Billabong International Limited
You are the audit senior assigned to the audit of Billabong International Limited (Billabong), a listed public company,for the year ended 30 June 2017.
As an audit senior, you have been assigned the task of gaining an understanding of the client, as well as identifying inherent risks and risk of material misstatements based on your research. The information you gather will be used to help plan the audit. You are required to write a report to your audit manager outlining the information you have gathered with regards to the following:
a. Provide an overview of the client's business, operations and industry(discussions should includeany recent events concerning the company.)
b. Refer to the annual reports for 2016 and 2015, and calculate the following ratiosfor 2016 and 2015.
Billabong - Clothing retail company annual reports
- look under "Preliminary Final Report and Full Year Statutory Accounts"& "Full Year Accounts to 30 June 2015"):
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Ratios
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Industry Averages
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Current ratio
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2:1
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Debt to Equity
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1:1
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Gross profit margin
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60%
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Inventory turnover
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4 times
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Receivables turnover
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6 times
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Based on your calculations and the industry averages given, comment on the client's ratios. Also comment on the company's losses and what impact this might have on the future of the company.
(Note: Comments for part b should take into consideration knowledge gained in part a)
c. Identify 5areas of business risks/audit risk for Billabong
d. Based on your analysis above (parts a, b & c), identify 5 areas of risk of material misstatement in the financial statements. (You will need to mention specific transaction/balance and assertions at risk and why you think these are risk areas).
Length and Format, should include:
1. A title page containing title of the assignment, name and student numbers of the group members
2. A table of contents
3. An executive summary
4. Word limit: 2000 words, Times New Roman size 12 font, double spacing.
5. Appropriate reference citations throughout the assignment are expected
6. Pages should be numbered
7. Reference list to be included