This is group assignment my part is question number 1 2 4 5 and 6
ACCT6006 Auditing 1T2017 Assignment Page 1 of 2 ASSIGNMENT DETAILS Subject Code and Title ACCT6006 Auditing Assessment Group assignment (max 2 students in a group) Learning Outcomes 1 to 6 Weighting 30% Total Marks 60 Additional Information When there is evidence of academic dishonesty, a student will face Misconduct Procedures. Please refer to Torrens policies and procedures in: http://www.torrens.edu.au/about/policies Instructions Answer all questions Estimated word limit 2,500 words The assignment requires you to apply the knowledge and skills that you have developed during your auditing studies to an authentic scenario involving the publically listed company, Dick Smith Electronics Ltd. that has recently gone into liquidation. In this assignment you will need to research the company through news bulletins, ASX data and other media releases. Be sure to cite any sources of information being very careful not to plagiarise your sources. The assignment should be presented as a report/essay. You should not answer the questions in bullet points but instead write the paper in a way that includes answers to the questions being asked. Marks will be given according to the marking guide below. The report must be written in your own words. Required 1. Provide a brief history of Dick Smith Electronics Ltd (no more than a page) and an explanation of what caused the collapse of the company.(10 marks) 2. The directors are being accused of breaching Australian Accounting Standards? Which standards are in question? Explain what was done (or allegedly done) by the directors. (10 marks) 3. What signs should the auditor have looked for to indicate there might be a going concern problem. (10 marks) 4. Provide a brief analysis of the 2014/15 Annual Report for any evidence that the company might not be a going concern. (10 marks) 5. Why do you think the auditors gave an unmodified audit opinion for the financial year ended 30 June 2015? (10 marks) http://www.torrens.edu.au/about/policies ACCT6006 Auditing 1T2017 Assignment Page 2 of 2 6. Based on your knowledge of auditors’ legal liability do you think the auditors of Dick Smith Electronics Ltd, Deloittes, have a case to answer for providing an unmodified audit opinion for the financial year ended 30 June 2015? Provide clear explanations as to why you have come to your conclusion (10 marks) Marks will be awarded for the following Quality of written communication Extent and quality of research and referencing Appropriate application of knowledge and skills to the problem Extent to which each question has been addressed Critical analysis 3. Signs that an auditor should looked for indicate there might be a going concern problems. A Dick Smith Electronics LTD can be a going concern when the company is able to pay debts as when they are due, and continue company operation without any liquidation or insolvency for at least the next financial year (12 months) from the end of the current reporting period. Auditors are required by Australian Auditing Standards to evaluate the possible issues that may affect the going concern issue of the company and the director’s assessment of the company’s ability to pay debt to continue business effectively and efficiently for at least period of 12 months from the date of previous audit report of the company (Going Concern issues in financial reporting: a guide for companies and, 2009). The auditors and company’s director should concern about the following indicators there might be a going concern problem: 1. Financial indicators: · A net liability or net current liability position · Negative operating cash flows · Inability to comply with the long term loans · Dividend arrears · Lack of sustainable operating profit. · Inability to pay creditors and withdrawals of financial creditors. 2. Operating indicators: · Loss of major suppliers and customers · Company’s inability to handle increased competition in the market. · Management’s intention to cease operations. · Loss of key management personnel 3. Other indicators: · Non-compliance with capital. · Legal continuing against the entity · Change in government policy and rules and regulations. 4. Brief analysis of the 2014/2015 Annual Report for any evidence that the company might not be a going concern. The annual report of the dick smith electronics company shows negative operating cash flows of amount (3940,000) by year ended 28 June 2015 while in year ended 2014 it was 52,177,000. Moreover, the company could not attain proceeds from issue of shares in 2015 whereas, it has proceed of $343,611,000 from issue of shares in 2014 (Annual General Meeting, 2015). The net current liability of the company increases to 70,500,000 in 2015 from zero amount in 2014 which is one of the financial indicator of going concern problem. Furthermore, there was a stock of inventory of amount $39,230,000 in the year ended 2015 (Annual General Meeting, 2015). In addition, the total liability amount was increased by $55,143,000 in the year end 2015 which showed that Dick Smith Electronics Ltd that could not pay to creditors and financial creditors. In the end, the company paid too much for inventory of $992,828,000 in 2015 and subsequent shortage of cash flow made the company insolvent (carrett, 2016). 5. The auditor provides an unmodified audit opinion for the financial report if the financial report shows the true and fair view. In this case, Deloittes gave an unmodified audit opinion for the financial year ended 30 June 2015 because he couldn’t find any material misstatement (Annual General Meeting, 2015). According to Deloittes opinion, a. the financial report of dick smith electronics is in accordance with the Corporation Act 2001 which includes, i. True and fair view of consolidated entity’s financial position as at 28 June 2015 and the performance of the company for the year ended on that date. ii. In accordance with Australian Accounting Standards and the Corporations Regulations 2001. b. The company’s financial statement should comply with international financial reporting standard that is disclosed in Note 2. In our opinion Deloittes gave an unmodified audit opinion because as per the annual report 2014/2015 auditor concludes material uncertainty exists and the going concern aspect of the company is appropriate.