15 Pages 3994 Words HA3032 Auditing

| March 17, 2019


Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment
The objective of this project is to provide you with an opportunity to assess the business risks and perform analytical procedures for a real world company.
Introduction and Project Requirements
1. Prepare a Business Risk Analysis Project Report [Minimum of 3000 words] for the client/company in a group of 4 or 5 members.
2. If you have difficulties forming such groups, please contact your lecturer as soon as possible.
3. Get approval of the company/client (Any company listed with ASX and not taken by other group) from your lecturer, on which your group want to progressively analyze
4. The project focuses on the following categories of information related the understanding the entity and its environment:
• Nature of the entity
• Industry, Regulatory, and External Factors
• Objectives Strategies, and Business Risks
• Entity Performance Measures and Monitoring
• Management
• Governance

Detail project tasks:
Part 1 – Understanding Nature of the entity
Matters that you may consider when obtaining an understanding of the nature of the entity include:
• Business operations
• Investments and investment activities
• Financing and financing activities
• Financial reporting practices
Part 2 – Understanding the Industry
a) Industry size
b) Industry growth
c) Industry supply chain
d) Major players
e) Market shares of Industry players
f) Critical success factors
g) Major threats
Part 3 – Understanding the legal environment
Relevant regulatory factors include the regulatory environment. The regulatory environment encompasses, among other matters, the applicable financial reporting framework and the legal and political environment.

Part 4 – Understanding external environmental factors
a) PEST analysis
b) SWOT analysis
c) Porter’s five forces analysis
d) other external factors affecting the entity that you may consider include the general economic conditions, interest rates and availability of financing, and inflation or currency revaluation.
Part 5 – Understand objectives, strategies and Assessing Business Risks
a) Industry developments (a potential related business risk might be, for example, that the entity does not have the personnel or expertise to deal with the changes in the industry).
b) New products and services (a potential related business risk might be, for example, that there is increased product liability).
c) Expansion of the business (a potential related business risk might be, for example, that the demand has not been accurately estimated).
d) New accounting requirements (a potential related business risk might be, for example, incomplete or improper implementation, or increased costs).
e) Regulatory requirements (a potential related business risk might be, for example, that there is increased legal exposure).
f) Current and prospective financing requirements (a potential related business risk might be, for example, the loss of financing due to the entity’s inability to meet requirements).
g) Use of IT (a potential related business risk might be, for example, that systems and processes are incompatible).
h) The effects of implementing a strategy, particularly any effects that will lead to new accounting requirements (a potential related business risk might be, for example, incomplete or improper implementation).
Part 6 – Performing Analytical Procedures to understand Entity’s Performance
You are also required to perform analytical procedures (ratio analysis) on the selected company for 3 years and compare those ratios across time, and to industry data or a major competitor.

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