Woolworths - Internal Information, Position Analysis, Audit Strategy, and Fraud Triangle - Case Study Example

WOOLWORTHS Student name: Institutional affiliation: Date of submission: Executive summary In this study, there is the analysis of the Woolworths limited company. This is through its operations, the progress that it has made and their impact on the industry and the market in which it operates in. there is also an analysis of the techniques that it uses in the operations. An analysis is also given on the impact that it has made on the economy and the industry. An analysis of how the decisions that it makes affects the industry and the media is also given. Pointed out also is the risks that are present in the undertaking of the mandate of the company. This is through the analysis of the key areas of risk hat face the company. The existence of frauds is also analyzed and the motivation behind the frauds as given. WOOLWORTHS Woolworths is an Australian retail company. It has over the years climbed in its dominance to become the largest retail company in the whole of Australia. The growth that has been witnessed in the company has been in both the assets that it has and in the level of the profitability. The company also boasts of industry dominance in the retail industry with more than 43% industry control. The amounts and the levels of the assets which the company has at its disposal aids it in the creation of barrier to the dominance of other firms in the industry. This is because they would need many resources to outwit a company with the might and the prowess of Woolworths. The company also trades in the Australian stock exchange. The company, which mainly deals with the retail sale of groceries, magazines, DVDs and stationeries has become one of the dominating forces of the Australian retail market. Through this, it has continually improved and aligned its operations in a manner that allows for development and progress. This is therefore for the better of the company and the owners. The market in which Woolworths operates in is controlled by two major rivals. The main competitors in this case is the Coles limited which is owned by Wesfarmers. This makes the market that they operate 9 to become nearly a duopoly. This is because they both control close to 80% of the Australian economic market. Their dominance has helped them in the reduction of the levels and amounts of competition that is in the market and in the industry at large. It is through this that the two major companies in the retail industry are able to control the market and the industry prices and the performance. With this strengths, they are able to reduce the prices and adjust them in a manner that kills the competition that is present from other small players in the industry. It is through this that they continues striving while the small layers in the market keep on failing and struggling in their operations. The management to the company however believes that the business is yet to meet the goals that it has set to meet in terms of the returns and the profitability and also in the market and industry impact. Through this, there are goals that have been set that are aimed at seeing to it that future growth and progress is achieved. This will be for the better of the company and its operations. In the accounting for the company and others in this industry most notably Coles, there are issues that are pointed out and noted. The first is that they in most cases ignore the small petty cash book items. Through this the reporting of the company assets is not accurate as is required. Through this therefore, there is a tendency of understating the expenses that are incurred by the companies. This on the other had translates to the overstatement of the profits that are made by the company. The other areas that have been reported by the trends in the accounting and financial reporting the companies in the industries is that they also have a high tendency of overstating the incomes that thy make. This is a demerit in that it results to misleading of the users of the financial statements. In this case, the companies do this in a bid to attract more investors to the business and to attract more funding this can also be in order to get the trust of the financial institutions and to get funding and loans for their operations. This has become a major risk factor for the auditors and the accountants who undertake to investigate and analyze the performance of the company. Through this, the trend needs to be stopped in order to eliminate mislead and bias that it causes to the relevant users of the financial statements of the company. The company and its operations are governed by a set of laws and regulations. They include the foods acts which control the quality of the foods that are sold to the customers. They are also governed by accounting bodies which gives them a framework and basis for the conducting of their financial reporting. The government also controls the operations of the company. This is through legal factors as to such things as the levels of and types of competition in the firm. This is for the better of the operations of the company. The company also seeks to be socially responsible to the societies within which it operates. This has been reflected through the participation of the company in the affairs of the society and the matters that are of importance to the society. They include the ensuring of socially responsible policies and control of environmental matters that act to the advantage and the better of the societal good. They include the control of the environment and pollution levels I the environment. This operations are for the better of the community and through this, the companies in the industry are able to be socially responsible for their operations and their acts. This is therefore for the good of the community at large. Company internal information The company currently operates in more than 980 different locations. This has aided in the increase in the levels of incomes that it makes over time. Through this, the profitability levels also go up. As by the year 2015 financial reporting period, the company had made revenues amounting to A$42.132 billion. This is an indicator of the huge market that the company is operating in and the returns also that accrues from the operations. As by the same year, the company has a total of 111000 employees. This is a very huge number which also indicates the level of growth and the continued progress that has been made by the company over the years. The revenues of the company over the years have also been on the