Question:
The assignment also aims to evaluate students’ ability to apply the knowledge and skills learnt in the unit in analysing a real company from the auditor’s perspective. Further, this assignment seeks to improve students’ teamwork abilities. The framework of the Australian Auditing Standards (AUASB) and the corresponding International Standards on Auditing (ISA) should guide the analysis.
In analysing DSH, it is important that students understand the company operations, strategies, internal and external environment, and the relevant financial and non-financial information. To gain such understanding, students must conduct a thorough analysis of the company and its environment (in this case you will need to look at the environment from an historical perspective). Hence, the successful completion of the assignment requires extensive research on DSH.
Students also need to demonstrate their ability to identify the type of audit opinion provided by DSH’s auditor(s), as well as critically evaluating the various pieces of information gathered to come to the audit opinion.
Apart from assessing those abilities, the assignment also aims to assess students’ ability to present a written report in a professional manner by taking into consideration the target audience and the formatting requirements.
Required
Assume that you are an audit senior who has been assigned to the audit of DSH for the year ended 28 June 2015. You have been instructed by the engagement partner to gather the relevant background information about the company as part of the procedures to obtain an understanding of DSH and its environment as per the Auditing Standard ISA 315. DSH’s Annual Reports for the years ended 28 June 2015 and 29 June 2014 are provided for you as part of this Assessment Task.
Based on the information gathered and the understanding of the client and its environment, you need to comment on the type of audit opinion with reference to the Australian Accounting Standards and the Australian Assurance and Auditing Standards.
Your report must address the following issues:
You need to provide a detailed background description about DSH. This must include the information about its business operations, nature of revenue streams, product andservices, market and competition, and regulatory environment. For the regulatory environment, you must be specific as to what regulations affect the operation of DSH, particularly laws and regulations that DSH needs to abide by in relation to their business activity in and outside of Australia. The information presented must be based on your in-depth understanding of company’s operation. Students who simply provide a summary of information from the annual report will not receive good marks.
This question has three sections which you need to complete: Part A
You are required to calculate the following ratios in the Table 1 (include this table as part of your report). You are also required to show your workings. You have to do your workings (including the formula) on an Excel sheet and submit the Excel file along with your Word document [you need to decide on the type of ratios that are appropriate for DSH].
Table 1: Ratio Analysis
Ratio
2015*
2014*
Gross margin ratio
Net profit ratio
Asset turnover
Return on assets
Current ratio
Quick ratio
Inventory turnover
Debts turnover
Debt/ equity
Equity ratio
You are required to:
Read the audit report of DSH and its controlled entities for 2015.
Comment on the type of audit opinion with reference to the Australian Accounting Standards and Australian Assurance and Auditing Standards.
Whenever applicable, your comments should include:
Detailed explanation of the audit opinion (e.g., circumstances giving rise to the audit opinion).
Detailed explanation of the emphasis of matter (e.g., circumstances giving rise to the emphasis of matter).
Factors considered to come to the audit opinion.
Material misstatement.
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