is an inherent
part of the auditing procedure as this helps the auditor to fix the audit planning and procedure
that are required to perform in the auditing procedure. In addition to that if the materiality on
the client or on the company’s financial statements and accounting is low the auditor needs to
implement more substantive auditing procedure to make decision and comment on the
company’s financial report. The materiality of the company will be determined by conducting
the compliance procedure which will evaluate the strength of the internal control of the client.
If the internal control of the client is regarded as strong then the auditor assumes that the

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AUDITING AND ETHICS
findings of the auditing procedure will be contributory in the preparation of the audit report.
If the internal control is weak then in that case the auditor needs to conduct an investigation
for more audit evidences to make find the findings material.
In the given report the chosen company Independence Group is a listed company in
the ASX majorly operates in the excursion of copper, nickel, gold and others. The internal
control of the company is regarded well and strong as there are separate departments and
supportive documents are available in research outcomes (Moroney2015). The materiality is
obtained by the analysis of comprehensive review of the independence group’s adherence to
regularity guidelines and security policies to access control over the financial management.
From the audit report of the company and other financial notes it has been found that
the company’s auditor needs to review the statutory audit duties in the auditing procedure.In
evaluating the mining assets, the management’s impairment models are used for the NOVA
mine, as there are significant issues that are affecting and challenging the assumptions of the
management for the assessment terms. In addition to that benchmarking and analysing the
management’s commodity price assumptions against the external market information and
trends to determine whether the significant changes might leave an impact on the assets
valuations. In addition to that, the companies production forecasting and challenging the
appropriateness of the management on the ore reserves are being required to make the
estimates on the assumption of the source data available (Louwerset al. 2015).
Section 2:
In this portion of the report the main objective is to provide an analytical view of the
key ratios of the profits and loss statements and the balance sheet. The ratios taken here are
net profit ratios, current ratio and the Debt equity ratio. The study will held upon the annual
report oflast four financial years. In addition to that for better understanding of the study and

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AUDITING AND ETHICS
increase and decrease of the cost or component of the financial statements bay taking the base
of the figures of 2014.
Independence
Group Amount Trend
Ratio
Particul
ars 2017 2016 2015 2014 2017 2016 2015 2014
Net
Profi
t
ratio
Net
Profit 17256
-
58336 78809 44144 39% -132% 179%
100
%
sales
42192
6
41705
0
49859
4
39905
9 106% 105% 125%
100
%
Net
Profit
ratio 4% -14% 16% 11% 37.0% -126.4% 142.9%
100.
0%
Debt
Equit
y
ratio
Total
Debt
19704
1
26582
6 510 28362 695% 937% 2%
100
%
Total
Equity
17327
84
14557
91
66549
5
60950
5
2.84293
648
2.388480
816
1.09186
143 1
D/E
ratio 11% 18% 0.08% 5% 244% 392% 2%
100
%
Curr
ent
Ratio
:
Current
assets
Cash
and
cash
equivale
nts 35763 46264
12129
6 56972 63% 81% 213%
100
%
Trade
and
other
receivab
les 59383 30900 22086 30070 197% 103% 73%
100
%
Inventor
ies 63158 46498 40298 40383 156% 115% 100%
100
%
Total
Current
Assets
15830
4
12366
2
18368
0
12742
5 124% 97% 144%
100
%
Current
Liabiliti
es

