Auditing Assignment Evaluating Financial Position of Bega Cheese
The purpose of the auditing assignment is to build your skills to research and explore specific aspect(s) of auditing and assurance as a group, and prepare and submit written work in an academically acceptable format linking your knowledge of auditing standards, corporate law and auditing guidelines and ethical standards to the world of corporate auditing for an Australian Listed company.
In Part A you are required to carry out a risk assessment of either:
- Myer Limited; OR
- Bega Cheese Limited.
Both companies are listed on Australian Stock Exchange.
Also, and prepare a plan for audit of this financial report audit engagement for the year ending 30 June 2022. You have worked as the manager of this engagement for the past five years. You are now asked to present written response on three key segments of the audit plan primarily based on the audited financial reports of the company for the year ending 30 June 2020 and other publicly available information on: -
- five key facts about the company, its management and governance;
- analytical review of company’s performance and financial position;
- discussing five main matters that are required to be addressed for planning the audit for the year ending 30 June 2022.
In this part you are required to submit a research essay on the implications for the audit for the one company you have selected in Part A above as well as for Australian companies generally, of an over reliance on one or more customers and / or one country for customers and / or supplies). Some issues to consider are: -
- Business Continuity Planning
- Risks to the operations of the business
- Impact of the continued operations (going concern) of the business
- Supply chains
The concept of auditing and assurance explored in the segments of auditing assignment can be primarily identified as the process under the management of the business organization effectively appointing an independent auditor for evaluating the organization's financial statement to have a favourable idea regarding the true and fair nature of financial reporting. Under the auditing process, the auditor evaluates and inspects the organization's financial statements and ensures that the financial statements are prepared by the financial framework and reporting standards, along with communicating an opinion that the financial statements communicated a true and fair picture of organizational operations. Under the given assignment, a detailed risk assessment is conducted concerning the financial statements and financial reporting framework of Bega cheese Limited to identify its true and fair financial position.
The organization Bega Cheese can be identified as one of Australia's most renowned and trusted Dairy companies, catering to a large group of customers and having a major share of the Australian Dairy market (Quick and Sayar, 2021). Therefore, risk assessment in respect to a wide variety of risks associated with the overall operations of Bega cheese is effectively discussed below in detail.
The evaluation of Bega cheese's financial statements and operating structure effectively provides that the organization's operations are involved in a wide variety of engagement risks that may pose a significant threat towards favourable and true financial reporting. The significant failure in the process of financial reporting of the organization during the financial year 2015 significantly enhanced the risk of material misstatement within the financial statement as there were significant weaknesses within the financial reporting framework and the results communicated by the financial statements. The engagement risk of the organization was significantly enhanced after the acquisition of competitive brands like Vegemite and Kraft. It effectively indicates that the organization's financial health is not good, and the company is still recovering from the low profitability and inefficient operations taken during the financial year 2015.
The evaluation of the financial health and the structured operating procedure of financial reporting effectively indicate a significant risk of material misstatement within financial statements as there is a lack of quality control over operations. As the organization is engaged with a wide variety of complex transactions with a poor system of internal control that is a significant chance for material misstatement occurring due to fraud or error (Bik and Hooghiemstra, 2018). Therefore, to effectively communicate a favourable opinion in respect to the financial reporting framework of the organization, the auditor must effectively undertake risk assessment procedures and further audit procedures to minimize audit risk and ensure the communication of favourable audit opinions.
Another risk associated with the operations of Bega cheese is that the organization has inadequate funds for undertaking favourable and desired business operations. The financial imitation also makes the management of Bega cheese enter into complete transactions enhancing the audit risk.
The only system for management of raised within the organization is the internal control system that is effectively designed, controlled, and implemented by the organization's management to control organization operations and ensure the communication of true and fair information regarding organization information. The evaluation of the internal control system with the use of risk assessment procedure effectively provides that the internal control system is inadequately managed by the organization and is inefficient towards completely controlling inefficient and inadequate operations.
Key facts the management and governance of Bega Cheese
The evaluation of the key facts regarding the management and Governance of Bega cheese provides the following.
- Firstly, the management of the organization effectively identifies acquisitions as the primary factor for business growth and success. Under the acquisition process, Bega cheese acquires various companies within the industry to enhance its competitive strength.
- The organization also focuses on acquiring foreign business competitors to undertake international expansion. For example, to enhance its operations within the New Zealand Bega cheese market, it effectively acquired Kraft Mac and cheese and vegemite with a total valuation of 460 million dollars.
- As a strategic move towards undertaking a favourable business operation, the management of Bega cheese primarily relies on selling facilities to fund its acquisition. It helps the organization's management effectively diversify its funds from lower revenue-generating facilities to efficient and higher revenue-generating facilities.
