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MA611 Auditing Assignment Sample

Unit Learning Outcomes Addressed:

a. Explain and apply the principles, practice and process of auditing to practical situations.

b. Interpret the legal and ethical requirements involved in an audit and apply them to diverse situations.

c. Compare and contrast the organisation’s and the auditor’s responsibilities for an audit.

d. Explain the importance of planning an audit and distinguish the steps involved.

e. Identify and critically evaluate the risks inherent in an audit.

Weight - 20%
Total Marks - 50 marks
Word limit - Not more than 1,000 words
Release Date - Week 3
Due Date - 28 th April, 2021 at 5 PM.

Submission Guidelines

1. All work must be submitted on Moodle by the due date (as above) along with a completed Assignment Cover Page.

2. The assignment must be in MS Word format, 1.5 spacing, 11-pt Calibri (Body) font and 2 cm margins on all four sides of your page with appropriate section headings.

3. Reference sources must be cited in the text of the Assessment Task, and listed appropriately at the end in a Reference List using APA 6 th edition for the School of Business.https://library.mit.edu.au/referencing/APA

 Assessment Task Description

In addition to the Submission Guidelines appearing on page 1, the assignment is to be completed individually. The submission into the specific assignment drop box in Moodle is to be made by each student individually.
The marking rubric below sets out the requirements:

Principally you will be marked on five components for assignment help

(1) Critically examine what happened at Western Desert Resources, including who held primary responsibility for the shambles. (10 marks)

(2) Who was the auditor, and explain whether they should have issued an unqualified report? (10 marks)

(3) Examine in detail the key legal issues. (10 marks)

(4) Discuss critically the key ethical issues. (10 marks)

(5) Format, Presentation Quality and Demonstration of Research (10 marks)

A key aspect in your choice of format/layout should be to ensure you impart your key messages effectively (i.e., complete the requirements) and efficiently (i.e., it should be succinct and take into account the word limit).
Make sure all pages are numbered, and the text fits within the margins of your pages. Make sure to include the relevant heading.

Required:

Critically examine the failures of Western Desert Resources Limited and the issues surrounding the failure, and the responsibilities of the Audit Firm in regard to the failure in terms of the above five components.

Solution

Introduction:

The aim of this study is to critically examine the failures of Western Desert Resources Limited and the issues surrounding the failure, and the responsibilities of the Audit Firm in regard to the failure. In order to perform this examination, the researcher has discussed the background of the case study including the primary stakeholder, who held primary responsibility, evaluating the key legal issue, ethical issue, and auditor’s role.

Situation analysis:

The Wagner’s is one of the biggest creditors that have collapsed the iron ore junior Western Desert Resources. The creditors of miner ore were close to $ 135 million, out of that almost $ 71 million was unsecured. The organization was also subject to damages worth $ 27 million which was claimed by the creditors (Muneer, Sayl & Kamal, 2021). The collapse was happened due to the Roper Bar venture which is in the Northern Territory that ran after the Macquarie Bank at the time they lost patience when the negotiates was carried out related to the restricting payments that were close to $ 80 million and there is further need of short term funds. Bruce Mathieson, the hotel billionaire who holds almost 21.5 % of the shares of Western Desert Resources, was caught up in a collapse and became high profile victim related to the iron ore price (Khalifa & Abdelall, 2019). The Western Desert Resources was collapsed and the amount of market capitalization was almost close to $ 285 million. As the Roper Bar venture suffers some issues due to heavy rain, there were some operations in Bing Bong port. There was a weak beginning and the financial risk was much higher which was very critical and there was schedule repayment which is from debt. Though there was some partial protection that was provided, the iron ore spot price worse the situation which they were getting from hedging arrangements.

Auditors and their role:

The auditor of Western Desert Resources is Deloitte. As per the audit report, it was declared there was compliance with independence requirements as per Corporations Act 2001. The audit report of Western Desert Resources comprises the statement of financial position, statement of comprehensive income, statement of cash flow, statement of changes of equities, and there are notes provided for the accounting policies (Abdel, Metwalli & El Sayed, 2018). As per the report, there was a declaration of directors based upon a consolidated entity that comprises the organization. The directors were held fully responsible for the preparation and presentation of the financial report which is as per the Australian Accounting Standards and the Corporations Act 2001. As per the responsibility of auditors, the audit requirements were made as per audit engagements and can perform the audit as per reasonable assurance and it is assured the report which is prepared is fully free from the material misstatement (Abdelazeem, Fathy & Gobashy, 2021). At the time of the audit, it involves several procedures through which it can easily obtain the audit evidence related to the amount and disclosures that are in the financial report. The procedures are usually dependent upon the judgment of auditors that includes risk assessment related to a material misstatement in the financial report if there is any fraud or error. At the time of preparing a risk assessment, the auditor will help in making internal control which is quite relevant to the preparation of financial reports (Belal et al., 2021). At the time of the audit, it helps in the evaluation of accounting policies so there are no chances of an unqualified report.