rise. This is due to the framework of operations that the company has put in place. The increase in the revenues has further on been translated to an increase in the levels of the profits that the company is making over the years. The level of the revenues is also high since the company deals with fast moving inventories. This works for the better of the operations of the company as huge sales eventually result to increase in the levels of the profitability. The company since it was founded back in 1924, has surpassed all the targets that had been set before it. Through this, it has amassed huge wealth and made great returns from the operations. This has been instrumental and has acted as a pivot in the success ladder. This is for the better of the performance of the company. The framework and strategic plan that it operates on is the leading reason behind the growth that t has witnessed over the years. They however believe that the best is yet to come. Huge gains and rewards await the company in the future. This will be for the better of the performance of the company in its future operations. Company position analysis The company has over the recent past been on a rising trend. This is mostly attributable to the increase in the revenues that it makes from its operations. Revenues increase on the other hand is attributed to the continued increase in the number of stores in which the company operates in. currently, it has close to 1000 stores that it operates. This is an indicator of the growth that the company has made in its operations. The performance has however despite increasing in the revenues, been affected by the competition that is posed by the leading competitor. This is Coles. The company which is a subsidiary of Wesfarmers has cut up the market share of the company. This has also resulted to an increase in the price competitions which has further reduced the returns expected by the company. The company main source of capital is through investments and sale of shares in the stock exchange. The company is also funded by loans from financial institutions and bans in the country. Therefore, it is funded by both debt and equity financing. The company is a dominant force in the market with almost half of the control of the market. With this, all the decisions that it makes affect the whole market. The market and the media are therefore very keen on the news around the company and its operations. This is because it has the ability to shake the economy of the whole country with its moves. The company in order to be on the upper side, tries if possible to use the prudence concept. This is where the expenditures are overstated and the incomes understated. This helps in the creation of a balance in the operations of the company. Due to its control over the market and the industry, its goals and standards act as the benchmark in the industry. This is in such things as the prices, discounts and other services of the company. This is also in the application of technology. Audit strategy In the operations of the business, there are several risk areas. They are mostly in the identification and the reporting of some incomes and expenditures of the company. In such large companies, there is a tendency by the staff, mostly in the accounting department to fail to record some transactions. This is mainly so because the high amounts of income make them so minimal to an extent that they appear to be immaterial. Another risk are is in the control of the human resources. With an employee count of more that 111000 people, there is a high possibility and likeliness of the existence of ghost workers. Misuse of the assets of the company is also a risk factor in that it is hard to account for each piece of the thousands of the assets. Through this therefore, the auditor and the forensic accountants are faced with the challenges that they should deal with effectively. Some of the low risk areas include the inventory management and recording. This is due to the existence of a strong set of internal control systems that see to it that the inventories of the company are maintained at a level that is clear and free from any issues or errors. In the financial statements of the company, the risk areas such as the assets are recorded at the book values. This is so as to know their exact worth at the time of the undertaking of the preparation of the financial statements. The assets are also listed each of them such as the motor vehicles, the inventory, the debtors and such. In this case, the transactions that mainly take place are purchases and sales of assets. Fraud triangle a. Pressure on the individual The motivation behind the committing of the frauds such as in the reporting of the financial statements of the company is the immateriality of the amounts as compared to the revenues and returns that are made by the company. The lack of documentation can be through the lack of issuing of sales receipts and such small items. This can also be through the lack of return of the assets of the company. b. Opportunity to commit fraud This is carried out through the lack of proper documentation as to the actual state the affairs r the transactions that took place. This is because they believe that they probability of discovery is very minimal if there is any possibility. c. Ability to rationalize the crime The justification that is given by the perpetrators of the frauds is that the amounts are so minimal to call for the investigation. They also seek to justify that h company since it makes so much revenues from its operations, it would not mind the loss of some small amounts which they can refer to as drops in the ocean. References Commonwealth Scientific and Industrial Research Organization (Australia), & Woolworths Ltd. (1997). Building billion dollar industries in Australia. Rozelle, N.S.W: Standard Publishing House. Knox, M., & Knox, M. (2015). Supermarket monsters: The price of Coles and Woolworths' dominance. Collingwood: Schwartz Publishing Pty, Limited. Mortley, R., Stevens, C., Liddle, D., Alberts, M., & Woolworths Ltd. (1986). Coinage of Australia. Rozelle, N.S.W: Standard Pub. House. Vaughan, J. C., & Roberts, K. (1986). Emblems of Australia. Rozelle, N.S.W: Standard Pub. House. Woolworths Ltd. (1999). Concise report to shareholders: Refresh. Sydney: Woolworths. Woolworths Ltd. (2000). Financials report to shareholders. Sydney: Woolworths. Woolworths Ltd. (2006). Woolworths in the community. Bondi Junction, N.S.W.: Focus Publishing. Woolworths Ltd., & Australian Heritage Commission. (1995). Australian national estate. Rozelle, N.S.W: Standard Pub. House. Read More