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AUDITING AND ETHICS
Trade
and
other
payable
s 49052
10713
2 45091 46855 105% 229% 96%
100
%
Borrowi
ngs 56226 43154 510 3508 1603% 1230% 15%
100
%
Total
Current
liabilitie
s
10527
8
15028
6 45601 50363 209% 298% 91%
100
%
Current
ratio
1.503
676
0.822
844
4.027
982
2.530
131 59% 33% 159%
100
%
From the above analysis, it is identified that the portion of their Equity investment of
the company is increased substantially over the periods (LarránJorgeet al. 2015). The margin
of profits has been raised to maximum in the year 2015. However, in the year the company
has initiated some loss in 2015’s operations. The trend of the net profit ratio is the
measurement of the ability of The Company to make profits against the sales. This shows the
ability of the company to make the profits for the shareholders of the company. In addition to
that, the company’s ability to pay the liquidity obligations is calculated by the current ratio
analysis. The ratio depicts the difference of the short term or current liabilities and the current
assets of the company. In the analysis period, one significant observation has been located as
the company is not having the Receivable or debtors as the current asset rather they are taken
as the non-current assets of the company. This is because of the nature of the business that the
company is associating with or the business policies. The possible reason of such is that the
company is not selling the products in credit. The assets that are located in the non-current
assets because of the any special case allowance (Knechel and Salterio2016).
From the above analysis the main portion of the auditing risk are associated in the
sudden increase in the borrowing of the company and the lower profitability of the Company.
In the auditing procedure the company needs to comply with the associate lists that are

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AUDITING AND ETHICS
lowering the profit margin of the company. In addition to that the company’s receivable is
also increasing over the years this means the company is not getting paid back the dues. The
current collection policy is to be reviewed a major portion of the funds which are blocked in
the way of receivables. Management assertion in auditing is the claims made by the members
of the management regarding certain aspects of the business management. In the auditing of
the financial statements, the auditor primarily uses the reliability upon the variety of assertion
regarding the activities performed in the business. Therefore, auditing of the assets
presentation and discloser appropriateness for each of the main debtors of the company is to
be analysed. The confirmation of the salesis required to be attained from the external sources
by the purchasing company;however, the risk of mismanagement for each assertion will vary
according to the type of account (Karaibrahimoglu and Cangarli2016).
Section 3:
The statement of cash flow is a part of financial statement that depicts the collection
and allocation of the cash in various activities (Kaptein2015). In the cash flow, the cash are
segregated into three different categories based on the character of the cash flow activities.
These activities are operating activities. The other two activities are investing and Financing
activities. In the financing activities, the sources are related with financing or sources of
finance.In the report, the major discussion will be held regarding the allocation and sources of
the cash inflows and outflows in relation to the operating activities. The major source of fund
are collected from debtors of the company, the company from the interest income that was
amounted as $416375 and $ 2201 respectively generated a minor portion of the cash inflow.
The collected cash are utilised and allotted in the payments to the suppliers and employees of
the company. Out of the collected cash $ 323416 are paid for the payment to the suppliers
and employees of the company. Another cash outflow was initiated by payments for
exploration expenditure. In addition to that, another inflow of the company was

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AUDITING AND ETHICS
generatedfrom other operating activities.The major or non-cash investments are made by
providing the equity shares of the company. But in the year 2017 there was no non cash
investing and financing activities during the current or previous year (Hutabarat2018).
Audit report analysis
For the year ended 2018 the auditors of the independence group is BDO.
Opinion- It is the primary and main objective or duty of the auditor to comment on the
financial statement of the client. In the opinion paragraph the auditorinclude an opinion out of
“Fair”, “Qualified”. if the auditor present the clear opinion that will signify and assure the
shareholders of the company that all presented information including the financial statement
and the directors report are made properly. The company has maintained all material
discloser in relation to the business and preparation of the financial statement are made in
association with the Australian Accounting Standards (Ghahramani, Soleymanporand
Fatahi2016).
The audited financial statements include the report of the independence group and the
subsidiaries of the company which comprises the consolidation balance sheet as at 30 June
23017, the statement of profits or loss and other comprehensive income, the consolidated
equity and consolidation statements of cash flows for the year ended and the notes to the
financial statements. The word consolidation means to gather a consolidated data of
independence group and its subsidiaries (García-Marzá2017).
In addition to that the company has accompanied with all the components of corporation Act
2001, and the auditor of the company form an opinion “FAIR” for the financial performance
in the year ended 30 June 2017.
Basis for Opinion:

