HI6026 - Wesfarmers Limited: Audit, Assurance & Compliance Report

This report provides an analysis of Wesfarmers Limited, focusing on its adherence to ASX Corporate Governance Principles and its risk management strategies. It begins with an executive summary outlining the company's approach to corporate governance and risk management, emphasizing the importance of these elements for achieving a competitive advantage. The report then details the application of ASX Corporate Governance Principles within Wesfarmers, covering aspects such as board structure, financial reporting integrity, management system effectiveness, performance responsibility, risk identification, balanced disclosure, remuneration, and shareholder rights. A significant portion of the report is dedicated to evaluating the risks faced by Wesfarmers, including an analysis of financial ratios and audit procedures used to assess and mitigate these risks. The report concludes that Wesfarmers has effectively complied with corporate governance principles and disclosure requirements, fostering a strong ethical foundation for its operations. The document is contributed by a student and available on Desklib, a platform offering study tools and resources for students.

qwertyuiopasdfghjklzxcvbnmqwertyui
opasdfghjklzxcvbnmqwertyuiopasdfgh
jklzxcvbnmqwertyuiopasdfghjklzxcvb
nmqwertyuiopasdfghjklzxcvbnmqwer
tyuiopasdfghjklzxcvbnmqwertyuiopas
dfghjklzxcvbnmqwertyuiopasdfghjklzx
cvbnmqwertyuiopasdfghjklzxcvbnmq
wertyuiopasdfghjklzxcvbnmqwertyuio
pasdfghjklzxcvbnmqwertyuiopasdfghj
klzxcvbnmqwertyuiopasdfghjklzxcvbn
mqwertyuiopasdfghjklzxcvbnmqwerty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
vbnmqwertyuiopasdfghjklzxcvbnmrty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
vbnmqwertyuiopasdfghjklzxcvbnmqw
Audit, Assurance and
Compliance

Wesfarmers limited
Executive summary
A company’s success is based on the type of the methods and the strategies which it uses to
grow and function in the prevailing market. All the strategies and approaches which are being
designed by the management are taken into force with the help of corporate governance
which helps it to manage all the risks efficiently for the future. The Wesfarmers limited may
gain the competitive advantage over others if they will have a good and efficient risk
management strategy and also have a strong structure of corporate governance to assist the
strategies. After the basic study of all the theories, the case of Wes, farmers limited has been
taken for assessment. The company Wesfarmers limited is already listed in the accounting
standards and is also having relation to the ASX corporate governance principles. The report
provided states the application of the corporate governance principles and then it is followed
by an emphasized assessment of the risk management strategies. It also contains the
information of the firm related to the ASA 570 in which several ratios are mentioned.
2

Wesfarmers limited
Contents
Introduction...........................................................................................................................................3
Applications of the ASX Corporate Governance Principles....................................................................4
Evaluation of the risks...........................................................................................................................6
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9
Appendix.............................................................................................................................................10
3

Wesfarmers limited
Introduction
The Wesfarmers limited is a fir which is having a very good reputation in the market and also
it has its stock listed in the Australian stock exchange market. According to the management
of the Wesfarmers limited, audit planning is conducted to find the expected losses and profits.
The nature and size of the business will also be affecting the time required for the completion
of the audit. Also if the business will have a big reach and diverse approach then it will be
time-consuming for the firm to formulate strategies and also the audit process will consume
more time (Wesfarmers, 2017). Therefore this process can also be termed as the systematic
approach of the area control in which the internal and financial processes of a firm are
reviewed in accordance with the engagement. Audit engagement and audit planning must not
be viewed separately and thus a discrete decision should also not be made according to the
ISA 300. They should be taken into consideration together and thus they may be helpful in
making error corrections and control deficiencies.
4

Wesfarmers limited
Applications of the ASX Corporate Governance Principles
The principles of the corporate governance that should be followed by the Wesfarmers
limited workforce are as follows:
1. Efficient top structure
The board of the firm Wesfarmers limited consists of independent and trustworthy directors.
They also check that the directors have no personal profit in relation to the firm’s
enhancement. They also keep an eye on almost every job function of every level so as to
ascertain that there are no future problems that may be faced by the firm.
The firm asks the board of directors to make unbiased decisions and also to ensure the firm's
safety from time to time. Also, there is a nomination committee that appoints the non-
executive directors with the help and recommendations of the top structure of the firm. Thus
the nomination committee makes it easier for the stakeholder to believe the firm's overview,
and thus make them tension free to invest in the finances of the firm (Deegan, 2011). The
main objective decided by the Wesfarmers limited is to have an honest and ethical conduct
which will help to improve the quality of the firm and thus also work with the compliance of
the ASX governance principles.
2. Protection of the honesty of the financial reporting system
The top management structure of the company should have the proper knowledge relating to
the social, economic and political situations which affect the environment of the firm. Also,
the directors must be up to date with the knowledge of the concerned field and thus have
enhanced professionalism in the digital scenarios of the firm (Parrino et. al, 2012). The
directors should also recognize any kind of gap or fault present in the working environment
of the firm and thus use his knowledge to mold it. The directors should also look that they are
working in accordance with the statutory concerns of the firm so that the process of risk
management can also be carried out in a more elaborated manner. Thus the company
Wesfarmers limited have introduced such systems of work and management to make its
organization more successful by acting in governance to the corporate governance principles.
3. Building a base for the effective and efficient management system
5

