Auditing and Assurance Assignment-
Required:
1. You are a part of the team responsible for planning the Woolworths (parent and the consolidated economic entity) audit engagement for 2016. You have been assigned to gather relevant background information and prepare a report for a meeting with your audit partner and audit managers. Your report must address the following issues:
a. What are the major sources of Woolworths revenue?
b. What are the areas in which Woolworths conducts its operations?
c. Which particular laws/regulations (other than financial related categories which include legislations such as: Corporation Act 2001, Australian taxation laws, etc.) affect its operations?
d. Who are its primary competitors (major and minor)?
e. What is Woolworths market share?
The answers for above questions should be reflective of your in-depth understanding of how the company operates.
2. Identify and explain SIX significant business risk factors that the auditor needs to consider for the Woolworth group engagement.
3. Complete the below table
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Formula
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Results 2015
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Results 2014
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Liquidity
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Gearing ratio
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Total liabilities/total equity
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Debt ratio
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Total liabilities/total assets
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Current ratio
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Current assets/current liabilities
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Quick ratio
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Cash and trade and other receivables/current liabilities
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Profitability
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EBIT to sales (%)
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Per annual report (%)
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Ordinary earnings per share
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Per annual report(cents)
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Managerial efficiency
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Days sales of inventory*
*(This is used as a liquidity ratio as well as being an indicator of managerial efficiency.)
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{Inventory/cost of sales}x365
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Return on equity
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Per annual report (%)
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Cost of doing business
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Per annual report (%)
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Commentary on financial performance: Using the data in above table, as well as your knowledge of the Woolworths Group and its environment (from your research in
Q.1 and 2 and/or other applicable research) discuss the below factors which have impacted the Woolworths Group's:
Short-term liquidity
Long-term liquidity
Profitability
Efficiency
Overall conclusion on financial position
4. Based on your business risk analysis (Q. 2), analytical procedures (Q3) and your understanding of Woolworths Group and its environment, list and explain at least Three accounts to be at risk of material misstatement (key audit risk areas). You also need to identify the assertion most affected by the risks identified.
5. Recently Woolworths Group Limited announced that it will be either selling or shutting down its Master's chain (a joint venture between Woolworths and US partner Lowe's). You need to identify why it ended up as a bad investment decision for Woolworths Group Limited?