Detailed Audit Report: Ingham Limited Financial Position and Risks

This report provides a comprehensive audit analysis of Ingham Limited, evaluating various aspects of its financial health. It begins with an executive summary and introduction, followed by an identification of key business risks faced by the company, including market, credit, and cyber security risks. The report then delves into an analytical procedure of the company's financial position and performance using ratio analysis, revealing trends in debt, revenue turnover, and profitability from 2016 to 2018. Materiality is discussed, referencing ASA 320, and the report identifies material accounts, assertions, sampling methods, and corresponding audit procedures. These include cash and cash equivalents, accounts receivable, inventory, and accounts payable, with detailed audit steps and evidence collection methods. The audit risk model is applied, and the report concludes that Ingham Limited is considered to have a low audit risk due to strong internal controls and effective risk management strategies. The report emphasizes the importance of audit procedures in assessing and mitigating financial risks, providing a detailed overview of the company's financial performance and risk profile.

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Auditing

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Executive summary
In this report, all of the aspects in relation to the audit have been considered for the Ingham
limited. In the company there are several risks which are involved and they have been identified.
The audit risk is taken into consideration and the model is applied which showed that company is
having low risk. The material misstatement concept has been taken into account and with that all
of the material accounts have been ascertained. There is the proper calculation of the ratio which
shows that the performance of the company has declined in 2018. The assertions which are
involved have been identified and with that all of the steps which are to be taken in their audit
procedure are also identified. The sampling which will be used is ascertained with the help of the
sampling plan and in that size of sample is also taken into account.

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Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
Key business risks............................................................................................................................5
Analytical procedure of financial position and performance..........................................................7
Materiality........................................................................................................................................8
Material accounts, assertions, sampling and related audit procedures............................................9
Conclusion.....................................................................................................................................15
References......................................................................................................................................16

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Introduction
Auditing is the main requirement of the business by which all the tasks can be evaluated and the
elimination of the risks is made possible. In this report, various aspects in this respect will be
discussed with context to Ingham limited. The business risks which are involved will be
identified and with that all the factors by which the control and inherent risk are affected will be
identified. The analytical procedure will be carried with the help of which the financial position
of the company will be evaluated. This will be done with the help of ratio analysis and after this
the material accounts will be identified. Various material accounts will be taken into account and
their assertions will be listed together with the reason for the same. The steps which will be taken
in the audit process will be provided and with that sampling plan will also be incorporated for all.

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Key business risks
Ingham Limited is the company which is carrying out the business since 1918 in New South
Wales. The business is for the organic growth and acquisitions (Ingham, 2019). There is the
expansion which is made with the production of stock feed and by that changing requirements of
the consumers are met. The company holds strong market position.
In all the businesses there is a certain risk which is involved in the company and so is the case
with the Ingham limited. There are various risks which are faced by the company and in the
given case there is the risk of competitors and also with cyber security. There are market risk,
credit risk and liquidity risk which are involved. It is necessary for the company to manage them
in the most effective manner. There will be risk with the interest rate fluctuations which will be
involved. All the other risks which are involved include compliance risk, credit risk, liquidity
risk, strategic risk and operational risk (Contessotto and Moroney, 2014). They will be required
to be managed in the business so that the adverse impact which can be faced due to them is
controlled and company can maintain its performance. In the business there are various risks
which are involved in relation to the material misstatement. In this all the entries which are
misstated in the accounts are considered. They are reported in the reports in the Auditors
statement section. The assessment of this risk is made by the auditor at two levels and that is at
the assertion level and financial statement level.
At the assertion level, there is the classification of the risk in two sections which are inherent risk
and control risk. Inherent risk is the risk which is incorporated in the accounts because of the
material misstatement and in that it is assumed that there is no control which is incorporated in
this respect. The control system of the company will have to be considered in relation to the
control risk. It is the risk that internal control of the company is not strong and that will be
affecting the performance of the company.
All the risks which are involved are affected by various factors and it is required that they shall
be taken into account. In relation to the inherent risk, the factors which shall be considered
include liquidity, volume of transaction, estimates, and complexity of the transactions. They are
important as by that the chances of errors and frauds increase (Fadun, 2013). There is the more

