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ACCM4400 Auditing and Assurance Assignment Sample

Assessment Title: Case Study

Weighting: 40%
Word limit: 1,800 words (max.) (Do not include title page, table of
contents, executive summary and reference list in the word count.)

Due Date: Tuesday of Week 13 at 19.55 AEST

Your Task

You must complete a report detailing your findings and suggested audit procedures as stated in Assessment Question for an ASX listed company.

Assessment Description

This assessment is designed to test your ability to apply the knowledge gained from ACCM4400 workshops during the semester, in identifying assertions at risk and developing appropriate audit procedures. This will be done by analysing available information of an Australian company (hereinafter referred to as “The Company”) that is listed on the ASX. The name of The Company will be made available on the Assessments page of MyKBS for ACCM4400 on Friday of Week 11 and you must submit your report at 19:55 (AEST) on Tuesday of Week 13.

Your facilitator will discuss the assessment requirements during Workshop 11. Workshop participants will be divided into groups to discuss the assessment requirements based on a sample case study.

Your facilitator will then give feedback on each group’s responses to the application of the questions to the sample case. It is expected that the discussions during Week 11 will clarify the expectations and requirements for performing at a high standard in this assessment.

Please remember that this is an INDIVIDUAL ASSESSMENT and must be based on The Company, name of which will be released at 08:00 (AEST) on the Friday of Week 11.

Learning Objectives:

After completing this assessment, you will be able to:

1) Research information about the selected company (using multiple sources)
2) Address particular areas of the audit process and develop appropriate audit procedures
3) Develop professional report-writing skills

Case Study for Assignment Help

Assessment Question:

During your semester break, you participated in a vacation program at a local audit firm. During the vacation program, you assisted an audit senior on the planning of a medium sized company, including developing appropriate substantive audit procedures. You have one more semester to complete your post graduate course and have indicated to the audit manager that you would like to work on a full- time basis at the audit firm on completion of you course.

The audit manager has asked you to write a report as part of the process of determining your suitability as a candidate for a permanent role in the audit firm. The manager wants to assess your ability to apply the knowledge you gained, to the audit planning process and developing appropriate substantive procedures as well as your report writing skills.

You are required to address the following in your report (refer to rubrics on page 4 & 5 of this document for breakdown of marks and achievement criteria by component):

1. Identify 4 business risks of The Company, that will increase the risk of material misstatement (specifically inherent risk) at the assertion level for classes of transactions or account balances.

For each business risk, identify only 1 class of transaction or account balance (income statement or balance sheet line item), and for each class of transaction/account balance please identify the assertion most (only one) at risk of misstatement. You need to explain why each business risk will lead to a risk of misstatement to the specific class of transaction/account balance and assertion that you have identified.

2. Describe in detail, the appropriate substantive procedure that will address each of the class of transaction or account balance and assertion identified as at risk of material misstatement. The description of procedures must be detailed enough for someone without auditing knowledge to be able to carry out the procedures correctly.

Additional Requirements:

You must include the following in your report:
1. Title page
2. Table of contents
3. Executive summary
4. Introduction
5. Body of report
6. Conclusion
7. References

Sources of information for this assessment may include:

1. The latest annual report of The Company
2. The Company website
3. Announcements on ASX with regards to The Company
4. News articles on The Company
5. Corporate Governance statements of The Company

Solution

Executive Summary

The report has discussed TPG Telecom Limited and the risk associated that would increase the assertion level in the misstatement in the transactions. Each class of transaction has been discussed by pointing out one risk for each of the risks and their substantive procedures. The risk identified in this report includes network capability and performance, competitive industry and market disruption, legal and regulatory risk and technology stability and resilience. Four different substantive tests have been mentioned to address each class of transactions. This is also helped in understanding how every operation of an organisation is related to the transaction and balance statement of the company. This is pointed out that the operations and management of the telecommunication sector request sustainability, especially in this pandemic era. The substantive procedures that have been identified include reviewing the board of directors and how they manage every step of the operation. There should also be an understanding of the inventory valuation calculation and the asset records to manage the misstatement of accounts. The payable balances and loan balances must be kept under record to minutely follow the board of directors' decision and the financial performance of the company. The bank confirmation and also the cash balances must be monitored to see if there are any problems with the technical stability and the resilience of the company. Following all these addresses substantive tests will help TPG in controlling its operations and managing risk in the future years.

Introduction

The report will discuss the business risks of TPG Telecom and how the risk can increase the material misstatement at the level of assertion in transaction or account balances. TPG Telecom Limited which was formerly known as Vodafone Hutchison Australia was renamed after the merger with the TPG. This is the second largest telecommunication Organisation on the Australian Securities Exchange (TPG Telecom, 2022). This is home to many brands in Australia including TPG, Vodafone, iiNet, AAPT and so on (TPG Telecom, 2022). After the risks are identified substantial procedures will be addressed to state how the risk has been identified for material misstatement.