Key Legal Issue:

The Western Desert Resources do put the administration in start-up problems. The share price related to iron ore was battered. As the prices of iron ore are dealt with a blow in Australia, the administration has to deal with the issues and they were unable to reach the bank over the debt. Western Desert Resources is one of the top four iron ore producers that have flooded the market with supplies that are lower in cost (Gad & Saafan, 2021). The producer of Northern territory faced issues through the Roper Bar mine, but there were warnings from analysts due to the smaller to medium size producers of Australia have seen the price slump which was faced recently. The prices of the US dollar were at $ 83.60 which was the lowest as per the statistics of five years. The miners in Australia have failed this impact as the Australian dollar was raised by 5 % in comparison to the US dollar at that time (Zaher et al., 2018). The output of iron ore from Australia and Brazil was dominated by the giants like BHP Billiton, Fortes cue Metals Group, and Rio Tinto that have raised more than 15 percent in the present year that has added close to 132 million tonnes. For Western Desert Resources, all the shares were suspended and the Macquarie Bank has rejected the proposal for the payment of AUS $ 81 million.

Key Ethical Issue:

Western Desert Resources was negotiating with creditors for some time and it can be seen that the Macquarie is not supporting from September 2, which forces the organization to a trading halt as per for advancing of the advancement. The projects which were carried out by Western Desert Resources were highly leveraged with the debt as the full facility of AUS $ 80 million was withdrawn by Macquarie and added a short-term loan of AUS $ 12 million and it was not disclosed to the trade creditors (Adham et al., 2018). Though there was an improvement in production level, some changes were there in shipping contractors. There was little chance in additional equity funding which is in the soft market and the debt provider was stepping up but the Macquarie Bank instead of providing funds, they kept it to the administration itself. The new mining operation which was planned was very uncertain and was an expensive process that was not possible to execute (Moghazy & Kaluarachchi, 2020). Additionally, there was the one secured creditor which is the bank, but it was ended as they were possibly trying to own first and then resale the whole thing and took the replacement cost, through which they thought of making profit through quick resale. The option which was provided was quite attractive rather than paying the interest.

Conclusion:

Thus to conclude, it can be said that the study rightly pointed out the reason behind failure of Western Desert Resources Limited. In addition, this study also rightly explained the role of auditors behind this failure.

Reference list

Abdelazeem, M., Fathy, M. S., & Gobashy, M. (2021). Magnetometric Identification of Sub-basins for Hydrocarbon Potentialities in Qattara Ridge, North Western Desert, Egypt. Pure and Applied Geophysics, 1-26. Available at: https://link.springer.com/article/10.1007/s00024-021-02678-2

Abdel-Fattah, M. I., Metwalli, F. I., & El Sayed, I. M. (2018). Static reservoir modeling of the Bahariya reservoirs for the oilfields development in South Umbarka area, Western Desert, Egypt. Journal of African Earth Sciences, 138, 1-13. Available at: https://www.sciencedirect.com/science/article/pii/S1464343X17304181

Adham, A., Sayl, K. N., Abed, R., Abdeladhim, M. A., Wesseling, J. G., Riksen, M., ... & Ritsema, C. J. (2018). A GIS-based approach for identifying potential sites for harvesting rainwater in the Western Desert of Iraq. International Soil and Water Conservation Research, 6(4), 297-304. Available at: https://www.sciencedirect.com/science/article/pii/S209563391830114X

Belal, A. B., Mohamed, E. S. S., Abdellatif, M. A., & AbdelRahman, M. A. (2021). Soil Conditions of Dakhla Oasis, Western Desert, Egypt. Sustainable Water Solutions in the Western Desert, Egypt: Dakhla Oasis, 123-144. Available at: https://books.google.com/books?hl=en&lr=&id=rzsiEAAAQBAJ&oi=fnd&pg=PA123&dq=western+desert+resources&ots=bSl31-_uYX&sig=RWdMuOdD65Dp4r5UAh0lQRKjMQQ

Gad, M. I., & Saafan, T. (2021). Future Visions for The Integrated Water Resources Management for Old Cultivated Areas of Siwa Oasis, Western Desert, Egypt. (Dept. C). MEJ. Mansoura Engineering Journal, 28(3), 102-120. Available at: https://journals.ekb.eg/article_141851.html

Khalifa, M. M., & Abdelall, M. I. (2019). Ecological desert settlement Egypt western desert. Alexandria Engineering Journal, 58(1), 291-301. Available at: https://www.sciencedirect.com/science/article/pii/S1110016819300031

Moghazy, N. H., & Kaluarachchi, J. J. (2020). Assessment of groundwater resources in Siwa Oasis, Western Desert, Egypt. Alexandria Engineering Journal, 59(1), 149-163. Available at: https://www.sciencedirect.com/science/article/pii/S1110016819301590

Muneer, A. S., Sayl, K. N., & Kamal, A. H. (2021). Modeling of spatially distributed infiltration in the Iraqi Western Desert. Applied Geomatics, 1-13. Available at: https://link.springer.com/article/10.1007/s12518-021-00363-6

Zaher, M. A., Saibi, H., Mansour, K., Khalil, A., & Soliman, M. (2018). Geothermal exploration using airborne gravity and magnetic data at Siwa Oasis, Western Desert, Egypt. Renewable and Sustainable Energy Reviews, 82, 3824-3832. Available at: https://www.sciencedirect.com/science/article/pii/S1364032117314582

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