Wesfarmers limited
The risk management system of the company Wesfarmers limited tells us about the controls
of the risk management system and the principles which have been taken into consideration
for carrying out the job of reporting and analyzing (Needles & Powers, 2013). There has also
been an introduction of the risk management system between the audit committee, managing
directors, finance directors and the board to check the uncertainties. This framework was
introduced to the company in May 2016 and it was quite helpful for the company to manage
its treasures and also see that the financial risk movements of the interests and foreign
currencies are observed correctly.
The operating framework of the company Wesfarmers limited tells us about its reports,
activities, divisional structure and helps in assisting the business. It also helps to promote
corporate identity and culture and also have a very applicable management system which has
been designed specifically for the divestments and the acquisitions.
4. The performance responsibility and morality
A code of conduct has been set up by the company so that it can ensure that the firm is
functioning according to the management framework and all the corporate governance
principles are applied so as to have a healthy and responsible environment for the firm.
Wesfarmers have looked after its company by maintaining and applying all the necessary
corporate governance principles wherever required. Also, the ethical values have been made
known to the lower level employees, consultants, directors and the contractors so as to
ascertain the design made by the company will help the people to get motivated and act
morally to their superiors.
5. Managing and identification of risk
The Wesfarmers limited firm ensures the safety by preparing a SWOT analysis of the
preparation and the performance of situation planning. it also uses its program of transferring
to reinsurers and external insurers so that it can meet its formal corporate planning structure
and thus have necessity divisions which will help them to mould the company by
identification of the changes or risk present in the industry. The committee of the risk
management also helps the company to find various loopholes or vulnerabilities in the
management system of the firm and thus also suggest them with some quick measures. The
audit and the internal control team plays an important role in verifying all the transactions of
the firm and thus ascertaining that there are no internal disputes within the accounts
6

Wesfarmers limited
(Wesfarmers, 2017). These reports are also given provided to the stakeholders so that they
can be kept informed about the company’s performance and all the risks faced by it and then
invest in the company’s portfolio.
6. Facilitation of the balanced and timely disclosure:
Wesfarmers limited has appointed two company secretaries who are assigned with the task of
assessment of the overall functioning of the firm. Also, the board has been asked to make a
time to time disclosure of the reporting framework so that the information can be used for the
betterment of the firm’s performance in future (Wesfarmers, 2017). The company has also
decided to make a committee of four board members who will help to facilitate the proper
advisory matters. This committee plays a vital role in the enhancement of the company’s
framework by giving them suggestions and other necessary information. The auditors have
also been asked to provide a much more balanced and elaborated report on the assessment of
the risk factors. Both the internal and the external auditors play an important role for the firm
by providing it with the key financial statement and also the timely disclosure of the reports
(Peirson et. al, 2015).
7. Remuneration of the responsibility and fairly
The company was given the status of gold tier employer in relation to the remuneration
operations. Also, the company follows gender equality which helps them to distribute the
tasks and responsibility equally among the employees. There has been a committee of people
performance which helps the firm to take decisions regarding the remunerations. Also, there
will be no gap present between the males and females of the company which will help to
prevent the company from any type of misbehaving (Wesfarmers, 2017).
8. Respecting the rights of the shareholders
Based on the ASX principles, Wesfarmers have been giving all the necessary information to
its stakeholders. This information will be helpful for the holders to analyze the firm’s
performance and then act in its accordance. Also, the company takes several other measures
which are helpful for the shareholders (Petersen & Plenborg, 2012)
7