Discussion

Four Business Risks of TPG Telecom Ltd

Network Capability and Performance

As the company primarily deals with telecommunications, the key risk that has been identified in its annual report is related to the availability and performance of its fixed and mobile networks. Any form of network congestion or outages can lead to a poor consumer experience which can negatively impact the reputation of the company. The pandemic has highlighted the role of the telecommunication sector and has reinforced the importance of reliability and resilience in the services of telecommunications. Various potential problems can cause the network failure that may include accidental damage, extreme weather, human error, power outages and natural disasters and so on. Moreover, as it deals with telecommunications the systems and technology must be kept up-to-date, especially in this present time where people are completely dependent on digital communication.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be managerial incompetence. The company is planning to increase the network infrastructure and also significantly invest in their resilience and network capability to provide a robust operational management process. The company has paid 84 million dollars in the spectrum payments of Dense Air Limited's 3.6 GHz spectrum and also in their 2.6HHz spectrum in the networks Australia Pty Limited. This TPG corporation merger has come into effect on 26 June 2020 (TPG Telecom, 2022). This is an important part of the financial misstatement of balance because if the network does not function properly then the company will lose a lot of capital in repairing the process. The company has also added additional leases of 124 million dollars that have less termination of 15 million dollars.

Competitive Industry and Market Disruption

The competitiveness of the industry is quite high as there are several other telecommunication organisations present in Australia. The industry is susceptible to rapid changes as the technological innovation and the trends of the consumer are evolving rapidly in the practices. These trends can cause a discontinuity and affect the business models leading to a failure in translation for quick adaptation. The pandemic is still a continuing risk for the business as many migrations and international travel have slowed down even after the reopening of borders. The company has focused on proposition development so that the appeal in the domestic market can increase and also offset new ways like monetisation of 5G. The consolidated financial statement said that the company has put almost 1963 million dollars in 2021 for the cost of the provision in the telecommunication services (About TPG, 2022). The revenue that has been generated from the contract with the customer is 5274 million dollars in 2021. The finances are yet not quite down but have decreased when compared to the previous years as in 2020 the provision of telecommunication services will be 1351 million dollars (About TPG, 2022). The industry is challenged with complex operational processes that require customised solutions (Aivo, 2022). This is often a risk for companies as updating faster becomes a challenge.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be the operation of the rapidly changing industry. Another important aspect of the pandemic was that the financial stability board has shown that Covid-19 has helped in accelerating the digital transition which is the positive side for the telecommunications industry. The company is still in the number two position in the Australian telecommunications market and so there is less chance of misstatement of any account balances very soon. The existence assertion will affect the assets and liabilities including the equity balances if there is a problem in the financial statement.

Legal and Regulatory Risk

The company works in a highly regulated industry and does have an evolving and complex legal requirement that is subjected to various regulations from the consumer service delivery following the network security. This forces the company to change its regulatory policy and other interventions of the government which could impact the financial performance and also the commercial viability of its operations. The company has established various codes and policies for the training and awareness initiatives that help in ensuring that the employees are adequately equipped and also can manage the compliance obligations. This part of transactions is often included in the various sales and purchases of the accounting period. The legal part is important as it helps in understanding the transactions and events related to completeness, occurrence, accuracy, classification and cut off. The rights and obligations and also the presentation help in assertions about the account balances that can be related to the disclosures of a current period (About TPG, 2022). The investment that the company makes in the legal compliance department is sufficient to regulate the body regularly to stay relevant to the business rules.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be poor oversight of the board of directors. This is important and a grave risk because if the legal part is not followed properly then the company is not only going to lose the financial part but also would face a lot of problems in remaining in the business. The test completeness is a procedure that starts from the underlying documents and also checks the entries of the relevant ledgers to ensure that nothing is missed.

Technology Stability and Resilience

The company has identified that technology stability and resilience are one of its key risks in the present year. The company states that although they have invested enough to make the operation efficient there have still been issues regarding service interruptions and unavailability in critical business systems. The company has also invested enough for a strong governance framework that would help in any disaster recovery and manage destruction appropriately. Disruption in this area can impact the company to their reputation, operations, revenue, customer retention and even costs. The assertion that has been identified in this risk is the evaluation of the financial statement regarding the investments. For example, if the company does not provide accounts receivable then the customer will period accounts receivable amount that is owed.

Identification of The Assertion at Risk of Misstatement

The risk of misstatement, in this case, would be declining economic conditions. This risk can be managed if an auditor comes to examine the accounts receivable and determine if there are any bad that allow accurate ones. The inventory of the company can also be reviewed to understand if there are any issues in the appropriate valuation method. The company has a target of 485 million dollars to be spent on their operating FCF. This is almost 15% of the total service revenue that the company has fixed in their annual report for 2021 (About TPG, 2022). The financial reporting of the company is clearly showing that they have invested a substantial amount in the risk management of this particular issue. This can be mitigated by various other methods that have been taken as an approach to solving the problem in the current year.