- Furthermore, the organization's management is primarily focused on incorporating innovation, creativity, and research to support the development of new and better products capable of providing enhanced satisfaction to customers (Chang et al., 2019). The organization is also focused on enhancing its manufacturing and supply chain management capability and establishing a positive and direct relationship with customers. Lastly, the organization's corporate governance structure effectively provides a favorable and efficient breakdown of work and responsibility. Each department of the organization consists of a leader capable of undertaking favorable business operations within the department and ensuring positive results for collaborative growth and development.
Review of performance and financial position
The evaluation into the financial performance of branches effectively provides that the organization effectively generated a revenue of 2.07 billion dollars during the financial year 2021, of which 73% contributed to revenue generated from sales through branded businesses. The earning capability on the organization's net profit has also increased from 103 million dollars during the financial year 2020 to 141.7 million dollars during the financial year 2021. The overall profit after tax of the organization has also increased from approximately 32 million dollars during the financial year 2020 to 39.6 million dollars during the financial year 2021. The significant increase in the revenue-generating capacity of the organization effectively indicates that the organization was able to efficiently undertake business operations during the contingent Period of the covid-19 pandemic (Ahmad and Abdul-Rahman, 2020). The organization's financial reports also communicate that the management effectively provided a decent return on capital during 2021. The organization was also able to diversify its market share towards creating value.
The organization is also identified to generate higher profitability above the industry average, and therefore, the organization is highly efficient in maintaining its financial health and solvency.
Matters to consider for planning future audit
The evaluation of the matter needs to be effectively addressed while planning for the audits of Bega cheese is effectively discussed below.
First, it is essential to identify the organization's complexity of transactions, such as related party transactions and subsidiary organization transactions. It will help you effectively identify the degree of materiality within financial reporting.
Secondly, the order must effectively evaluate its internal control system to identify its efficiency and ability to control, detect, and prevent material misstatement. The order must also evaluate the overall funding structure of the organization to identify its financial stability and solvency. It will help the auditor assess the risk associated with financial performance effectively.
The auditor must also evaluate the overall procedure in which funds are channelized and utilized within various organization departments (Ab Ghani et al., 2019). As the organization is engaged with a wide variety of complex transactions, evaluation of the procedure in which funds at Canada is helping to provide a better understanding of financial operations.
Lastly, it is important for the auditor to effectively evaluate the correctness of financial reporting and the use of financial assumptions within financial reporting.
The implication of audit on Bega Cheese and other Australian companies
The auditing process has a wide variety of positive implications over the organization's operations as it directly helps identify internal weaknesses within the operations of the organization and provides the basis for correcting the same in real-time. Through effective audit utilization, the management can easily identify internal control weaknesses and the risk of material misstatement within financial reporting.
Concerning Bega cheese, the organization's management effectively identified the weaknesses within the organization's overall operations that provide a favorable basis for undertaking efficient business operations in the future (Codesso et al., 2020).
Some of the affected areas from the auditing process in respect to Bega cheese and Australian companies in general and effectively discussed below in detail.
Business continuity planning: with the help of auditing, the organization's management can effectively evaluate the organization's internal and external environment and evaluate the potential impact on business efficiency and productivity. Therefore, the management can effectively form business continuity plans providing due consideration to a wide variety of contingencies and risk factors that may affect the organization's overall operation in the long run (Stafford et al., 2018). Therefore, the management of organizations like beggar cheese and other Australian companies can effectively develop a business continuity plan with the help of auditing. It makes the management aware of future contingencies and the potential impact on business operations.
Impact on continued operations: the overall auditing process is primarily undertaken at a future date after the completion of their respective financial year regarding which the audit is undertaken. Therefore, as the overall process of auditing provides significant scope for future business growth and development and provides appropriate information to investors regarding future financial perspectives, the process of auditing has a favorable impact on continued operations.
Supply chain management: primary in respect to Bega cheese as the organization is engaged with the wide variety of transactions within the international market; the complete auditing process has a favorable impact on supply chain Optimisation and Management (Johari et al., 2018). The auditing process provides favorable information regarding optimizing the overall quality of supply chain management and providing appropriate scope for implementing new and better strategies for enhancing the efficiency of the same.
The analysis into this assessment regarding Bega cheese Limited effectively provides that the organization's management is capable of undertaking favorable and well-regulated business operations and ensuring that the organization's financial statement is communicated through their picture of operations. The evaluation effectively provided various risks directly associated with organization operations. Still, the auditor must effectively undertake risk assessment procedures and implement the audit procedure to communicate a favorable audit opinion.
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