Potential Impact on the Woolworths Audit †Myassignmenthelp.Com

Question: What Is The Potential Impact On The Woolworths Audit? Answer: Introduction The preparation of the financial report is very much important for an organization as it shows the accurate value of the company. The accountants and auditors are responsible for the preparation of the financial statements of the company. The financial statements provide significant information to the stakeholders of the company. The financial report helps the stakeholders to make investment decisions (Appannaiah, Reddy, Putty, 2010). The profitability, liquidity, and efficiency of the organization can be recognized with the help of the financial report. When an organization conducts an audit process, then the auditors may use audit engagement term. The auditors have to follow the guidelines and procedures for handling the audit engagement. The audit engagement refers to the audit that the auditors perform. The audit engagement includes different steps that are organized into planning, fieldwork or substantiation, testing of control and finalization or exit. The auditors review the financial report of the company and conduct a survey to understand the position of the company. The main focus of the report is to conduct an audit engagement of Woolworths Limited. Woolworths is a retail organization in Australia that focuses on providing quality products and services to the customers (Beechy, Conrod, 2008). The company has established its brand position in the market. The company also focuses on the preparation of the financial statements and engages its accountants and auditors. Main context SWOT analysis The internal analysis will help to determine and evaluate the strategic objectives and business operations of Woolworths Limited. The internal analysis can be conducted with the use of strategic tools such as SWOT analysis. The SWOT analysis is referred to the strengths, weakness, opportunities and threats of an organization (Pinnock, 2012). Strengths The strengths of the Woolworths are that the company has maintained its brand position in the market and it is the leader in the retail industry. The leadership position enhances further the ability of the organization to exploit the market opportunities through the use of its huge resources in the form of human resources, technological resources, and financial resources. The company operates many subsidiaries and has highly efficient staff members. The company has a strong management team that helps in the growth of the company. Weakness The company has limited global presence in comparison to its competitors. The company has not able to sustain its competitive advantage. The company has also entered late in the online market which means many companies has already taken steps to ensure online presence. The growth strategy of the company is affected by the external environment factors. The government of Australia has restricted to increase the prices of the products for Woolworths and shows major weakness to the organization (Floyd, 2006). Opportunities The company has the opportunity to expand its business operations in other countries. The retail industry all across the world has depicted potential growth, and the factors such as advances in the supply chain, lifestyle changes, and computerization have enabled the company to grow in the market. The company is positively looking forward and has wide opportunity to fulfill the demands of the customers. The company can develop its business operations through franchise models and strategic acquisitions in the emerging economies. The company has the opportunity to use the technologies such as social media platform in order to ensure their online presence. Threats The main threat to the retail companies in Australia is a higher level of competition in the market. The main competitor of the company is Coles supermarket. The government is also interfering in the development of the company with the implementation of strict rules and regulations in the retail industry. The increase in the costs of the raw materials also imposes a significant impact on the profit margin of the company. Potential impact on the Woolworths audit The internal factors can impose a significant impact on the audit processes of Woolworths. The government is changing its rules and regulations that can impose a significant impact on the audit. The accountants and auditors have to follow the rules, regulations, and guidelines while preparing the financial statements. The changes in the pricing policies mean there should be changes in the preparation of the statements (Britton, Waterston, 2013). The auditors have to present fairly the financial statements in front of the stakeholders. The financial statements should provide adequate information to the stakeholders and present it into the financial report. Significant risk of material misstatement for Woolworths Specific account balance (i) (ii) (iii (a) Explain why the account balance is at significant risk of material misstatement. The sales revenue can be at the risk of material misstatements. The changes in the pricing policy may lead to the change in the selling price per unit of the products (Cosserat, Rodda, 2009). The changes in the values of the selling unit mean changes in the sales revenue of the company. The increase or decrease in the value leads to the changes in the profitability of the company. The increase in the sales revenue means an increase in the profitability of the organization. The changes can affect the overall value of the company. The purchase account can also be at the risk of the material misstatement. The changes in the pricing policy can affect the purchases of the raw materials of the company (Dassen, Schilder, Wallage, 2005). The increase or decrease in the prices of the items can lead to increase or decrease in the overall value of the organization. Inappropriate adjustments of the accounts can lead to the changes in the value of the income statement. The changes in the rules mean change in the values of the items. The stock account can be at the risk of the material misstatement. The changes in the values of the stock lead to the changes in the value of the current