Fortescue Metals Ltd Financial Report Audit: 2017-2019

Desklib provides solved assignments and past papers to help students succeed.

Running head: AUDITING.
AUDITING

AUDITING
2
Executive Summary
The astounding examination on the significant centrality of the association has been acknowledged
through which one of their closest to perfect quality based evaluations. The survey-based assessment a
conclusive way through their capacity evaluation has been mulled over that could be helpful keeping
gotten to ability related to the best in class area. The tempest assessment related to the account of the
risk and the organization has been acknowledged by the studied tremendousness. The exhibited
evaluation and its related tremendousness would be critical for the broad systems.
The more raised measure of procedures and this level of significant worth based satisfaction has been
acknowledged through its past and prior yearly reports. The unquestionable, similarly as vague assets,
has been given through which most of the working criteria has been issued. The better approaches and
its level best zones have been gotten a handle on through the examination. The higher quality and
higher ability have been evaluated through the procedure of senior chiefs to be managed.

AUDITING
3
Table of Contents
Introduction.................................................................................................................................................4
1. Result of analytical procedure.................................................................................................................4
2. Risk of Material Misstatement (Inherent Risk) at the Financial Report...................................................7
a. The integrity of management..............................................................................................................7
b. Management experience, knowledge and changes during the period................................................7
c. Unusual pressure on management......................................................................................................8
d. Nature of the entity’s business............................................................................................................8
e. Factors affecting the industry in which the entity operates................................................................9
3. Risk of Material Misstatement (Inherent Risk) at the Assertion Level.....................................................9
a. Explain why the account balance is at significant risk of material misstatement................................9
b) Explain the key assertion at risk of not being valid..............................................................................9
c) Detail one (1) relevant substantive audit procedures to address the assertion at risk as identified in
b) above.................................................................................................................................................10
d) Detail one (1) relevant practical internal controls that would mitigate the risk in relation to the
assertion at risk.....................................................................................................................................11
Conclusion.................................................................................................................................................11
Reference list.............................................................................................................................................12

AUDITING
4
Introduction
The amazing investigation on the important centrality of the organization has been appreciated through
which one of their absolute best quality based appraisals. The review based evaluation in a definitive
direction through their capability appraisal has been contemplated that could be useful keeping gotten
to capability identified with the up and coming section. The storm cellar identified with the dangers
account and the administration has been appreciated according to the surveyed hugeness. The
presented appraisal and its related hugeness would be significant for the extensive methodologies.
The more elevated amount of methodologies and this degree of value-based fulfillment has been
appreciated through its previous and earlier yearly reports. The unmistakable just as impalpable
resources has been given through which the greater part of the working criteria has been issued. The
better approaches and it is level best areas have been grasped through the appraisal. The higher quality
and higher capability have been assessed through the methodology of senior supervisors to be
overseen.
1. Result of the analytical procedure
Fortescue Metals Ltd has managed to maintain appropriate business performance per year. With the
assistance of key ratios such as gross profit margin, net profit margin, operating profit margin, current
and quick ratio, the financial performance of the company can be calculated properly in the market.
Particulars 2017 2018 2019
Gross profit margin 42% 28% 49%
Operating profit margin 41% 27% 48%
Net Profit margin 25% 13% 32%
Current ratio 1.2 1.3 1.4
Quick ratio 0.9 0.6 1.0
Table 1. Calculation of key ratios of Fortescue
(Source: Fmgl, 2019)

AUDITING
5
In relation to the above discussion, it has been clear that the business organization has been capable of
maintaining appropriate business performance in 2019. Even though the financial performance of the
company decreased in 2018, potential business performance has stabilized in 2019. In addition, it has
been seen that the organization expanded its cash assets based on the high sales revenue in the year
2019 (Fmgl, 2019). It can help the organization in gaining competitive advantage and maintaining
appropriate performance per year.
In relation to the gross profit margin, it is seen that the company failed to increase its management
effectiveness in 2018, which has decreased the potential profitability rate. Nonetheless, as the senior
executives have properly evaluated the financial statement, the potential profitability rage has
expanded rapidly. Similarly, as the potential gross profit margin has developed in 2019, both operating
profit and net profit margins have increased. It has helped the business organization in avoiding
additional economic loss in recent years. Moreover, the company may avoid unnecessary market
liabilities in the upcoming years. Finally, the liquidity ratios such as quick ratio and current ratio have
shown that The Fortescue Metals Ltd was unable to increase the liquidity of assets in 2018. As the
amount of the assets has decreased compared to the market liabilities, the potential crisis has
constantly expanded. However, the senior executives of Fortescue Metals Ltd have evaluated the
current situation and taken appropriate action to mitigate the issue. It has helped to improve the rate of
current ratio in the year 2018.
In relation to the above discussion, it can be stated that the organization has stabilized its market
position in the current year. However, the unnecessary losses in 2018 had forced the organization to
take implement appropriate management strategies. The senior executives of The Fortescue Metals Ltd
had hired an external group of auditors who were capable of evaluating the business effectiveness of
the company. Based on that, the potential business performance of the organization has improved in
the future. In addition, in 2019, the effectiveness of audit management is improved as both internal and
external auditors review the financial statement. The review of both internal and external auditors has
helped in improving the quality of audit evaluation. Therefore, the potential crisis of the company can
be reduced in an effective manner. In addition, the organization can be capable of providing appropriate
business performance per year.

