Annual reports to complete this assignment, you will need to access Seven’s Annual Reports: http://www.sevenwestmedia.com.au/investors/annual-reports
Your team is planning the ‘audit’ of the 2016 report, but you will also need to earlier reports for comparative data.
Your team may find the IBISWorld Industry report for Free-to-air Television Broadcasting in Australia a useful starting point for your research. Please note that ‘Googling’ will NOT allow you to access the full report, you must go through Flinders library or use the link I have provided for you on FLO which goes via the library website.
You may find internet research of news articles, other competitors in the industry, etc. of further use
Requirements Task 1 –
Understand the Client
Assess business risk (25 marks)
Research Seven to gain an understanding of the client. You can use Internet research (e.g. business and financial media articles) and the other information in the annual reports. It is essential to reference all sources with in-text referencing and a reference list. From your research, you need to:
1.1. Provide a brief summary of the client.
1.2. Identify business risks at the entity level.
1.3. Identify business risks at the industry level.
1.4. Identify business risks at the economic level.
1.5. Identify any areas of the audit where you may consider the use of an expert.
Perform preliminary analytical procedures
Perform analytical procedures on the data from Seven’s 2016 Annual Report Final Report. You will need prior period data (e.g. from the 2015 and 2014 Annual Reports) for calculating comparative figures from previous periods. You need to:
Calculate the following eight financial ratios for both 2016 and 2015. For each ratio, show the general formula (in words), the actual formula (in numbers) and your final answer:
2.1.1 Current ratio (liquidity)
2.1.2 Quick asset ratio (liquidity)
2.1.3 Cash flow ratio (liquidity)
2.1.4 Net profit ratio (profitability)
2.1.5 Return on total assets ratio (profitability)
2.1.6 Return on shareholders’ equity ratio (profitability)
2.1.7 Times interest earned ratio (solvency)
2.1.8 Debt to equity ratio (solvency)
2.2. Perform trend analysis for the following items:
2.2.1 Revenue and other income
2.2.2 Net profit (loss) after tax
2.2.3 Net cash flow from operating activities
Interpret the results of your ratio and trend analysis in parts 2.1 and 2.2 above, including their impact on the audit of Seven
Task 2 – Assess Inherent and Control Risk
Assess inherent risk
Use the research and data you have prepared in Task 1 to assist you in this question
Discuss the risk of fraud in the audit of Seven
Discuss any risk factors for the going concern assumption in the audit of Seven
Discuss any risk factors arising from related parties in the audit of Seven
. Identify six inherent risks facing Seven. For each of these risks, explain which accounts would be affected, the key assertions at risk for each account, and briefly explain why these accounts/assertions are affected
Provide an overall assessment of the inherent risk level for Seven (high, moderate, or low) and briefly justify your assessment
Assess internal control risk at the entity level
Describe factors that contribute to internal control for Seven at the entity level, based on the information provided in the annual reports.
Provide an overall assessment of the control risk level for Seven (high, moderate, or low) and briefly justify your assessment.
Task 3 – Set the Audit Strategy and Overall Materiality
Plan your overall audit strategy
Describe how your assessment of inherent risk and control risk relates to the overall audit risk, the planned detection risk, and the amount of evidence required to be gathered
. Describe the relevant audit strategy to address Seven’s risk profile. (2 marks) 5.3. Describe how you would develop your detailed audit program based on the above strategy and your overall knowledge of Seven
Set overall and performance materiality
Choose a relevant base and justify your choice
Set a relevant percentage and justify your choice, including a final overall materiality figure
Calculate and justify a performance materiality figure
Relate your final overall materiality figure to your risk assessment from part 5
Task 4 – Presentation and Referencing
Use the Assignment Template provided to you. Please note that the number of bullet points in the template is provided as a guide only, you will need to adapt the template to your needs. Ensure you provide enough relevant detail on each point
Ensure you provide appropriate in-text referencing when referring to sources, and include these sources on a reference list