assets. The increase or decrease in the values means changes in the balance sheet of the company (Horngren, 2014). The accounts are at risk of material misstatement as the accountants and auditors can make changes in the accounts. The increase or decrease in the stock means there are changes in the purchase and sales of the items. (b) Explain the key assertion at risk of not being valid. The financial statements assentations are the explanation of management about the recognition, measurement, disclosure and presentation of the information in the financial statement (Jones, 2013). The sales revenue account is at the risk of material misstatement, and the risk is not being valid. The accountants and auditors play a significant role in the preparation of the financial statements. The accountants and auditors of Woolworths follow the rules the regulations during the preparation of the financial statements. However, there is a risk of material misstatement. The purchase account can be at the risk of material misstatement. The accountants of Woolworths prepare the financial statements carefully, and the changes in the values of items mean changes in the overall value of the company (Parrino, 2015). There is very change less of material misstatements in the accounts of the financial statements. The stock account can be at the risk of the material misstatement. The changes in the values of the account can lead to the changes in the overall value of the company (Pickett, 2005). The rules and regulations are being followed during the preparation of the statements. The stock account shows the quantity of products coming in and quantity products going out. (c) Detail one (1) relevant substantive audit procedure to address the assertion at risk as identified in b) above. The accountants should record the selling price in an appropriate manner and the values of the items. The sales (Powers, Needles, 2012). The audit procedure should be performed in order to test the financial statement assertions. The procedure for preparing the sales revenue account should have written in a clear manner and checking all the money received from the sale of the goods. The whole process should be clearly described, and it should be recorded by following the rules and guidelines. The risk should be determined, and it should be eliminated. The sales account transaction should be recorded and disclosed in the financial statements. The procedure of auditing the accounts should be clearly stated. The sales account should be prepared and then posted in the trail balance in order to analyze it. The values should be analyzed before posting into the income statement. The accountants should record the purchases of the items in an appropriate manner. The auditors should check the price value of each of the items. The guidelines and procedures should be clearly defined and show the fair value of the statement (Ricchiute, 2006). The next step is to determine the omissions or errors in the accounts. The determination and evaluation of risk help to represent the fair value of the statements. The purchase account transaction should be recorded and the audit procedure should be based on the fair value representation of the financial statements. The purchase account should be prepared at first. Then it should be posted in the trial balance and then in the income statement. The accountant should record all the products that are going out and coming in an appropriate manner. The transaction should be recorded to shows the value of the items. The next step to determine whether there is any errors or omissions in the accounts (Spiceland, 2010). The account procedures should be based on the identification of risk of material misstatement and record all the transactions. The stock account should be prepared, and then it should be posted in the trail balance. The procedures should be followed before posting it into the balance sheet. (d) Detail one (1) relevant practical internal control that would mitigate the risk in relation to the assertion at risk as identified in b) above. An effective internal control ensures that the plan information is accurate and complete and decrease the risk of the asset loss (Stice, Stice, 2014). The internal control will be effective during the preparation of the sales account. The sales revenue account should be verified with the selling of the products and the internal control provides reasonable assurance regarding the fairness and reliability of the financial report. The preparation of sales account and posting in the trial balance will help to show the accurate value. The effective control can be used in the preparation of the purchase account. The purchase account should be first recorded in the journal account and then posting in the ledger and trial balance account in order to ensure fair preparation of the account (Weil, 2017). The stock account should also be prepared in a prepared. The transaction should be recorded in the journal account and then in the ledger and trial balance account. An effective control system ensures accurate and complete values of the items. Conclusion The audit procedure ensures fair representation of the financial statement. The material misstatement leads to the increase or decrease in the value of the company. The stakeholders make decisions on the basis of the information they get from the financial statements. An effective control system and audit procedures ensures that the accounts are prepared in an appropriate manner. The audit assessment of Woolworths clearly the accounts that are a risk. The income statement shows the income and expense; cash flow statement shows the inflow and outflow of cash and balance sheet show the liabilities and assets. The accountants and auditors are responsible for the preparation of the financial statements. The changes in the values of the accounts can lead to the changes in the total value of the company. The management should implement appropriate rules and regulations for the preparation of the financial statements. References Appannaiah, H., Reddy, P., Putty, R. (2010).Financial accounting. Mumbai [India]: Himalaya Pub. House. Beechy, T., Conrod, J. 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