BBAC601 Auditing And Assurance :you are assumed to be an auditor

Audit Strategy

In this assignment you are assumed to be an auditor who has just been appointed by your auditing firm to perform the audit at a particular client. You are in the process of understanding the client and produce part of an audit strategy to help plan the audit for the 2017-2018 financial year, in accordance with the guidance on Australian Standard on Auditing (ASA) 315 (paragraph A25 to A49).

Part A: The Client:

Information about the client

Name: Telstra Corporation Limited. Tls

• Address
• Year of establishment
• Field of operations
• Period of financial report period under consideration
• Type of financial report (consolidated or single)

2.2. Industry, regulatory and other external factor

• Economic condition (upturn or downturn), overall and within the sector
• Law and Regulations applicable to the client
• Level of competition
• Name of main competitors
• Level of government’s support
• Level of demand for goods or services provided
• Is there any current or potential significant barriers to entering the client’s industry or market

Nature of the entity

• Its operations (i.e. area or types of products or services)
• Major customers
• Is the client heavily dependent on any specific customers or class of customers
• Major suppliers,
• Ownership’s structure and details about corporate governance to some extent (Board of Directors, audit committee, etc.)
• Operational structure (any branches within and outside Australia, location of warehouses, etc.)

Accounting policy

Main accounting policies may include:

• Policies regarding property, plant & equipment (PPE) (e.g. cost or revaluation model)
• Policies regarding inventory (perpetual or periodic, FIFO, average etc.)
• Policies regarding account receivables
• Policies regarding financial instruments
• Policies regarding intangible assets
• Policies regarding revenue recognition.

Related parties and transactions with related parties

• Controlled entities (names and percentage of financial benefit or voting right)
• Non-controlled entities (names and percentage of financial benefit or voting right)
• Other related parties (names and their relationship with the client)
• Transactions with related parties in the financial year

Part B: Analysis Of The Client And Impacts On The Future Audit Work:

Changes in accounting policies and the impact of changes

• Any changes in the year compared to prior years and the possible or actual impact of these changes on the financial report.
• Any expected impact as a result of the changes in accounting standards in the future.
• Discuss the potential impact of those identified on the future audit work

Preliminary analytical procedures

• Provide at least 5 ratios (using formulas provided by the text book or lecture notes) for the current and the prior year. Of the three ratios, three below are compulsory: current ratio, quick asset ratio, debt to equity.
• Comments on the ratios and any anticipated impact on the future audit work.
• Comments on the client’s ability to operate as a going concern.

Measurement and review of financial performance

• Identify the measurement and review of financial performance (e.g. Director’s remuneration, employees’ performance measure and incentives, loans with conditions such as maintaining a specific liquidity ratios, etc.).
• Discuss the potential impact of those identified on the future audit work.

Objectives, strategies and related business risks

• Identify the objectives or strategies (any plan to develop new products or services, or to expand the business locations, use of information technology)
• Identify the related business risks (the risk that that an entity’s business objectives will not be attained as a result of external and internal forces brought to bear on an entity)
• Discuss the potential impact of those identified on the future audit work

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