Auditing and Accounting Information Assignment Help

Auditing and Accounting Information Assignment Help

Auditing and Accounting Information Assignment Help

Introduction

Organization is the complex set of activities in which several functions are performed by many employees and top management so that set goal could be accomplished in determined manner. In this report we will be discussing how an auditor uses financial statement to showcase its finding in orderly manner. In addition to this inherent risk and several ratio analysis would also be implement to find out actual working performance of the Bonto.

Auditing and Accounting Information Assignment HelpBody Context

(a) Preliminary analytical approach

Preliminary analytical approach is the best manner used by auditors to better understand the business and plan the critical path to analysis the Bonto’s performance and audit procedure. These are consisted with evaluation of financial and non-financial aspects (Uechi, et. Al., 2015)

(1) Horizontal analysis for 2015 and 2014. For asset’s items use the net assets as base figure and for items in the income statement use the net profit before tax as the base figure. Use the findings to suggest to him the audit risk areas bearing in mind the assertions

Horizontal approach is used by the auditors to identify or make comparison between factors having a time relation between each other. It is also known trend analysis to identify the Bonto’s performance in the significant time duration. Profession skepticism and internal control over the financial statement are to intents of the auditors to focus on the current regulatory requirement (Malin et. Al., 2011).

Particular

2012( Amount AUD $ '000)

2013 ( Amount AUD $ '000)

2014 ( Amount AUD $ '000)

2015 ( Amount AUD $ '000)

Revenue

112500

115875

108923

92584

NPAT

9455

6577

2740

232

Current Assets

42,102

48,116

55,130

65,662

Total Assets

84,574

87,877

92,363

100,539

Current  Liabilities

9276

10657

12256

14707

Total shareholders’ equity

50,666

57,243

59,983

60,215

Creditors

 

 

 

 

Receivables

21,171

24,347

27,999

33,598

Creditors

5,000

0

2,500

4,000

COGS

90,000

98,494

98,031

86,103

Quick Assets

22318

25364

28966

34265

Quick Ratio

0.530093582

0.527142738

0.525412661

0.52183912

Current Ratio

4.538809832

4.514966689

4.498204961

4.46467668

Net Profit Margin ratio

0.084044444

0.056759439

0.025155385

0.00250583

Average Account Receivable

33344.5

38346.5

44798

44183.5

Average creditors

139247

1250

4500

6500

Inventories

19,784

22,752

26,164

31,397

 

 

 

 

 

Creditors turnover ratio

0.142078465

18.2016

5.814222222

4.83030769

Receivable turnover Ratio

5.31387275

4.759313262

3.89024608

2.75564022

Average stock turnover of the company

1.25

1.176467602

1.111107711

1.07527032

Solvency Ratio

0.111795587

0.074843247

0.029665559

0.00230756

(2) Calculate 2 liquidity ratios, 2 activity ratios, 4 profitability ratios and 2 solvency ratios over the period 2011 to 2015.

Net profit after tax of the Bonto from 2012 to 2o15 is given respectively AUD $ 9,455, 6,577, 2,740, 232. This amount shows that Bonto’s earning has been gone down drastically and shows the negative impact on the Bonto brand image, credibility in the eyes of investors and loss of intellectual property at large. As per the finding made it is found that Bonto has showcased drastic downfall in its profit earning. In addition to this High amount of expenditure made by the Bonto could be falsified.

Liquidity ratio- This ratio could be used to describe the actual capacity to pay off its current debts in orderly manner. It is observed that Bonto’s liquidity ratio has not been changed throughout the time and Bonto has been maintaining its liquidity ratio around .52%. There could be two liquidity ratios one is current ration and second one is quick ratio.

Liquidity ratio

Current Ratio = Current Assets / Current Liabilities

Quick ratio = (current assets – inventories) / current liabilities

Cash and cash equivalent

Activity ratio- It is the ration which show case Bonto’s ability to covert its different account within its balance sheet. There are following activity ratios such as

Activity ratio

Average stock turnover ratio = Total sales/account receivable

Average collection period= 365/ account receivable turnover

Inventory turnover rati0= total sales/inventory cost

There is seen that Bonto’s activity ratio has not been very much fluctuating throughout the time.

Profitability ratio- This ratio shows that Bonito Ltd Financial and non-financial capacity to earn more profit during the business life cycle.  This ratio could be described with the help of profit margin ratio, assets turnover ratio and further more.

Profitability ratio

Net profit margin of the Bonto was .08 in 2012 which has reduced very drastically to 0.002 in the current year. This results Provides that Bonto has lost its profit earning capacity and making too much of investment in their operating assets to make organization more sustainable in the new future term.

Solvency ratio – This ratio depicts the Bonto capability to survive in this tough competition. There is finding that Bonto was having a very good amount of equilibrium in its equity and debts structure but in 2015 there is seen downfall in the solvency ratio to .002 from .11 in 2012.

Solvency ratio

(b) List four area of high inherent risk based on finding

An auditor must determine the risk while working with clients and inherent risk arises when client have no adequate level of internal control system in preparing financial statement. There are four areas in which I have seen inherent risk exist (Bujaki  & Durocher, 2012)

Management area-   In this area it is found that Bonto due to the lack of management staffs lost its adequate working structure which results into several inherent risks.

Preparation of financial statement area- Preparing financial statement is one of the critical tasks and due to inefficiency of account and internal control Bonto Ltd has to face various inherent risks.

Accounting area – There are following causes that results into high inherent risk in the Bonto working system

Application of different accounting system
Wrong justification with rules and regulation applicable on the Bonto
Inefficiency of accountant
Technical errors and use of absolute software accounting system (Bujaki  & Durocher, 2012).

There are various problems which are faced by the companies in preparation of financial statement but inherent risk in the process system is one of the common factors. If companies want to mitigate this problems then extra efforts and due diligence from all the staff members and employee are need to be taken.

Conclusion

Now I would like to conclude my report  by saying that  the entire ratio has been computed by using financial performance of the company and various graph and charts has been used to evaluate the Bonto’s performance throughout the time.

References

Bujaki, M. & Durocher, S. 2012, "Industry Identification through Ratio Analysis”, Accounting Perspectives, vol. 11, no. 4, pp. 315-322.

Kural, M.A., Fuglsang-Frederiksen, A., Johnsen, B. & Tankisi, H. 2016, "Quantitative MUP and peak ratio analysis in diagnosis of myopathy", Clinical Neurophysiology, vol. 127, no. 3, pp. e35.

Malin SONG Jie WU Yumei WANG 2011, "AN EXTENDED AGGREGATED RATIO ANALYSIS IN DEA",vol. 20, no. 2, pp. 249-256

Uechi, L., Akutsu, T., Stanley, H.E., Marcus, A.J. & Kenett, D.Y. 2015, "Sector dominance ratio analysis of financial markets", Physica A: Statistical Mechanics and its Applications,vol. 421, pp. 488-509.