Expertise on Monitoring Reporting Process Free Samples to Students

Question: Discuss about the Expertise on Monitoring Reporting Process. Answer: Introduction: In the context of the preparation and presentation of the financial statements in a true and fair manner, the frameworks of the financial reporting are undertaken for the discussion of the theory and the concept of the materiality. The frameworks may discuss and explain the materiality with the terms that include the material misstatements that include the omissions. The omissions are considered material in cases where they are of the nature of that would exert an influence or pressure on the decisions of the users of the financial statements. Performance materiality is the technique that can be used in arriving at the materiality as it has the manner that diminishes the levels of the likelihood that the cumulative of incorrect and undetected misstatements in the financial statements on a whole. The company Graincorp Ltd.can detect the material omissions or incorrect data through the technique of the Performance materiality that involves the simple and mechanical calculations and the exercise of the judgment in a professional manner (Abbott et al., 2015). The company can thus get access to the material risks associated with the company by the above measures. The auditors have to carry on the performance of the assessment of the risks towards the assessment and the evaluation of the material and other important misstatements at the assertion level and the procedures must take into account the analytical procedures. The auditor has to perform the procedures at the near end of the financial period that will comprise of the assessment of the consistency in the financial statements with the awareness and knowledge of the auditors towards the entities. The analytical procedures take into account the usage of the assurance engagements and the non-audit that includes the reviews related to the financial information of a prospective nature (Castka et al., 2015). The procedures must have an alignment with the standards and also the principles that are relevant to the use of the methods in knowing the analytical process. The application of ratios and the analysis of the substantive analytical procedures are based on the awareness of the existence of the relationships in the data of the financial statements. It provides accuracy, completeness and other efficient features. The procedures also help in directing the attention of the auditors for the further investigation. The auditor must carry on the identification of the deficiencies or risks in the internal control and help in the attainment of more assurance. 2012 2013 2014 2015 Net Margin % 6.17 3.16 1.23 0.79 Asset Turnover (Average) 1.21 1.48 1.25 1.16 Return on Assets % 7.48 4.69 1.55 0.92 Financial Leverage (Average) 1.84 1.8 1.91 2.02 Return on Equity % 14.07 8.54 2.87 1.8 Return on Invested Capital % 10.67 6.98 3.07 2.16 Interest Coverage 8.2 5.14 2.45 2.01 Current Ratio 1.74 1.84 1.62 1.72 Quick Ratio 1.01 1.03 0.87 1.04 Financial Leverage 1.84 1.8 1.91 2.02 Debt/Equity 0.22 0.34 0.34 0.43 Days Sales Outstanding 37.13 31.52 34.83 36.8 Days Inventory 78.81 56.56 60.42 62.69 Payables Period 39.27 29.42 24.39 18.35 Cash Conversion Cycle 76.66 58.66 70.86 81.14 Receivables Turnover 9.83 11.58 10.48 9.92 Inventory Turnover 4.63 6.45 6.04 5.82 Fixed Assets Turnover 3.95 4.33 3.41 3.14 Asset Turnover 1.21 1.48 1.25 1.16 The net profit margin has been decreasing from the year 2012 to 2015 i.e. from 6.17 to 0.79 that is to be controlled and overlooked with great care and management. The drastic decline reflects that the net profits were too low i.e. the profits earned on the total sales declined to a major level that must be controlled. Further the other returns, i.e. the return on the total assets also declined drastically that represents that the company was unable to obtain and develop the returns and earnings on the total assets that are in the possession of the company. The interest coverage ratio was declining and the same represented that the company was inefficient in covering up the interest of the finances attained by the management in keeping up its liabilities. Thus, the same has to be maintained and controlled. The current ratio and the quick ratio measure the liquidity position of the company and the ability of maintaining the current liabilities with the available current assets. The benchmark of the above ratios is 1 and the company is maintaining the same as over the years, the company has maintained the ratio above 1. The other ratios like the turnover ratios of the assets, inventories and others are maintained that is over the years, the turnover ratios are in maintenance that reflects the superior position of the company. The financial leverage is high that means that the company is inefficient in meeting up the debts and other obligations with the available finances in the form of equity and other earnings and profits. The key risk areas for the audit and the matters to be addressed in the audit plan include the entire reactions to attend to the evaluated misstatement risks at the level of the financial statements. It must also consider the nature, timing, and extent of the procedures of the audit. Next, the association of those procedures must be addressed with the assessed risks at the level of the relevant assertions. Lastly, the results of the audit procedures and the ending reached with the current and prior audit processes must be a part of the address procedures. The examples of relevant assertion include: Existence: The examination of documents that has a link with the inventory transactions. Rights and obligations: The laws and the legislative rules must be maintained and confirmed with the vendors and the other parties related to the company. Completeness- The examples is the complete and accurate count and documentation of the total inventory present with the entity. Understandability- There is a proper awareness and understanding of the relevant accounting