Comprehensive Audit Report: Flight Centre's Key Risks & Responses

This report provides a comprehensive analysis of the audit conducted on Flight Centre, an Australian travel agency company. It begins with a brief summary of the company, highlighting its establishment, services, and the impact of the COVID-19 pandemic on its operations. The report then delves into key audit matters, emphasizing the auditor's responsibility in addressing these issues and ensuring transparency in financial reporting. It identifies specific financial reporting issues, such as going concern assessments, impairment assessments, contract modifications, fair value measurements, and the impact of government rules and regulations. Furthermore, the report discusses the audit risk model, explaining inherent risk, control risk, detection risk, and their interrelation. Finally, it outlines potential audit responses, including overall responses and specific procedures, to address the identified risks and ensure the accuracy and reliability of Flight Centre's financial statements. Desklib offers this and many other solved assignments for students.

Auditing

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
A brief summary of the flight centre......................................................................................3
The key audit matters.............................................................................................................4
The audit matters relating to financial reporting issues..........................................................5
The audit matters affect the audit risk....................................................................................6
The potential response to the audit risk .................................................................................7
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The auditor is examined the financial statements of an entity whether the entity earns
profit or does not earn profit. The main goal of the audit is given the opinion of the balance sheet
and other financial statements. The person conducts the audit with efficiently and effectively
manner. The auditor should cover all aspects of the enterprise while doing audit of the financial
statements. The auditor should obtained sufficient and appropriate financial information (Al-
Taee, 2021). In this report, discuss about the flight centre company that is situated in the
Australia. This report discuss the brief summary, key audit matters, audit risk and audit strategy.
TASK
A brief summary of the flight centre
Flight centre company is situated in the Australia. It is a travel agency company. It was
established the business in the year 1982 and head office in the Brisbane, Australia. It conducts
the business in different name like as New Zealand, South Africa, India and China. It provides
many services such as flights, hotels, care rent facility, travel insurance and visas. This company
provides the services 24/7 hours to assist the unforeseen situations. The objective of the company
is to become the world famous company and profitable travel retailer company. In U.K the
company works in different brands such as Liberty Travel and Travel associates brands. This
company was affected due to COVID-19 pandemic. In these days the share price of the company
has fall down up to 80%. To overcome this situation company was issued the share capital of
$700 million at a price of $ 7.20per share. The company was paid the cancellation fees to the
customers due to cancellation of flights. It was huge loss for the company. To overcome this
situation the company has started the new business in the year 2021 of Tour and packages. The
company divides the vision into different categories they are as follow:
 People- It believes our company is our people. It cares the colleagues health, professional
development and financial security. It believes the work should be hard and work divides
into different people (Ayres and et.al, 2019).
 Customer- It focuses on every customer. It prefers the customer choice. It provides
various benefits to their customers such as tour packages, hotels and ticket bookings. It
works with honesty, integrity and attitude. The key operations are to giving better
benefits, best products and very best services that they take benefits again and again.

 Future highlights- They assume the customer have to right to belong as a member, a
village and nation. It provides the roadmap to the people to achieving the goals of the
company (Canning and et.al, 2018).
 Responsibility- The company owner takes full responsibility of success or failure. It does
not give the responsibility of external team members. It recognises the individual success.
The Flight Group Company works on the following principles:
 Ownership- The company gives the opportunities to the employees and individual to
share the company success. It is very necessary to the business owner that they review the
business is conducted properly.
 Incentives- Incentives are based on measurable and dependable outcome primarily based
Key performance. The company agrees with that ‘what receives Rewarded, gets carried
out’. A reward for producing the Wished final results. If the proper outcomes are
rewarded, the organization humans will prosper.
The key audit matters
This SA is applicable for audit of balance sheet and profit and loss. It describes the listed
company. The Auditing standards offers with the auditor's duty to cope with all key audit topics
inside the auditor's document. It contains the info of auditor's judgement as to what speak within
the auditor's document and the bureaucracy and contents of such conversation. The key audit
matters provide the extra transparency to the auditor report. The auditor shall determine, from the
subjects communicates with those charged with governance, the ones matters that required huge
auditor interest in appearing the audit. The auditor check the ones regions that includes excessive
hazard of fabric misstatement. The important thing audit matters ought to described within the
sub headings in a separate section. The auditor have to no longer talk those subjects while the
auditor could be required to regulate the opinion in accordance with the SA. The verbal exchange
of key audit subjects in the auditor's document may additionally offer meant consumer a
foundation to in addition interact with control and people price with governance approximately
certain topics referring to the entity, the audited monetary statements (Daniel and Vasanthi,
2019). This SA applies to audit of complete sets of popular reason financial statements of
indexed entities that is Flight Centre group and occasions while the auditor in any other case
comes to a decision to communicate key audit matters within the auditor's record. The dedication
of key audit subjects involves making a judgment about the relative significance of topics that