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risk which will be involved in the accounts and the same will be inherent which will be difficult
to be controlled. The control risk which is involved in the company is affected by the
environment in which the company is carrying out its operations and also the monitoring process
which is undertaken in the company. There shall be adequate control process which shall be
followed and then only the risk can be controlled.
Audit risk is the risk that is involved and in that auditors will be provided with the unqualified
opinion in the case of the existence of the material misstatement in the financial statements. In
such situations there is the weak internal control which is involved. Audit risk has three main
components which include the inherent risk, control risk, and detection risk. The risk which is in
the account balances due to misstatement will be considered as inherent risk. The risk associated
with the weak control system will be covered in the control risk. Lastly the detection risk is the
failure of the audit process in determining the risks which are involved. All of them are related
and there is the audit risk model which is used for the same.
Audit risk model = control risk X detection risk X inherent risk
In the process of an audit of the company the auditor will be responsible for all the risks which
are involved as they together form the risk of the audit. In the planning of the audit there will be
consideration of all the aspects in relation to various types of risks which are involved. In cases
where the risk in the company will be at high level then the auditor will be required perform the
additional processes by which the same will be eliminated and there will be reduction of the risk
to the level which is acceptable. All the risks which are involved will have to be identified and
evaluated so that decisions can be made in the required manner. By this the relation which exists
among all of them will be identified. If the control risk and inherent risk will be high in the
company then the sample size which will be taken by the auditor will be high for the
performance of the audit test. With the help of this the reduction in the detection risk will be
made possible. On the contrary the sample size will be kept at lower level if the control and
inherent risk will be low as then the detection of the risk will not be a complicated process.
In the given case the Ingham limited has the high amount of inherent risk which is involved but
its strategies and procedure are strong by which the detection risk will be reduced. This is
because all of the aspects will be identified easily. The inherent risk is low and it is assessed in

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appropriate manner. The detection risk will be affected as in this situation the internal control of
the company shall be strong and then only the detection will be made in an appropriate manner.
there will be low detection risk as the internal control will be strong and all the assessment will
be made in appropriate manner. Due to all of this company will be considered to be having a low
risk.
The analytical procedure of financial position and performance
Ratio Formula 2016 2017 2018
Debt ratio Total liabilities/total
assets
1.00 0.80 0.77
Total asset
turnover ratio
Revenue / Total
assets
2.44 2.26 2.08
Net profit ratio Yearly
Income/Sales *100
1.09% 2.44% 4.83%
Debt to equity Total debts/ Equity
capital
-789.67 3.96 3.37
The ratios have been calculated above by which the various aspects of the business can be
evaluated. In the financial statements, there is all the information which is required and the data
is collected from the same (Nuhu, 2014). It can be noted that the debt ratio of the company is
declining in all the three years. It can be said on this basis that the company is reducing all the
liabilities. There are changes which are made to them but they are made in such manner that the
available balance is maintained among them. Total assets turnover is also declining (Inghams,
2018). This is appropriate and it can be said that all of the assets which are available with the
company have been utilized in an effective manner. The revenues which are generated from the