Wesfarmers limited
Evaluation of the risks
Wesfarmers limited have been facing different types of risk from time to time. So, in order to
manage its framework and the system, it has kept it strategy concerns in the particular area. It
has the main focus on the establishment of the moral values for its customers and
subordinates. Further, it even has an emphasis on the capital management so that it can have
the high credit rating (Kaplan, 2011). Moreover, it keeps its main focus on the areas that are
most likely to be affected by the risk of competitors.
ASA570 have the main focus on the evaluation process of the auditors and also how these
processes help the firm to gain expertise and advantage in the field. The auditors are required
to make proper analytical reports. The major processes used by them are the evaluation of
various ratios in comparison to the ratios of the past year. This helps in knowing where the
difference arises (Fazal, 2013). Secondly, the regression analysis can be used. Thirdly, the
account balances that pertain to the figures of unadjusted account balances must be compared
with that of the statement of trial balances. Lastly, the ratios must be computed, as well as
compared. The auditor can use the financial statement together with the computed ratio to
find the deviation so the manner in which the business is performing. When it comes to the
point of view of the auditor, the auditor strikes the notion of various ratios especially the
balance sheet ratios as it helps in providing a formidable answer to the business performance
(Elder et. al, 2010). Hence, going by the financial statements and ratio, a clear cut answer
can be famed and decision can be taken.
2013 2014 2015 2016 2017
GP ratio =
GP/net sales*100 33.32941 30.83666 30.68661 30.50891 31.84004
NP ratio=
NP/sales*100 3.804988 4.489673 3.92902 0.62126 4.224068
Current ratio =
CA/CL 1.105934 1.131486 0.934917 0.92901 0.024863
Quick ratio =
Quick assets/ current liabilities 3.44052 3.967943 4.202535 0.668734 169.8924
Audit risks are to be analyzed using the analytical and audit procedures. In the first case,
audit process has been helpful in the analysis of the risks which are concerned with the
8

Wesfarmers limited
business. These risks can be of several types. Significant steps have been taken to mitigate
risks from the appointment of internal or statutory auditors and thus the hiring of experts can
be done to mitigate risks in various segments (Gay & Simnet, 2015)
9

Wesfarmers limited
Conclusion
Going by the overall study conducted on Wesfarmers, it can be commented that the company
has complied with the principles of corporate governance and adhered to all the disclosures
requirements. The ethics with which the business is performing is enabling the business to
cement their position in the industry. Moreover, the auditors can further comment on the
business performance through various mechanisms such as ratios, report, etc.
10

Wesfarmers limited
References
Kaplan, R.S. (2011) Accounting scholarship that advances professional knowledge and
practice. The Accounting Review [online]. 86(2), pp. 367–383. Available from
https://doi.org/10.2308/accr.00000031 [Accessed 27 April 2018]
Elder, J. R, Beasley S. M. and Arens A. A. (2010) Auditing and Assurance Services. Person
Education, New Jersey: USA
Fazal, H. (2013) What is Intimidation threat in auditing?.[online]. Available from:
http://pakaccountants.com/what-is-intimidation-threat-in-auditing/ [Accessed 27 April 2018]
Gay, G. and Simnet, R. (2015) Auditing and Assurance Services. McGraw Hill
Deegan, C. M. (2011) In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill
Needles, B.E. & Powers, M. (2013) Principles of Financial Accounting. Financial
Accounting Series: Cengage Learning.
Parrino, R, Kidwell, D. and Bates, T. (2012) Fundamentals of corporate finance. Hoboken,
NJ: Wiley
Peirson, G, Brown, R., Easton, S, Howard, P. and Pinder, S. (2015) Business Finance, 12th
ed. North Ryde: McGraw-Hill Australia.
Petersen, C. and Plenborg, T. (2012) Financial statement analysis. Harlow, England:
Financial Times/Prentice Hall.
Wesfarmers. (2017) Wesfarmers 2017 annual report and accounts [online]. Available from:
http://www.wesfarmers.com.au/util/news-media/article/2017/08/17/2017-full-year-results
[Accessed 27 April 2018]
11

Wesfarmers limited
Appendix
2013-06 2014-06 2015-06 2016-06 2017-06
Gross profit 19805 18469 19057 19987 21656
Net sales 59422 59893 62102 65512 68015
GP ratio =
GP/net sales*100
33.32941 30.83666 30.68661 30.50891 31.84004
2013-06 2014-06 2015-06 2016-06 2017-06
Net income 2261 2689 2440 407 2873
Net sales 59422 59893 62102 65512 68015
NP ratio=
NP/sales*100
3.804988 4.489673 3.92902 0.62126 4.224068
2013-06 2014-06 2015-06 2016-06 2017-06
current assets 10586 9311 9093 9684 259
current liabilities 9572 8229 9726 10424 10417
Current ratio =
CA/CL
1.105934 1.131486 0.934917 0.92901 0.024863
2013-06 2014-06 2015-06 2016-06 2017-06
current assets 10586 9311 9093 9684 259
Inventories 5047 5336 5497 6260 85
Quick assets =
C.A - inventories
5539 3975 3596 3424 174
current liabilities 9572 8229 9726 10424 10417
Quick ratio =
Quick assets/ current
liabiltiies
0.578667 0.483048 0.369731 0.328473 0.016703
12

Wesfarmers limited
13