Financial Audit Planning Report: Flight Centre Travel Case Study

This report presents an audit planning analysis for Flight Centre Travel, a major travel company operating in Australia. The report begins with an executive summary and introduction, emphasizing the importance of audit planning. The body of the report is divided into two parts. Part 1 examines Flight Centre Travel, including its industry position, economic trends, competitive environment, product information, and technological advancements. It also considers relevant laws and regulations. Part 2 focuses on the risk of material misstatement at the financial report level, with specific attention to account balances. The report highlights the importance of understanding the client's business, industry, and internal controls to develop an effective audit plan. The audit plan includes understanding the business, market condition, competitive environment, product, customer, supplier information, technological advances, and applicable laws and regulations. The report also discusses the importance of identifying and addressing the risks of material misstatement in financial statements.

AUDITING

Table of Contents
Table of Contents.............................................................................................................................................2
Executive Summary..........................................................................................................................................3
Introduction......................................................................................................................................................4
Body of Assignment..........................................................................................................................................4
Part 1: Flight centre travel............................................................................................................................4
General and industry –specific economic trend and condition................................................................5
Competitive Environment.........................................................................................................................6
Product, Customer, and supplier information..........................................................................................6
Technological Advances and effect of the Internet..................................................................................7
Laws and regularity requirement.............................................................................................................7
Other Area................................................................................................................................................8
Part: 2 Answers: Risk of material Misstatement at the financial report level...............................................8
Conclusion......................................................................................................................................................11
Reference List.................................................................................................................................................12

Executive Summary
To start with audit of any entity, auditor has to understand the client’s business. It will affect the many
factors, for example industry scenario, industrial position in the company, political environment,
competitive environment. Before starting any audit, auditor prepares audit plan of the work to be done
while doing audit and also mentioned the manner in which team shall carry out the audit so that audit shall
be done in efficient manner. Audit planning is done after accepting audit engagements and after gathering
information about the client.

Introduction
 It is very important for auditor to make audit plan before starting any audit.Before planning audit of
any entity, it is necessary to know about the entity in order to frame proper audit plan and to
execute it in effective way. It is very important to know the type of industry in which entity exist,
Industry trend, Legal and other compliances applies to entity, Culture and environment in which
entity operate, Product or services in which entity dealing with, Customer and supplier base for
that industry Before starting audit, auditor shall make audit plan in order to use his resource in a
proper way, also to decide the nature timing and extent of audit, audit planning is very useful.
Before conducting audit it is very necessary to obtain the information relating to client. may ask for
financial statement and other details from the client to get the understanding of the client Auditor
may conduct an interview or questionnaire and also can visit client premises in order to get
understanding of the client. It is very important to have all the details regarding client before
starting audit. It is the first step for any successful audit is to obtain the information of the client at
the planning stage of an auditMain purpose of audit planning and preparing audit strategy is to
allocate resources in a proper way. If any matter is material then more resources must be allocated
into that and the matters having lower importance shall be allocated less resources and time.
- Audit plan shall be prepared keeping in mind the audit objectives.
- Before starting the Audit of any client Auditor first understand the client business its market,
industries, its comparative, its market condition, so that will prepare the plan for client audit,
this information will be obtained from outside the agency and obtain the information while
visit the client business.
Body of Assignment
Part 1: Flight centre travel
 Here an auditor needs to obtain all the details like business type, industry type, legal entity type,
applicable law, market segment and many other information of the flight centre travel in order to
plan the audit to decide nature, timing and extent of audit in every items of business.

