Financial Template and Inherent Risk Assessment: Wesfarmers Limited

This report provides a comprehensive financial analysis of Wesfarmers Limited, focusing on inherent risks and audit considerations. The assessment utilizes the ASA 200 framework to evaluate the nature of the client's business, results of previous audits, and the quantity of non-routine transactions and estimates. The analysis identifies key risk factors, including potential for fraudulent financial reporting and misappropriation of assets, as well as the impact of factors outlined in ASA 315 and ASA 570. The report concludes with an overall assessment of the inherent risk level, which is determined to be moderate, taking into account the company's size, operational scope, and potential for changes. The report highlights the importance of understanding and managing these risks for effective financial reporting and auditing.

Running head: FINANCIAL TEMPLATE
FINANCIAL TEMPLATE
Name of the Student
Name of the University
Author Note

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NAME of
your Entity >>>
Wesfarmers Limited
DISCUSSION
FACTOR According to ASA200.13 (n) (i)
inherent risk (IR) is a measure of the
susceptibility of material
misstatement before considering any
internal controls.
LOW MODERAT
E
HIG
H
Nature of
client’s business
The Wesfarmers limited can be
described as an Australian
Conglomerate which is headquartered
in Perth in the West of Australia
( Wesfarmers.com.au 2019). The
enterprise has interests predominantly
in the New Zealand as well as
Australian chemicals, retails and the
fertilizers, coal mining along with the
industrial and safety products. The
firm can be described as the largest
company by revenue and has taken
over both the Woolworths and the
BHP. In consideration with this, it
becomes essential to understand that
the firm is the largest private
employer in Australia with more than
220000 employees. The firm was
found in 1914 as a cooperative which
provided adequate scope for
providing services as well as
merchandise to the different farmers.
The enterprise was listed on the
Australian securities exchange in the
year 1984 and has since then grown
into a major retail conglomerate.
The different areas where the firm is
involved in can be mentioned to be
the home, improvement, outdoor
living, apparels, general merchandise,
office supplies along with Industrial
divisions in the chemicals, fertilisers,
industrials as well as the safety
products ( Wesfarmers.com.au 2019).
The firm has 484000 stakeholders in
total.
The inherent risks identified are as
The nature of
clients
business
reflects
moderate
Inherent risk

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follows:
Not recording the sales of any one
department for a certain day
Not taking into consideration the
returns for a department
Not recording the interests received
on deposits
Not recording the dividends earned
from stakeholders ( Schaltegger and
Burritt 2017).
Results of
previous audits
The external auditors of the firm can
be mentioned to be the Ernst and
Young. The company has audited the
financial report of the enterprise and
its related subsidiaries which also
comprise of the consolidated balance
sheet as of 30 June 2018. The various
statements which have been assessed
can be considered to be the
consolidated statement of
comprehensive income, the
consolidated cash flow statements,
declaration of the directors, notes to
the financial statements and the
comprehensive income statement. As
per the opinion of the different
auditors of the enterprise, the
financial report of the enterprise is in
accordance with the Corporations Act
2001 and provides a true and fair
view of the consolidated financial
positioning of the Group.
Additionally, the preparation of the
financial statements of the enterprise
abides by the Accounting standards as
well as the different Corporations
regulations which are crucial
( Preiato, Brown and Tarca 2015).
The different auditors in the external
auditing team also made an analysis
of the Remuneration report and in
their opinion, all the financial reports
along with the remuneration report
for the year ended as of 30 June 2018
The
results
of the
previou
s audits
reflect
low
inherent
risk.

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tends to compile with the Section 300
A of the corporations Act 2001.
Initial versus
repeat audits
The Wesfarmers Limited is one of the
largest enterprises in Australia and
has been in the business domain for a
period of overall 105 years
( Legislation.gov.au 2019). The initial
and the repeat audits reflect the same
response from the external auditors
which essentially mention that, the
company has complied with the
different acts as well regulations
which have assisted the company in
attaining all its goals successfully.
Hence, the Initial versus the repeat
audits of the enterprise will remain
the same.
The
initial
versus
repeat
audits
reflect
low
inherent
risk.
Quantity of
non-routine
transactions
Quantity of the non-routine
transactions has been null. This
simply means that no such
transactions have been carried out by
the enterprise which devoid it from
the routine transactions. Wesfarmers
engages in transactions which are
legal and strategizes well in order to
ensure that it is being able to perform
well.
Nil.
Hence
Low
risk
Quantity of
estimates and
judgement
required for
accounts
The key estimates which have been
made by the enterprise can be
referred to as the estimates made in
regard to the items relating to the
Income, Tax expense, Inventories,
Property Plant and Equipment,
Goodwill and intangible assets,
Provisions to be made, the
Impairment of non-financial assets,
associates and joint agreements in
addition to the Commitments and
Contingencies ( Hasibuan and
Syahrial 2019). These estimates and
judgements have been undertaken in
regards to the application of the
firm`s key accounting policies and
assist in pertaining to future
The Quantity
of estimates
and
judgements
required
reflects
moderate
inherent risk.