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AUDITING AND ETHICS
The audit conducted on the basis of Australian Auditing Standards. In the auditing procedure
the auditor BDO has complied with the corporation act 2001, ethical requirements of the
accounting Professional, and Ethical Standards Board APES 110, Code of Ethics For
Professional Accountants (Ferrell and Fraedrich2015).
Key Auditing Matters:
As on 30 June 2017, the value of the nova mine has been increased to $1.61 billion due the
effect of volatility of the nickel price. The Carrying value of the mining properties is taken in
to consideration under note 14. The company has reassessed the value on the nova mine that
concludes that the mining assets was not impaired. In the assessment the following discussion
and analytical reviews are connected and discussed which states that the company:
 Long term nickel, copper and cobalt pricing;
· Reserves estimates;
· Production and processing volumes;
 Operating costs: ·
 Foreign exchange rates and inflation rates; and ·
 Discount rate.
Commodity prices against external market information and trends are used to determine
whether a significant change would impact the value of the asset by Benchmarking and
analysing management assumptions.
There are differences in valuation of ore reserves estimate by assessing the significant
assumptions, methods and source data used by management in estimating ore reserves, are
contradictory with the auditor’s assumption (Beauchamp and Bowie 2014).

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AUDITING AND ETHICS
Further, the forecasted evaluation productions and the processing volumes operating cost of
the Board and the auditor are not agreeable (Adelopo2016).
Another issue that is observedis the internal values discounting rate in the impairment model
is contradictory with the management’s discount rate.
Another issue that had come into existence in the auditing matter relating to accumulated
losses as well as the judgements behind preparing forecast to demonstrate the future expected
losses in association with the Australian accounting standards (Akbari2017).

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AUDITING AND ETHICS
Reference List
Adelopo, I., 2016. Auditor Independence: Auditing, Corporate Governance and Market
Confidence. Routledge.
Akbari, N.A., 2017. Identification and Prioritization of Ethics Enhancement Strategies in
Corporate Governance from Internal Auditing Perspective. International Journal of
Economic Perspectives, 11(1), pp.948-957.
Beauchamp, T.L. and Bowie, N.E. eds., 2014. Ethical theory and business. Pearson.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making& cases.
Nelson Education.
García-Marzá, D., 2017. From ethical codes to ethical auditing: An ethical infrastructure for
corporate social responsibility communication. El profesional de la información (EPI), 26(2),
pp.268-276.
Ghahramani, B., Soleymanpor, M. and Fatahi, R., 2016. ETHICS IN ACCOUNTING AND
AUDITING. IIOAB JOURNAL, 7, pp.293-299.
Hutabarat, G., 2018. The Effect Of Audit Experience Time Budget Pressure, and Auditors’
Ethics On Audit Quality. JurnalIlmiah ESAI, 6(1), pp.1-15.
Kaptein, M., 2015. The effectiveness of ethics programs: The role of scope, composition, and
sequence. Journal of Business Ethics, 132(2), pp.415-431.
Karaibrahimoglu, Y.Z. and Cangarli, B.G., 2016. Do auditing and reporting standards affect
firms’ ethical behaviours? The moderating role of national culture. Journal of Business
Ethics, 139(1), pp.55-75.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.

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Larrán Jorge, M., Andrades Pena, F.J. and Muriel de los Reyes, M.J., 2015. Factors
influencing the presence of ethics and CSR stand-alone courses in the accounting masters
curricula: An international study. Accounting Education, 24(5), pp.361-382.
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C.,
2015. Auditing & assurance services. McGraw-Hill Education.
Moroney, R., 2015. Auditing: A practical approach. Wiley Global Education.
Samsonova-Taddei, A. and Siddiqui, J., 2016. Regulation and the promotion of audit ethics:
Analysis of the content of the EU’s policy. Journal of business ethics, 139(1), pp.183-195.
Simnett, R., Carson, E. and Vanstraelen, A., 2016. International archival auditing and
assurance research: Trends, methodological issues, and opportunities. Auditing: A Journal of
Practice & Theory, 35(3), pp.1-32.
Sinha, V.K. and Arena, M., 2018. Manifold Conceptions of the Internal Auditing of Risk
Culture in the Financial Sector. Journal of Business Ethics, pp.1-22.