 Flight centre travel is company operating in Australia. It is listed on ASX. It is one of the world’s
largest retail travel company in Australia. Here, the company is Travel Company. It is operating in
23 countries and it has corporate travel management network in more than 90 countries.
 Dividend: company has declared interim dividend $60 as well as final dividend $107 which is more
than the interim dividend $45 and final dividend $94 in 2017.
 Control gained over entities: In 2017 company has acquired interest in many company horizontally
and vertically. In other words, Company has acquired control in the company in same industry as
well as different industry
- In July 2017, Flight centre travel acquired 100% of Bespoke Hospitality Management Asia
Limited (BHMA) which is a fast-growing Asia-based hotel management company, for payment
in cash of $6,553,000. There was also condition based payment that previous owners of the
company will receive incentive kind of payment to if the business will achieve targeted sales
and profit in future.
- In August 2017, FLT acquired major part of Les Voyages Laurier Du Valona Inc. (LDV) with the
payment of $17,094,000, and also put agreed into a put/call option for the balance payment. .
LDV is well established and well known company operating in travel business in based in
Canada it the company operating in same segment i.e. travel in which flight centre travel
operating.
- In August 2017, FLT acquired all the control over the Olympus Tours (Olympus) with the
payment of $27,565,000. Olympus is company operating in Mexico..
- As an Auditor first understands the business of the company her in current case Auditor know
the business of the company and plan the Audit.
- Auditor obtain the data from the reliable source for example internally and outside agency,
also discuss with management for company business policy, internal control system of the
organisation before starting the Audit of the organisation, it is very important task to start the
audit of the any organisation. As per generally accepted Auditing standard Auditor First
performs the Audit procedure of any organisation first understands the environment of the
business.
General and industry –specific economic trend and condition
 Before starting the Audit of the any organisation or client or any company As per standard
on Auditing Auditor should prepare the audit plan for that client or organisation, So that

Auditor should first understand the business of the organization, every company has
different business so prepare the plan as per auditing standard.
 Auditor should understand the industry where its audit there is different scenario in
industries, so auditor should first check the market condition of the industries of that
organisation auditor should first check the industry condition of that client, which market
condition effect the business , considered the internal and external factor which will effect
the business of the company.
 Auditor also check the economy condition of that organisation, its past trend future
economic trend o that organisation in the economic.
 This All information auditor should obtain from company internal source or Outsider
source, example of internal source Auditor should Visit the place of the business and
obtained the information from the employee of the organisation. Example of the Outside :
Auditor will obtain the information from the market, Journal Publication , vendor,
comparators, and other outsider Agency.
Competitive Environment
 Before starting the audit of any organisation auditor always check the comparative
environment of the business as per general accepted auditing standard.
 Competition is always effect the business of the organisation so that auditor is always
checking the competition of the market and its market condition, its effect in the business.
 Auditor should obtained the same data from Outsider agency for computation in the
business and check its effect in the business.
 Auditor should plan the Audit of the organisation after considering the comparative
environment of the business.
 Competition s most effected in any organisation so that auditor should obtain all the
information related with competition in the market, any past event of the competition that
will affect the business of that organisation.
 Comparative environment is most effective tool so that auditor should always check the
competition in the market of that organisation.
Product, Customer, and supplier information
 Starting of the Audit of the any organisation Auditor considered Its business product
company understanding of the product, its customer base, and its supplier as per Auditing
standard.

 Every company has effect its product series, its customer base whether customer is young
generation, old, which geographic, which age group, which male or female, company
supplier, supplier chain , because supplier effect the business of the company.
 Product: Product is always important for the company base its business of the company so
as Auditor check company product its market condition, its effect the market condition,
technology, first understand the basic of that product before starting the Audit of that
organisation.
 Customer: Auditor should the check the customer base of that company , understand the
customer trend, because its effect the business of the company, check the future customer
base , past trend of the customer, customer requirement, base on that auditor should
prepare the plan of the Audit.
 Supplier: supplier is always important for any business without supplier no business going
to success so that Auditor should the understand the supplier, its strategy, its future and
past trend because its always effect the business of the organisation.
Technological Advances and effect of the Internet
 In current time technology is most effect the business of the organisation, every business
has to upgrade or change technology as per requirement otherwise business will not
survive in the long run.
 Before starting the Audit of the any organisation Auditor should check that technology
effect in the company business , Auditor should the the market trend, product innovation ,
its technology effect in the business of the company, because in current scenario every
company has change the and upgrade its technology as per requirement of the business for
long run and survive in the business.
 Auditor is always check before starting the Audit of that organisation whether products
technology base, its market condition , innovation, process of that product, its future
requirement , its always effect the business of the organisation so before starting the Audit
of the organisation, check the product, its technology its market condition, prepare the
Audit plan accordingly, its effect the business of the company, in current scenario every
company has update its product technology to survive in the business in the market.
Laws and regularity requirement