required big auditor attention. Therefore, it is able to be uncommon that the auditor of a entire set
of fashionable cause financial statements of a indexed entity would not determine at the least one
key audit depend from the matters speak with those charged with governance to be
communicated within the auditor record. As in line with trendy on auditing the auditor speak
with the ones charged with governance on a well timed foundation. The correct timing for
communications about key audit subjects will range with the instances of the engagement (Hay,
2018). Those audit matters are critical within the current yr. These subjects had been addressed
inside the context of audit of economic statements. These audit matters are important in the
current year. These matters were addressed in the context of audit of financial statements. The
following key audit matters of Flight Centre Group are as follow:
 To determining the time covered by the Flight Centre Group's going concern basis from
the date of auditor's report. All the information of the Group's are relevant to the audit of
financial statements.
 The cash flow statements are based on the historical results. The cash flow expenditure,
growth rates and relevant external informations are proper.
The audit matters relating to financial reporting issues
The management and board of administrators are responsible that the topics said of the
groups Act with recognize to the education of those stand by financial statements that given a
true a fair view of the monetary function. This audit subjects are also included the duty that the
accounting statistics according with the availability of act for safeguarding the belongings of the
business enterprise and for preventing and detecting frauds and different guidelines and law. The
education and presentation of the monetary announcement that provide a real and honest view
and free form misstatement, whether or not due to fraud and mistakes. The management is
accountable to the coaching and presentation of the financial statements according with the
auditing preferred. The inner manipulate of the Flight group organization is vital to recognize the
training of books of bills. The management of the group need to difficulty the corporation will
continue inside the future. The control takes many judgements when guidance of financial
statements (Li and et.Al, 2020). Some of the matters have sizeable impact at the monetary
position of the organisation. Records is vital to the shareholders for taking selection. The
following financial reporting issues that involve significant management decision they are as
follow:

1. Going Concern – While control practise of the monetary statements then it asses the
business enterprise capacity to hold as a going problem. Within the cutting-edge-day
conditions, control will need to keep in mind the existing and anticipated consequences of
the coronavirus outbreak on sports in its evaluation. The unpredictability of the capability
impact, there can be material uncertainties that solid doubt at the organisation’s
functionality to function below the going situation basis. If the employer, notwithstanding
the fact that, prepares the monetary statements under this assumption, it have to divulge
these uncertainties (Li and et.al, 2022).
2. Impairment assessment- At the end of the financial year the Flight Group Company is
necessary to identify there is any losses of the non financial assets. The assets will
become impaired when the company can not recover its salvage value by selling it.
3. Contract modification- The Flight company was affected due to COVID-19. If they can
not pay their debts then they need to obtain the additional funds through issue of shares
and bank loan.
4. Fair value measurement- Flight Group Company are necessary to measure their assets
and liabilities at the fair value. The fair price should be taken on the current market
position. When the company measures the fair value then should undertaken the current
conditions and corresponding assumptions which are known as market participants.
5. Income tax and Government rules and regulation- A part of the response by governments
to the coronavirus outbreak has been to introduce help measures for character industries
along side wider financial stimulus packages. Those measures encompass direct
subsidies, tax exemptions, tax reductions and credit, extended expiry length of unused tax
losses, discount of public levies, condo reductions or deferrals and occasional-hobby
loans (Li and et.al, 2021).
The audit matters affect the audit risk
An audit risk is a very important tool and technique that are applied by the auditor to
assess the audit risk. The audit tools help the auditor to decide the audit evidence. The audit risk
model is based on three risk.
Audit risk model:
Detection risk = Acceptable Audit risk / Inherent risk * control risk

