Financial Accounting Process Report - University of Australia, Finance

This report delves into the intricacies of the financial accounting process, focusing on the transition from a partnership to a proprietary company and the subsequent requirements for listing on the Australian Stock Exchange (ASX). It examines the key differences between partnerships and proprietary companies, highlighting the advantages and disadvantages of each structure, particularly in the context of Australian law. The report outlines the steps involved in forming a proprietary company, including registration, selection of directors and shareholders, and share structuring. It further explores the rights and obligations of company directors, as well as various funding options available to companies, including raising capital from shareholders or through public offerings. The report also discusses the advantages and disadvantages of being a public company and the specific reporting requirements mandated by the ASX. Finally, the report provides a comprehensive overview of the key audit assertions, substantive audit procedures, and the communication of key audit matters in the auditor's report, offering a holistic view of the financial accounting and auditing landscape.

FINANCIAL
ACCOUNTING
PROCESS
ASSIGNMENT

1
By student name
Professor
University
Date: 25 April 2018.
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Contents
Background and Abstract............................................................................................................................3
Discussion and Analysis...............................................................................................................................3
Key Audit Assertions................................................................................................................................3
Substantive Audit Procedures.................................................................................................................3
Communication of Key Audit Matters in the Auditor’s Report................................................................4
References...................................................................................................................................................5
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Background and Abstract
In the given case, Xiaojing Wu is an entrepreneur from China who immigrated to Australia and set up a
partnership business with two other partners in South Australia but later decided to dissolve and
restructure the same as a company. The below section highlights the accounting regulation and the
reporting requirements w.r.t. formation of company in Australia and further listing of the same on
Australian Stock Exchange.
Discussion and Analysis
A partnership is a group of persons or entities who are doing the business together and sharing the
profits or losses in the ratio of capital contribution or pre agreed ratio. It has unlimited liability for each
partner and each one of them is personally liable to make good the losses of the third party (Choy,
2018). Whereas this shortcoming is overcome by the proprietary company where the individual and the
company have separate and distinct identity and no owner, shareholder or employee assumes the full
liability of the company’s debts. As per the Australian Law, the proprietorship company has limited
liability of members based on ownership or unlimited by the share capital (Alexander, 2016). Therefore,
shareholder’s own assets are not under threat in this type of business. Some of the disadvantages
include many rules and regulations framed by ASIC needs to be followed, the shareholders are not able
to take decision on behalf of the company, there is a difference in the control and ownership of the
company and the cost of establishment of the company is generally higher than sole trader or
partnership form of business.
The proprietorship company can be
set either by self or through a
service provider using ASIC form
201, available on ASIC site with
applicable fees. Then the name of
the company should be chosen and
ACN number needs to be taken
(Dichev, 2017). Post this, the rules
or constitution of the company
needs to be formed, the
shareholder and directors (at least
1) needs to be chosen, the share
structuring needs to be done, the
Australian state in which the
registration needs to be done has to
be selected. One registered office
and principal place of business is
selected, the company stands
registered (Heminway, 2017).
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The rights and obligations of directors include being honest and careful in dealing with company or on
its behalf, understanding the legal obligations and making necessary compliance, being informed of
company’s financial position and performance and payment of debt on time, get professional advice in
case of any doubts and working in the interest of the company and directors (Werner, 2017).
The funding options include raising funds from the existing shareholders or employees of company or
any of its subsidiaries or from general public if it does not requires any disclosure document.
In case the company needs to be listed on ASX, it has to follow the listing requirements. The main
advantage of the public company is the unlimited number of shareholders, the ability to take decision is
in the hands of the investors, visibility of the company, the multiple fund raising options that opens up
for the company (Trieu, 2017). It also gives the benefit of share transfer amongst the owners which is
not available in the case of proprietorship company. The disadvantages are following the rules and
regulations of Corporation Act, compulsory audit, the enhanced disclosure requirements in the annual
report and the set up costs is also high as compared to Proprietorship Company.
When the company is listed on the Australian Stock exchange a lot of funding options are made
available to the company like that of issue of shares and debentures to the public, thereby raising
money through equity and debt respectively. This helps the company in raising large amounts of capital
in quick time but at the same time, it also entails a higher regulatory and fund raising costs (Linden &
Freeman, 2017).
The reporting requirements as per ASX include providing reports to the shareholders, holding the annual
general meeting, making the constitution of the company available to its shareholders and maintaining
the share register.
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References
Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-
431.
Choy, Y. K. (2018). Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview
Analysis. Ecological Economics, 145. doi:https://doi.org/10.1016/j.ecolecon.2017.08.005
Dichev, I. (2017). On the conceptual foundations of financial reporting. Accounting and Business
Research, 47(6), 617-632. Retrieved from https://doi.org/10.1080/00014788.2017.1299620
Heminway, J. (2017). Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and
Organic Documents. SSRN, 1-35.
Linden, B., & Freeman, R. (2017). Profit and Other Values: Thick Evaluation in Decision Making. Business
Ethics Quarterly, 27(3), 353-379. doi:https://doi.org/10.1017/beq.2017.1
Trieu, V. (2017). Getting value from Business Intelligence systems: A review and research agenda.
Decision Support Systems, 93, 111-124.
Werner, M. (2017). Financial process mining - Accounting data structure dependent control flow
inference. International Journal of Accounting Information Systems, 25, 57-80.
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