 Every business has effect the law and regulation in the country where its work, its favrabale
for the company or unfavrable, its Always effect the business of the company, So As per
Auditing standard Auditor should check the Law and Various Regularity effect the business
of the organisation.
 Being Auditor of the Company before starting the Audit of Any organisation Auditor should
check the Legal requirement , its Local rules and regularity which will Applicable for the
company,
 Auditor should also check if there is any change in rules and regular and law how business
effect.
Other Area
 Starting of Audit of any origination Auditor should prepare the plan for the Audit
understand the business and its environment because its effect the business of the
company.
 There is lots of factor which will affect the business of the company; Being Auditor of the
company Auditor should check the Market condition, Political environment, its stake
holder, its relationship, internal environment of the company, company relationship with
stakeholder.
 So being the Auditor of the company Auditor considered all the factor befor starting the
Audit of the Company because effect the business of the company.
Part: 2 Answers: Risk of material Misstatement at the financial report level
 Always Auditor should check the internal control system of the organisation to check the
risk in presentation of the financial statement of the organisation.
 There is always risk of material misstatement in financial statement of the organisation
auditor should check the material misstatement f the financial statement of the
organisation because its effect the user of the financial statement of the organisation.
 Material misstatement in preparation and presentation of the financial statement affect
the taking the decision of the company decision.
 Auditors check the presentation and preparation of financial statement of the company
and identify the material misstatement in the financial statement of the organisation.

Specific Account Balance
(a) Explain the why account balance is
at significant risk of material
misstatement
Account balance is always under high risk of
misstatement or possibility is always high in
material misstatement, so its always check
the being Auditor the all account balance
with ledger account any account balance
misreported there is high possibility to
misreport in accounting balance in the
financial statement of the company. for
example Sundry debtors , Sundry creditor,
as per Actual is less than the Actual figure
so its effect the the user of the financial
statement of the company.
In Current Company balance Sheet Flight
Centre $845098000 reported in the balance
sheet 30 June-2018 balance there is high
possibility material misstatement so
Auditor should check with its ledger
consider the all the control of reporting in
the organisation because its effect the user
of the financial statement of the company.
(b) Explain the Key Assertion at risk of
not being valid.
Auditor always give the true and fir view of
the financial statement of the company,
preparation and presentation of the
financial statement is responsibility of the
management Auditor is not start the Audit
with suspected mind , so Auditor should
check the preparation and presentation of
the financial statmnt of the company there
is possibility of the Risk and check the level

of the risk, Check the its material effect in
the financial statement of the company.
(c) Details one (1) relevant substantive
Audit procedure to address the
assertion at risk as identified b)
Above
Being Auditor of the company Auditor has
found any suspected on preparation and
presentation of the financial statement of
the company Being Auditor Use the proper
method as per Auditing standard and check
the risk and find out the Material
misstatement in the financial statement of
the company and follow the procedure for
Finding Misreporting in the financial
statement of the company.
(d) Detail one (1) relevant practical
internal control that would mitigate
the risk in relation to assertion at
risk identified in b) Above
Being Auditor Auditor should check the
internal control system of the organisation,
internal control system is system which
minimise the risk , so Auditor shold check
the internal control system of that
organisation and find if its not proper or not
sufficient communicate management and
also use the Technique for finding out
misstatement in financial statement of the
organisation.
Internal control system strong then change
of misstatement of financial statement is
reduce.

Conclusion
 To identify and assessing the risk of the material misstatement of the financial statement of
the organisation, auditor should understand the business of the company, its environment,
its internal control system, identify and understand the risk of the material misstatement in
financial report of the company.
 Misstatement can arise fraud and error in preparation and Presentation of stage financial
statement reported figure which ill effect the user of the financial statement of the
company .

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