The audit hazard model is primarily based at the evidence which is wanted for each transaction
magnificence and account disclosure. Inherent risk is the auditor’s evaluation of the
susceptibility to fabric misstatement of an announcement about a transaction beauty, an account
balance, or an attached disclosure, quoted in my view or an aggregation. Manage chance is the
auditor’s assessment of ways in all likelihood a material misstatement can occur in an statement
about a transaction magnificence, account stability, or an connected disclosure and can't be
diagnosed or prevented in a time-touchy way by means of the patron’s pre-present day internal
controls. Suited audit threat is the auditor’s stage of danger that they are willing to just accept to
release an unqualified opinion on financial statements that can be materially misstated.
Unqualified audit reviews country that economic statements are presumed to be free from
misstatements. Detection chance is the hazard that audit proof for any given audit statement will
fail to seize fabric misstatements. If the patron indicates a high detection threat, the auditor will
probably be capable of discover any fabric mistakes. The auditor will react with the aid of
reducing great trying out (Li and et.al, 2023).
The potential response to the audit risk
There are two types of audit responses. Responses which have an total impact on how the audit is
conducted ("the overall responses") and responses concerning the nature, timing, and quantity of
the audit processes to be executed.
The auditor have to layout and put into effect overall responses to deal with the possible risks of
any material misstatement as follows.
 Making suitable assignments of important engagement obligations. The skill, knowledge,
and capacity of engagement crew individuals with important engagement obligations
have to be commensurate with the possible risks of any material misstatement.
 Providing the supervision extent which is suitable for the circumstances, along with, in
particular, the examined risks of any significant misstatement (Loch and et.al, 2021).
 Incorporating elements of unpredictability within the choice of audit methods to be
completed. As a part of the auditor's reaction to the assessed risks of misstatement, along
with the assessed dangers of misstatement due to fraud, the auditor have to include an
element of unpredictability within the preference of auditing strategies to be performed
from year to year. Examples of techniques to contain an element of unpredictability
encompass includes:

1. Performing audit processes associated with accounts, disclosures, and assertions
that could now no longer in any other case be examined primarily based totally on
their quantity or the auditor's evaluation of risk
2. Varying the audit processes timing
3. Selecting objects for checking out which have decrease quantities or are in any
other case out of the normal choice parameters
4. Performing audit processes on an unannounced basis
5. In multi place audits, various the place or the nature, timing, and quantity of audit
processes at associated places or commercial enterprise from year to year.
Evaluating the company's choice and applicability of important principles of accounting. The
auditor have to compare whether or not the company's choice and application of important
accounting principles, specifically the ones associated with subjective measurements and
complicated transactions, are indicative of bias that might result in any significant misstatement
of the monetary statements (Peecher and et.al, 2022).
Substantive approach: A predominantly substantial technique is whilst the assessed degree of
risk of control is high. When a predominantly substantial technique is chosen, the auditor must
have enough understanding of the inner management system to apprehend the potential reasons
of misstatements. Lower assessed degree of manage risk technique. It is a method that the
auditor has decided not to depend upon the organisation's internal management and to audit
directly the associated economic statements accounts. Set management risk at the maximum for a
few or all assertions because the controls are ineffective. An assertion can not be checked from
the inner control. Testing the effectiveness of controls is inefficient (Yuan and et.al, 2022).
Control reliance approach: Reliance on controls which is supported with the aid of using
enough and suitable audit proof that enables the auditor to evaluate management risk at much
less than the maximum, which ends up in a decrease assessed risk of any significant
misstatement. A technique that the audit has decided to depend upon the organisation's inner
controls and it calls for a extra exact information of inner controls. An auditor's choice to observe
a reliance method involves identifying particular assertion applicable to particular that is possibly
to save or detect significant misstatements and also involves testing of controls to assess their
effectiveness (Zanon and et.al, 2021).

CONCLUSION
In the above report the audit is important to the Flight Group Company. Auditing is the
independent examination of the financial statements that are prepared by the management. The
company provides many services to their customers such as tour packages, car rent facility and
hotel. It conducts its business of the different brands in the different countries. This report
included the two key audit matters that are important to the management decision. The auditor
gives the inappropriate opinion to the financial statements because management does not follow
the concept of going concern. Further in this report contained the direction, timing and scope of
an audit. The strategy are used when introduce the audit plan.

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