Substantive Procedure To Address Each The Class of Transaction

? The substantive test that can address managerial incompetence is true by reviewing the board of directors' minutes and verifying the existence of all the approved evidence by the organisation. This is the best method to understand the substantive test for internal audits as the board of directors makes the prime decisions in the company. This will also provide the path for future audits while understanding managerial competence and changing it if need be (Bragg, 2022). This is a singular substantive test which can help in understanding the balances and the misstatement that can occur through the risk that has been identified.

? The substantive test that is most applicable for the misstatement of operations in the industry can be addressed through inventory valuation calculations and fixed asset records. This would help in understanding what the present valuation of the inventory is and how the company must upgrade their operations to meet the requirement. The fixed assets would also help in determining the operations that required changing especially after the pandemic. The balance line can also be mitigated by understanding the fixed assets and evaluations of the company that has been already invested in 2021 (Girsch-Bock, 2022). This would also provide a clear understanding of how much investment should be done in the inventory in the upcoming year.

? The substantive test appropriate for this statement is contacting the suppliers and lenders and understanding loan balances and the payable balances are affecting the financial part that has missed the sight of the board of directors (Ozlanski et al., 2020, p.28). Financial performance is important because unless that is monitored well by the top management it can cause problems in the legal and regulatory areas of the company. This is one of the prime risks that the company might face if the balances are not checked properly by the auditing system.

? The last risk can be addressed by bank confirmation and testing the cash balances to monitor the technical stability and resilience. This would help in understanding how much the company is investing in improving its technology and also providing a resilient service in the coming years. This can be done by the internal audit of the company as the internal recordation systems can be performed in a planned manner (Aldhamari et al., 2020, p.4). This will also provide a cleaner audit as external auditors conduct the various tests at the year-end and this might create more risk in the entire year.

Conclusion

It can be concluded from the above discussion that TPG has various risks identified by themselves in the annual report. Although only four risks have been discussed in this report that is related to network capability and the performance. There has also been discussion about the competitive industry in which this organisation is working including the legal and regulatory risks. The various issues regarding technical stability have been mentioned and how it would affect their misstatement is also explored. After identifying the risk, the substantive tests have been mentioned that would help to solve these issues. This would also encourage an understanding of the auditing system of TPG better. The report has also highlighted how the risks associated with the present management can affect the present position of the organisation.

References

About TPG, 2022, Annual Report 2021, Tpgtelecom.com.au. Retrieved 6 June 2022, https://www.tpgtelecom.com.au/sites/default/files/asx-announcements/TPG_Annual_Report_Accessible%20Version.pdf.

Aivo, 2022, Top 5 Challenges in the Telecom Industry and How to Overcome Them with Chatbots. Retrieved 7 June 2022, https://www.aivo.co/blog/5-challenges-telecom-industry-with-chatbots

Aldhamari, R., Nor, M. N. M., Boudiab, M., & Mas' ud, A, 2020, ‘The impact of political connection and risk committee on corporate financial performance: evidence from financial firms in Malaysia’, Corporate Governance: The International Journal of Business in Society. Retrieved 6 June 2022, <DOI 10.1108/CG-04-2020-0122>

Annual Report TPG, 2022, TPG Annual Report, Tpgtelecom.com.au. Retrieved 6 June 2022, https://www.tpgtelecom.com.au/sites/default/files/asx-announcements/TPG_Annual_Report_Accessible%20Version.pdf.

Bragg, S, 2022, Substantive testing definition — AccountingTools, AccountingTools. Retrieved 6 June 2022, https://www.accountingtools.com/articles/what-is-substantive-testing.html.

Girsch-Bock, M, 2022, Understanding Audit Assertions: A Small Business Guide, The Motley Fool. Retrieved 6 June 2022, https://www.fool.com/the-ascent/small-business/accounting/articles/audit-assertions/.

Ozlanski, M. E., Negangard, E. M., & Fay, R. G, 2020, ‘Kabbage: A fresh approach to understanding fundamental auditing concepts and the effects of disruptive technology’, Issues in Accounting Education Teaching Notes, vol. 35, no.2, pp. 26-38. Retrieved 6 June 2022, <DOI: http://dx.doi.org/10.2308/issues-16-076>

TPG Telecom, 2022, About TPG | TPG website. Retrieved 7 June 2022, https://www.tpg.com.au/about-us
TPG Telecom, 2022, TPG Telecom | TPG Telecom, Tpgtelecom.com.au. Retrieved 6 June 2022, https://www.tpgtelecom.com.au/.

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