AUDITING
6
2. Risk of Material Misstatement (Inherent Risk) at the Financial Report
a. Integrity of management
The company FORTESCUE METALS LTD has been one of the extraordinary company in the field of mining
and iron ore. The iron ore extraction and it's to the point-based assessment has helped the company to
be one of the growing companies in the country. The assessment based on the internal, external risks
assessment has been one of the high-level growth. The managers and the director has been managed
through the internal and external assessment of the company basic. The Director MR, Andrew Forrest
has been one of the extraordinary directors who have their eligibility to be consistently raised (Dai &
Vasarhelyi, 2015).
The responsibility and the share of management have to be comprehended through the share of
professionalism which is based on having much of the actions which could be maintained as per the
high-quality standard that has been utilized. Thee healthy and strong bond has been very quality based
work has been implicated in the recent future. The proper essence in the key satisfactory has been
taken within the management. The high quality of team management and it's level based
comprehensiveness has bene managed through proper comprehension.
b. Management experience, knowledge and changes during the period
The management of the company has been promised to be one of the better prospects which would be
meaningful through the direct and indirect analysis in perspective. The very comprehensive and very
meaningful analysis has been down through the step byes toes showcases its level of apprehensive
through the proper significance. The high quality and it's level best assessment in the correct and
enhanced procedure thee ASX governance council has been taking participants through the better
approach to take its perspective in the higher quality. The transparency, such as the direct client basis of
approach and its Lela based section using it for r a higher level. The better ambitious sections cut as the
level of management and it’s too the point-based management has been very accurate. The cost-saving
method as been taken into consideration which could be utilized through their integrity and
empowerment. The high performance-based work and its development have been comprehended
through the high quality of management to be processed. The principle and operation have been
concurrently utilized in the respected position. The ethical and unethical based world has been handled
by the governance Amanda the sustainability-based framework that has been done in the company. The

AUDITING
7
careful consideration and it's level based approaches have been considered to be one of the better
aspects which could be the best significance (Smith & Van Der Heijden, 2015).
The ultimate significance of the level best apprehension and its related apartment has been managed as
per the ultimate significance in terms of the better segregation. The high quality of management push
cam the HR management and the audit based management has been taken into consideration which
could be easy for the better assessment and establishment of the company. The diversity and its
reliability of maintaining the balance have been comprehended through which most of the suckered
measure has arena considered to be produced.
c. Unusual pressure on management
The pressure which has been kept on the management in terms of more and more amount of profit
within the less spading of time act have to be processed through its level best of comprehension. The
utilization and the different types of appointment, such as the sisals and exposure of permeability has
been utilized through powerful management. The proper assignments such as non-executive and
executive based management has to be comprehended through the senior chair and the person who is
encouraged through the betterment of the perspectives. The remuneration and its perfect assessment
have been effected through its proper acceptance, and its proper Percival has been comprehensively
managed. The better assessment and its related level of aperture has been grown through which it
could be meaningful through the internal approaches.
The directors and the executive management are the main responsible assessment which could be
meaningful through the allover existence through the level of approaches. The board committee has
created the intensive pressure and it's level based approaches through the governance of the company.
The estimated growth of the company is based on having particular things to be adjusted with the
precedence. The high performance-based pressure and it's relevance significance which could make the
engagement of the growth a bit more.
d. Nature of the entity’s business
The business has been owned by the company founders and chairman with the minimal amount of
shares that has been precisely controlled within the context of approaches related to the enhancement.
The business has been considered by the enhancement of individual entire sand he overlaps properties
and share basis of development has been taken into consideration though the total amount of sales
within the statement. The entity of the business is being considered with the business which is purely

AUDITING
8
making money through the internal and external announces. The dividend and share basis of portion has
been taken into consideration which is based on having the consideration to be signified.
e. Factors affecting the industry in which the entity operates
There are several types of factors which could have a direct and indirect effect that might b be the high-
quality basis of advancement in terms of the betterment. The effect of entity operation and is probable
specs such as the rate of growth has been exempted through which the allover significance in the
growth margin would be considered. The entities such as the tiered approach of business the good and
the other export-related stuff are related to bee take through the higher approaches in terms of getting
better in quality. The GDP and the other financial-based sections are being considered as per the total
amount of consideration through their work approaches (SimMet, Carson & Vanstraelen, 2015).
3. Risk of Material Misstatement (Inherent Risk) at the Assertion Level
a. Explain why the account balance is at significant risk of material misstatement
The higher risks of the market opportunities have been explained in terms of misstatement, which has
been done in the corrective procedure. The statement which might be beneficial for the company could
put in risk, and those who might not be risk could be created to view them as a risks ion the potential
statement.
The Company, however, has sole confidentiality to the company director and the manager as per the
comprehensive management of the initial and final stage of assessment. In terms of the significant
assessment of the company current assets as liabilities, the entries must have to be in their particular
position (Beard et al. 2019). The particular position such as the high-quality basis of their improvement
through the estimated approaches. The assets could be highly imposed in the profit and sides of the
company, which is very helpful for the best possible management in the company based attainments.
The high quality based approaches could be highly utilized in the proper process of management.
b) Explain the key assertion at risk of not being valid
Account name Explanation Audit assertion
Other current assets The amount has been lowered in
terms of the previous year,
which has explained the chance
of misstatement has been
Proper data needs to be
collected from the senior
executives based on the
transaction. It will help to