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estimates.
Potential for
fraudulent
financial
reporting &
misappropriatio
n of assets (fraud
risk factors, see
ASA 240)
The ASA 240 can be essentially
described as the audit of a financial
report for a specific financial year in
accordance with the required
Corporation Act of 2001. This audit
standard establishes a certain level of
requirements which assist in
understanding the need of an auditor
to find any fraudulent activity. These
fraudulent activities may vary from
misstatement of information and
additionally the identification of the
limitations of an auditing report in
terms of the fraud. Hence, in this
context, the different potential for the
fraudulent financial reporting and the
misappropriation of assets may be as
follows:
Faulty report of preparing sales
statements
 As the company tends to
prepare a wide number of
statements for various
businesses and for various
outlets of each branch, it
becomes crucial to
substantiate the right kind of
information from the different
outlets and they may not
report the true nature of the
organizational records and
related operations.
Misinterpretation of the calculation of
the Intangible assets
 The company may not
evaluate the intangible assets
such as the goodwill and
liabilities in the right manner.
It may end up over evaluating
them or undermining them.
Hence, ultimately it will lead
to the incorrect calculation of
the different resources of the
business ( Bryce, Ali and
This aspect
tends to
reflect
Moderate
level of
Inherent risks.

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Mather 2015).
 Another aspect which it may
evaluate can be stated to be
the bad debts. In consideration
of this, it becomes essential
for the firm to ensure that it is
being able to undertake the
bed debts in the right manner
so as to reflect the true and
final financial position of the
enterprise.
List any other
factors (can you
see any
illustrations in
your client’s
annual report of
the examples in
ASA 315,
Appendix 2 and
ASA 570.A2?)
The ASA 315 Appendix 2 tends to
list down the examples of the
conditions and events which may
reflect the existent of the
misstatement in the financial report.
From the annual report, some of these
conditions have been compiled as
follows:
Changes in the supply chain
pertaining to Coles and Kmart
( Ellwood and Newberry 2016)
Changes in the key acquisitions and
related operations relating to the large
entities such as the Coles
Expansion into new location by one
of the subsidies of the enterprise
The existent of complex alliances
which the firm gets in.
In regard to the ASA 570.A2, the
factors catering to the needs of the
enterprise can be largely referred to
be as follows:
Basis of opinion: The reports are
largely prepared based on the
opinions of the different managers
and other such parties and in
consideration of this, it becomes
effective to understand that, the firm
would be required to ensure that the
opinions are based on a certain
standards ( Auasb.gov.au 2019).
The presence
of aspects like
the alliances,
subsidies and
the large
entity
operations
reflect
Moderate
level of
Inherent risk.

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Key audit matters: The key audit
matters also act as a concerning
factor.
Conclusion:
Overall inherent
risk level
Discuss how you arrived at your
overall assessment here:
Although the enterprise can be stated
to be well established and largely
established, there lays a moderate
level of inherent risk which the
company is essentially exposed to.
With consideration to this, the study
examined the risks underling ASA
315, 570, and 240. Hence, it can be
established from this assessment that
the overall inherent risk which this
company is exposed to can be
mentioned to be Moderate in nature
( Auasb.gov.au 2019). This is
because, although there do not lie any
identifiable risk components,
however, the operational extent of the
enterprise and the overall size and
changes in the firm may bring about
adequate risk to the different
operations of the firm.
Hence, the
overall
inherent risk
level can be
stated to be
MODERATE
in nature.

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References
Auasb.gov.au 2019. ASA Standards [online]. Available at:
https://www.auasb.gov.au/admin/file/content102/c3/ASA_315_Compiled_2015.pdf (Retrieved
on: 02 Jan. 2020).
Auasb.gov.au 2019. ASA Standards [online]. Available at:
https://www.auasb.gov.au/admin/file/content102/c3/ASA_570_2015.pdf (Retrieved on: 02 Jan.
2020).
Bryce, M., Ali, M.J. and Mather, P.R., 2015. Accounting quality in the pre-/post-IFRS adoption
periods and the impact on audit committee effectiveness—Evidence from Australia. Pacific-
Basin Finance Journal, 35, pp.163-181.
Ellwood, S. and Newberry, S., 2016. New development: The conceptual underpinnings of
international public sector accounting. Public Money & Management, 36(3), pp.231-234.
Hasibuan, R.P.S. and Syahrial, H., 2019, August. Analysis Of The Implementation Effects Of
Accrual-Based Governmental Accounting Standards On The Financial Statement Qualities.
In Proceeding ICOPOID 2019 The 2nd International Conference on Politic of Islamic
Development (Vol. 1, No. 1, pp. 18-29).
Legislation.gov.au 2019. ASA Standards [online]. Available at:
https://www.legislation.gov.au/Details/F2006L01368 (Retrieved on: 02 Jan. 2020).
Preiato, J., Brown, P. and Tarca, A., 2015. A comparison of between‐country measures of legal
setting and enforcement of accounting standards. Journal of Business Finance &
Accounting, 42(1-2), pp.1-50.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Wesfarmers.com.au 2019. Wesfarmers Business [online]. Available at:
https://www.wesfarmers.com.au/ (Retrieved on: 02 Jan. 2020).
Wesfarmers.com.au 2019. Wesfarmers Business [online]. Available at:
https://www.wesfarmers.com.au/our-businesses/our-businesses (Retrieved on: 02 Jan. 2020).

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