information and disclosures related to the same. The disclosures of the company has included and taken into account the accounts and revealing of the measures related to the Earnings per share, dividends, insurance of the officers, proceedings on behalf of the company, the non audit services. Further, the directors report attached with the same and other critical and major information has formed the part of the annual reports and the notes related to the same (Cohen et al., 2013). There are major notes and disclosures that are of most important or significant relevance and the objectives of the auditing contingencies include the assurance that these contingencies have an important force and impact towards the presentation of the financial statements of a client in a true and fair manner. Further, there must be a major check and control in the accounts that there is conformity of the contingencies with the principles that have a general acceptance (Porter et al., 2014). The procedures of the audit on the contingencies takes into account the following methods: There must be a review on the description of the charges on services for the fees of legal and other professional fees. A list of the anticipating litigations must be attained from the management The pending disputes of the laws and other legal services must be inquired and taken under consideration that includes the taxes, labor and environmental factors. The opinions on the amounts, scope or the possibilities along with the scope of the profits or losses of the above contingencies must also be included in the audit procedure. There must be an examination and review of the payments of the taxes with the help of the returns of the past years to know about the existence of the pending appeals. The review of the meetings of the board, shareholders and others of utmost importance must also be included. The review of the lease contracts, agreements to loan and the other major contracts related to the guarantees and endorsements must be recorded. The inquiry of the management of the noteworthy contingencies that have not been disclosed must be recorded. There must be conformity with the financial institutions like banks and others for the guarantees and other endorsements. There must be an attainment of the letter of representation from the management regarding the contingencies. The auditor should issue an opinion of qualified or adverse nature in cases where the contingencies of the clients are not in conformance with the accounting principles that are generally accepted (Chen et al., 2016). The cash flow statement has been prepared as per the requirement of the standards and the principles of auditing. The cash flows have increased in the year 2015 as compared to the year 2014 as the total cash and cash equivalents were $374M and $206 M respectively. The major reason was the increase in the net inflows from the operating and the financing activities. The category of cash flows provided the majority of cash inflows are the cash flow from the operating activities as it raised an inflow of $271M as compared to the other heads of the cash flows. The category of cash flows provided the majority of cash outflows are the cash flow from the investing activities as it invested a total of $213M as compared to the other heads of the cash flows. The main non cash financing activities and investing activities include the dividend declared, interest receivable and payable, conversion of the bonds in shares, acquisition of assets through shares and other assets payable. The going risk concern includes the concern that possesses the risk of the company falling in the risk of full liquidity or ending up of all the operations of the business. The assumption of the going concern is the continuance of the business and its operations for the foreseeable future i.e. measured in years from the end of the financial year of the entity. The assumption is that the entities have no intention of curtailing its operations or liquidating the entity. However, if the company faces huge risks and decline in a drastic manner the going concern is affected and there can be an insolvency faced by the company and its management, thus leading to liquidation and curtailment of the operations of the entity (Geiger Kumas, 2016). The above statements of ratio analysis and the cash flow statement states that although the company has faced a drastic decline in the overall revenue of the operations, there is a stability in the cash inflows from the cash flows from the operating and the financing activities that will save the company from the risk of liquidation and failure in the going concern assumption (Hamer Collinson, 2014). The audit procedures regarding the going risk assumption include the following: Performance of Analytical procedures Examination and analysis of subsequent events Investigation of the litigations, claims and assessments on the legal frontier. Confirmation with related and third parties. As per the auditor i.e. the PWC, the company GrainCorp Limited had complied with the presentation of the annual reports that is fair and true in view of the financial positions and other data of the company. The company had also complied with the Australian Accounting standards and the International Financial reporting standards that mean that the company had not defaulted in the same (Dowling, 2015). Thus, the auditor had given an Unqualified Opinion that means that the auditors are satisfied and found the report without any defaults. There were risks related to the operations of the company that took into account the claims and disputes related and linked to the inventory of grain or finished product, issues in supply, breakdown of the machinery, loss of long term harmony for supply or premises, disputes in the place of work, requirements of the legal and regulatory frameworks and impacts of environmental obligations. The other risks like the hedging and the food and feed industry risks were also considered in the report. 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