AUDITING
9
grown. identify the authenticity of the
other current assets, and the
actual amount can be
recorded.
Property, plant, and equipment The amount has been lowered in
terms of the previous year,
which has explained the chance
of misstatement has been
grown.
Proper data needs to be
collected from the senior
executives based on the
transaction. It will help to
identify the authenticity of the
property, plant, and equipment
the actual amount can be
recorded.
Intangible assets Even Though the intangible
assets have been increased, it is
clear that the intangible asset is
extremely low compared to the
other assays. Therefore it is
needed to be reviewed for the
auditor.
The auditor can collect the data
from the managing director
and make it look more
authentic.
c) Detail one (1) relevant substantive audit procedures to address the assertion at risk as identified in
b) above
Other current assets
Inquiry
The other assessment has been one of the better quality basis of calculation and their approaches which
could be effective after observation. The process of observing the assets will be having the correct
amount of auditor to be ensured. The value has to be much higher than other values. It could be highly
reliable than other things.
Property, plant, and equipment
Observation
The observation is needed to be done with proper care which is needed to be observed through the
ultimate significance in terms of the equipment based on the outer level of significance. The application
of maintaining the equipment is based on having better significance through the ultimate assessment
for the better assignment. The proper implementation through better applications has been corrected
through its related management.
Intangible assets

AUDITING
10
Recalculation
The recalculation has been considered through the proper implementation and ditto we point-based
assessment needed to be concerned.
d) Detail one (1) relevant practical internal controls that would mitigate the risk in relation to the
assertion at risk
The different types of duties. And calculation must have to be utilized through which the heavy and
accumulate analysis could be utilized. It is needed to be precisely managed through which the better
services are needed to be managed as per the document assessment. The high levels of assessment
through the intermittent level of assessment in the convenience assessment.
Conclusion
The high-quality analysis of the relevant significance of the company has been comprehended through
which one of their very best quality based assessments. The audit based assessment in the ultimate
guidance through their proficiency assessment has been taken into consideration that could be helpful
in keeping accessed proficiency related to the upcoming segment. The basement related to the account
of the risk and the management has been comprehended as per the assessed significance. The
conferred assessment and its related significance would be very relevant for considerable approaches.
The higher level of approaches and this level of quality based satisfaction has been comprehended
through its former and prior annual reports. The tangible, as well as intangible assets, has been
conferred through which most of the working criteria has been issued. The better approaches and it's
level best sections has been comprehended through the assessment. The higher quality and higher
proficiency have been estimated through the approach of general managers to be exclusively managed.

AUDITING
11
Reference list
Barr-Pulliam, D., Brown-Liburd, H. L., & Sanderson, K. A. (2017). The Effects of the Internal Control
Opinion and Use of Audit Data Analytics on Perceptions of Audit Quality, Assurance, and Auditor
Negligence. Assurance and Auditor Negligence (August 17, 2017).
Beard, J., Coram, P., Espahbodi, R., & Mock, T. J. (2016). Does recent academic research support changes
to audit reporting standards?. Accounting Horizons, 30(2), 255-275.
Dai, J., & Vasarhelyi, M. A. (2017). Toward block chain-based accounting and assurance. Journal of
Information Systems, 31(3), 5-21.
Edgley, C., Jones, M. J., & Atkins, J. (2015). The adoption of the materiality concept in social and
environmental reporting assurance: A field study approach. The British Accounting
Review, 47(1), 1-18.
Fmgl. (2019). Retrieved 20 September 2019, from
https://www.fmgl.com.au/docs/default-source/annual-reporting-suite/fy19-annual-report.pdf
Hardan, A. O., Mohamad, N. R., & Salleh, Z. (2016). Human capital antecedent's: The impact of the
implementation international standard on quality control1 isqc 1 on the audit firm performance
in Jordan: A conceptual study.
Kachelmeier, S. J., Schmidt, J. J., & Valentine, K. (2017). The disclaimer effect of disclosing critical audit
matters in the auditor’s report. Working paper.
Kowaleski, Z. T., Mayhew, B. W., & Tegeler, A. C. (2018). The impact of consulting services on audit
quality: An experimental approach. Journal of Accounting Research, 56(2), 673-711.
SimMet, R., Carson, E., & Vanstraelen, A. (2016). International archival auditing and assurance research:
Trends, methodological issues, and opportunities. Auditing: A Journal of Practice &
Theory, 35(3), 1-32.
Smith, S., & Van Der Heijden, H. (2017). Analysts’ evaluation of KPI usefulness, standardisation and
assurance. Journal of Applied Accounting Research, 18(1), 63-86.