Group Assignment BAO3306 AUDITING Semester 2, 2016 Introduction This is a written assignment to be done in group of three or four members. This assignment carries 20% of marks of the overall assessment for this unit. The aim of this group assignment is to test your ability to integrate skills learnt in Auditing to analyse a real company from the auditor's perspective and within the framework of auditing standards. The successful completion of this assignment requires extensive research on Boral Limited's internal and external environments, operations, strategies and an analysis of the annual report including financial information. You are expected to demonstrate your ability to critically evaluate various pieces of information and apply analytical skills to evaluate potential audit risks. An important aspect of this assignment will be to demonstrate your ability to present a written report in a professional manner. Learning Objectives On successful completion of this assignment, you should be able to: 1. familiarise the audit process and the techniques used by auditors including business risk analysis, internal control assessment, evidence collection and evaluation, use of computer assisted audit techniques and audit reporting. 2. evaluate the business risks of an audit client, assess the consequent risks of material misstatement, and develop the audit tests needed to obtain the evidence required to support an opinion on the company's financial report. 3. determine the appropriate audit procedures to be used and relate audit procedures to the concepts, audit assertions and professional standards of "risk-based" financial report auditing. 4. demonstrate ability to work independently and to lead and participate in teams from diverse cultural and social backgrounds Requirement Planning is one of the most demanding and important aspects of an audit. Auditors prepare planning documents that summarise client and industry background information and discuss important accounting and auditing issues related to the client's financial statements. ASA300 states that the auditor shall plan the audit so that the engagement will be performed in an effective manner. For the purpose of this assignment, assume that you are part of the team responsible for planning the Boral Limited's audit engagement (http://www.boral.com.au). You are required to download the 2015 Annual report and financial statements published by the Boral Limited: (http://www.boral.com.au/Images/common/pdfs/annual-reports/Boral-Annual-Report-2015.pdf) Using the template given in this assignment (Pages 4-6) develop an audit planning memorandum for Boral Limited. Please refer to the following auditing standards: ASA210 Terms of Audit Engagements ASA220 Quality Control for Audits of Historical Financial Information ASA230 Audit Documentation ASA250 Consideration of Laws and Regulations in an Audit of a Financial Report ASA300 Planning an Audit of a Financial Report ASA315 Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement ASA320 Materiality and Audit Adjustments ASA330 The Auditor's Procedures in Response to Assessed Risks ASA520 Analytical Procedures (see: http://www.auasb.gov.au/Pronouncements/Australian-Auditing-Standards.aspx for details) Submission instructions Assignment must be submitted electronically and in hardcopy in Week 11. The assignment should not exceed 3000 words (excluding appendices and references). Hardcopy submission must be submitted to the tutor in Week 11 tutorial class. A signed declaration form must be attached to the front of the assignment. Only one member of the group needs to submit the assignment. Electronic submission must be uploaded via turnitin located on VU Collaborate. Students can submit assignment on VU Collaborate until 11:30PM on the due date. An originality report is available to students upon submission. Assignment with originality report level of more than 30% may indicate that the contents have more than 30% in similarity with assignment submitted by other students OR assignment has not been properly referenced. Assignment with originality report level exceeding 30% will be penalised by four (4) marks. Students can re-submit assignment on VU collaborate as many times as necessary but the final submission both in electronic and in manual format must be made by the due date. The standard penalty for late submission will be 5% of the total possible mark per working day. Plagiarism Plagiarism is defined as presenting someone else's work, including the work of other students, as one's own. Any ideas or materials taken from another source for either written or oral use must be fully acknowledged, unless the information is common knowledge. If a Unit Coordinator decides that plagiarism may have occurred, the matter will be referred to a prescribed authority and can incur serious penalties. VU deals with plagiarism according to the Academic Integrity and Preventing Plagiarism Policy. Additional Information 1. Read relevant chapters of the textbook for information relating to audit planning and audit risk. 2. You are required to plan the audit using only information that is publicly available. That is, you only use the information that is published by the entity either on its website or printed materials. 3. Use the given template (see: pp.4-6). 4. Information on the organisation's internal control structure can be obtained by looking at the relevant section in the annual report, materials published on the entity website and comparing them to the Principles of Good Corporate Governance and Best Practice Recommendations published by the ASX Corporate Governance Council. 5. Quoting directly from textbooks and reports will increase the similarity index. Quoting without proper referencing will also increase the similarity index. You are advised to develop your own audit plan. Turnitin has the facility to report on whether your assignment is copied from other sources. 6. If you want to remove the previous version of the assignment on turnitin, submit a blank assignment or a new version. 7. Turnitin may take up to 24 hours to generate originality report. 8. Only one student in the group needs to submit the assignment. BORAL LIMITED AUDIT PLANNING MEMORANDUM Prepared by : Reviewed by : Date : 1. TERMS OF ENGAGEMENT (2 marks) 2. BACKGROUND INFORMATION 2.1 Business Risk Factors (Identify key factors and briefly outline why they impact on the business risk of Boral Limited at the financial report level under sections 2.1.1 & 2.1.2) 2.1.1 Factors that increase risk (3 marks) 2.1.2 Factors that decrease risk (3 marks) 2.2 Internal Control Environment (6 marks) Discuss the control environment, including company level controls. 2.3 Risk of Fraud for Boral Limited 2.3.1 Discuss whether you consider there to be any accounts susceptible to asset misappropriation (2 marks) 2.3.2 Discuss whether you consider there to be any accounts susceptible to fraudulent financial reporting (2 marks) 3. PLANNING MATERIALITY 3.1 Brief Justification of materiality base selected and percentage applied (2 marks) 3.2 Base amount selected and percentage applied (2 marks) 4. PRELIMINARY ANALYTICAL PROCEDURES (12 marks) Ratio Analysis for Economic Entity Liquidity Ratios: Formula used 2015 2014 Industry average Current Ratio Quick Ratio Receivables turnover Solvency Ratios: Formula used 2015 2014 Industry average Debt to total assets ratio Interest coverage ratio Cash debt coverage ratio Profitability Ratios: Formula used 2015 2014 Industry average Profit margin Asset turnover Return on assets Return on ordinary shareholders' equity Earnings per share (EPS) Dividend payout ratio 5. Commentary on Financial Performance (1 mark each = 3 marks) 5.1 Commentary on liquidity 5.2 Commentary on solvency 5.3 Commentary on profitability 6. KEY AUDIT RISK AREAS AND AUDIT PROCEDURES (4 marks each = 20 marks) In this section, select five significant accounts 6.1 Audit risk area: Outline of Issue/s Key assertion/s and audit procedure 6.2 Audit risk area: Outline of Issue/s Key assertion/s and audit procedure 6.3 Audit risk area: Outline of Issue/s Key assertion/s and audit procedure 6.4 Audit risk area: Outline of Issue/s Key assertion/s and audit procedure 6.5 Audit risk area: Outline of Issue/s Key assertion/s and audit procedure OVERALL PRESENTATION OF THE AUDIT PLAN (3 marks) Note: Total marks will be converted to 20%.