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ASX listed Company
Academies Australasia Group Limited
Prepared by
Arati Sapkota Pathak 3896168
Vaishali Dilip Kumar Patel 3896211
BAO 3306
Auditing Assignment
Semester 3 2012
Table of content
1. Executive summary …………………………. 3
2. Introduction .. 4
3. Audit plan …..
3.1 Understand the clients entity…………… . 5
3.2 Understand Internal Control .. 6
3.3Assessing the risks of material misstatement…………………… 7
3.4Audit Risk Model………………………………………………………….. 8
………………………………………………………….. 9
………………………………………………………….. 10
3.5 Developing responses to assessed risks……………………….. 11 ………………………… 12
4. Conclusion … 13
5. References … 14
6. Bibliography…………………………………………………………………. 15
7. Appendix 1………………………………………………………………….. Excel
1. Executive Summary
The scope of audit has been increased today because high risk associated with entity operation at the same time integrity and objectivity is demanding in industry, so need assurance service by independent auditor who can express the opinion on financial information. To provide assurance service a listed company must appoint external auditor to give opinion on their financial statements whether it is true and fair or not. So investors can understand the financial reports and make an investing decision. Hence increase the reliability of financial information and harmonise business environment.
For the purpose of clear understanding of auditing concept in financial accounting we have been asked to assume the role of auditor and conduct auditing for ASX listed Company Academies Australasia Group Ltd. Mainly focus on the audit plan which is stated in ASA300.5, it is key element of auditing which helps to finish auditing effectively and efficiently, it is highly required as an auditor must act in professional manner with their clients. The findings of assignment are having thorough knowledge of audit plan, understanding materiality concept and also audit procedures to response it.
All the information has been obtained from annual report 2011 and financial statements are for parent entity and consolidated entity. We have referred to Auditing Standards for this assignment and other web resources.
2. Introduction
When the auditor engages with new client, ASA 210 stipulates that an auditor need to follow certain procedures which are as follows:
· Regarding to the client relationship, continuity and audit engagement
· Compliance with ethical requirements and maintain independence with client
· Understanding the terms and conditions of engagement which should be fairly stated in audit engagement letter.
Audit planning is main stage of auditing which sets the scope, provide directions, conduct of auditing and provide guidance in development of audit programme. There are two aspects in audit planning one is audit strategy and another is audit plan. The following are seven stages of conducting audit on financial reports as stated in ASA 300.
.0/msohtmlclip1/01/clip_image001.gif” alt=”*”> understanding the business and its environment
.0/msohtmlclip1/01/clip_image001.gif” alt=”*”> understanding internal controls
.0/msohtmlclip1/01/clip_image001.gif” alt=”*”> assessing risks of material misstatement
.0/msohtmlclip1/01/clip_image001.gif” alt=”*”> developing responses to assessed risks
.0/msohtmlclip1/01/clip_image001.gif” alt=”*”> performing tests of controls
.0/msohtmlclip1/01/clip_image001.gif” alt=”*”> performing substantive procedures
.0/msohtmlclip1/01/clip_image001.gif” alt=”*”> completion and review
We have engaged with Academies Australasia to express audit opinion and a fee is $ 83000 which is clearly stated in engagement letter. Academies Australasia is educational and training service provider with different college and import and sale of fasteners. Being in the consumer service industry over 100 years has been successfully running their business and trading internationally. It has been listed in ASX in 1 Jun 1977 and the code is AKG (ASX, 2011) and diversifying the business in education and fastener.
ASA 230 states about the audit documentation, an experienced auditor should document all audit plans and audit strategy, gathering of evidence showing how they reach to conclusion, doing paperwork while audit of financial statements.Documenting the results of audit procedures and plan provide a basis for audit report.
3. Audit Plan
3.1 Understanding the entity and its environment
Academies Australasia has efficient organisation structure and includes the board of directors, management, nomination committee, and audit and risk committee, remuneration committee which review all operation effectiveness. Along with that corporate governance statement, share trading policy, performance evaluation, occupational health and safety are major components of organisation chart.
To operate education service, it has to register on CRICOS and responsible to comply with laws and regulations and making sure of higher standards of education has to meet Australian Quality Training Framework who partnership with government and overlook vocational education sector. Academies Australasia has listed in ASX so it is obliged to comply with two main regulators one is ASX and another is ASIC. While preparing financial statements has to comply with AASB standards and Corporate Act 2001. Failure to comply with laws would result in delist from ASX.
Academies Australasia revenue arise from principal activity education and training service and in addition it sell and manufactures fasteners. Education service industry in Australia is rapidly increasing and being second largest source of income. Australia is famous for providing quality education service and thousands of students come here around the world and mainly from India, Nepal, and Srilanka, Pakistan. The market size is big but there is high competition in market in education service. Tuition fee is also important to attract international students.
The large numbers of education service provider depend on overseas student. The main customer group are international student of Academies Australasia. When we talk about oversees student, they are restricted by Australian Immigration Law, if the law become tough, there is less demand and if the law is not hard, more student would come Australia for study. The economic condition of foreign country where student come would affect the demand of service. Degree recognition is issue in education service, course should recognise in foreign market, if it is not accepted then student may not interested in offered course.
3.1 Understanding Internal Control
Internal controls are essential to the success of the business operations of colleges and universities. It is all about how efficient the operation activities, what are the area we can improve and also recommendation for action. Internal control add value to organisation by ensuring transparency of information, compliance with policies, safeguard of assets, use of resources and meeting objectives. To understand the internal control of Academies Australasia we have reviewed following factors.
Corporate Governance is a set of process which oversees the corporate activities of business and provides assurance to meet objectives of firm. Academies Australasia has corporate governance policy to increase investor confidence and complying with ASX Corporate Governance Council also practicing eight principles in business activities. Practicing those principles such as timely disclose of balance, integrity in financial statements, ethical standards, board composition align to have efficient and effective control system.
Audit Committeeperforms various monitoring task to detect undesirable acts within business operations and assuring not to occur any unethical activities.Having audit and risk committee indicates that Academies Australasia is responsible for assessing risks that could undermine these objectives of financial statements:
· Existence of assets and liabilities
· Allocation and valuation of assets and liabilities
· Within reporting period
· Presentation and notes to financial statements
Fraud Risk
Going through corporate governance statement and applying those principles in business activities are not enough to say that business cant have fraud risk. There could be less chance but not apart from fraud risk which simply means doing unethical things intentionally with various reasons as business incentives, promotion, entitled to benefits. We have discovered following possible fraud risk in Academies