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assets are suitable but the company will be required to make the improvement in the same.
The profitability of the company has increased from 1.09% in 2016 to 2.44% in 2017 which is
high growth. It is a great aspect and the business will be benefitting from the same. This is
because of the rise in the income which is made by the company. In the next year, there was a
growth and the ratio reached to 4.83%. The debt to equity ratio of the company is negative
initially and it is increasing after that. Due to this it can be said that there is the need to reduce
the amount which is borrowed by the company as this increases the risk of the business and so
needs to be controlled effectively.
Materiality
Materiality is the concept by which the importance of fraud and error in decision making is
considered. It is identified that to what level will the decision be affected by the same. It shows
that the information which is provided in the financial reports is misguiding and does not provide
the required results. The ASA 320 is made in this respect which is materiality in planning and
performing of the audit (ASA 320, 2009). There are various factors which determine the
materiality of the account balances such as:
Size: The size of the respective accent balance is the main factor for the determination of
materiality. If the value of the transaction is high then it will be affecting the complete statement.
Nature: The nature of the account will also be considered (Inghams, 2017). Some of the accounts
are of nature that affects the results in a great manner. This change with the change in the nature
of the business and due to that it can be said that the account which is immaterial for one
company can be material for another one.
Other factors: In this, there are various other components which are involved such as
completeness, relevance, and other financial conditions.
The determination of the materiality is a complex process and in that there will be an application
of various processes. The areas that are most risky will be identified after which the risk
assessment process will be made applicable by the company. In this more focus will be made on
the internal controls and by that all the other risks will be determined in adequate manner. The

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ranking will be given and on that basis the materiality will be ascertained (ASA 500, 2006). Then
the misstatement which will be involved in them will be determined and this will give the final
results in relation to the material misstatements.
Material accounts, assertions, sampling, and related audit procedures
Account
Balance
Amount
(2018)
million
$
Assertions Audit
Procedures
Audit
Evidence
Sampling
Cash and
cash
equivalents
273700 Obligations &
Rights
At the end of the
year, there will be
right of the
company on the
balance
Existence:
It is present in a
physical manner.
 The cash
register will
be matched
with the bank
statement so
that all the
balances can
be
reconciled.
 If there is
any wrong
any entry
which is
made will be
identified.
Cash
statement
Reconciliation
statement
Bank
statement
Selective
sampling
will be used
in which 50
transactions
above the
value of
$100000
and 10
transactions
of above
$5000 will
be
evaluated.
 The receipts
of the

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Receivables 197300 Completeness:
In this all the
balances which are
due at the reporting
date will be
covered Freedman,
2018).
Valuation
Value of the
receivables will
have to be
confirmed in a
proper manner.
transactions
will be
checked with
the balances
that are
identified.
 All the
receipts
which have
been made
will be
adjusted in a
proper
manner.
Sale receipts
Bank and cash
account
Judgemental
sampling in
which 60
sales
receipts will
be evaluated
biological
assets
3208 Rights &
Obligations
The intangible
assets are the assets
of the company on
which it has the
complete right
Existence:
They exist on the
date of the balance
 All the
agreements
which are
available in
their respect
will be
checked
 Copyrights,
patents, and
certificates in
relation to
their expiry
License and
patents
certificate
Agreement of
lease
Calculation of
amortization
Selective
sampling by
evaluating
the license
and patent
agreement

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sheet.
dates will be
checked to
ensure the
right of the
company
amount
Derivative
financial
instrument
3300 Completeness
The reporting is
made on the
balance sheet date
Valuation
They are part of the
company and will
have to be valued
by considering all
the applicable
standards.
 The register
which is
maintained
for all the
assets will be
checked to
identify the
balances
which are
available.
 Any other
income or
expense in
relation to
them will be
considered.
Purchase
agreement
Receipt of the
amount paid
Selective
sampling by
using the
papers of
the
available
assets
Property 384300 Existence:
It exists in the hand
of the company on
reporting date
 The papers in
relation to
the property
will be
registration
certificate
Selective
sampling by
checking
the big

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(AGL Limited,
2019).
Rights &
Obligations
Company has the
right on the asset
and can do
anything with the
same whether
purchase or sell.
evaluated
 There will be
physical
verification
which will be
made of the
asset
records of
Physical
verification
expense sheets
transactions
of all the
available
assets
Liability accounts
Trade and
other
payables
313100 Existence:
There is the
obligation on the
company at the end
of the year
Completeness:
It will be ensured
that all of the
account balances
are recorded at the
correct value.
 The purchase
register and
the invoices
relating to
them will be
checked
 A proper
comparison
of the
balance
among
various
accounts will
be made
Purchase
ledger
Invoice of
purchase
Payables
account ledger
Bank
Judgemental
sampling by
checking
the purchase
receipts
involved