Auditing and Assurance Service - Essay Example

 AUDITING AND ASSURANCE SERVICE: DAVID JONES CASE STUDY Question 1: Business Risks Several risk factors should be taken into consideration in auditing the business risks of David Jones. According to Ali (2007), auditors usually examine business with the primary goal of identifying the operational and the financial risks that business is faced with. The auditors consider eight major business risk factors in their risk engagement with David Jones. They include risk of inventory, risk of price discrimination, strategic risks, financial risks, compliance risk, operational risk, and risk of changes in business environment. 1. Risk of Price Discrimination David Jones deals in luxury products, which it sells across various countries that are in different geographical locations. The fact that David Jones sells its products across various countries means that it can apply price discrimination effectively. Price discrimination is possible in the company because the markets in various locations are independent. Britton and Jorissen (2007) assert that price discrimination occurs when the same products are sold at different prices in various markets. For instance, an IPhone can be costing $2000 in the USA yet the same exact IPhone costs $1800 in Australia. However, the concept of price discrimination presents a potential risk of loss of sales. This occurs in the sense that customers are knowledgeable and they might identify this difference in prices and seek alternative means such as purchasing the products online. 2. Compliance Risk David Jones operates in a retail industry, which has its own regulations and practices. Adhering to all the regulations can sometimes be a daunting task and as a result, the company may result to ignore some regulations (Higgins, 2004). This scenario presents the possibility of compliance risk in which the company can be closed down by relevant authorities for failure to comply with set standards. 3. Strategic Risk David Jones operates in a retail industry, which is very dynamic. Changes in tastes and preferences for various products for the company can plunge the company into strategic risk, which might results to loss of sales. The strategic risk in David Jones also occurs when other rival firms merge and increase their business performance, which may edge David Jones out of the market. 4. Financial Risk Financial risk is yet another potential business risk facing David Jones. The company has two main sources of finance, which is equity and debt capital. Monye (2006) claims that if the company decides to finance its operations from debts the going concern is threatened because it might not be in a position to honor its financial obligations. On the other hand, if it chooses to use more of equity then the control of the business will be diluted. 5. Operations Risks David Jones faces the risk associated with administrative and operational procedures in the industry. For instance, the company risks being edged out of the market if they do not embrace the digital market. 6. Risk of Changes in Business Environment Several changes take place in the business environment and it is important that David Jones Company build the capacity to adapt to these changes in the industry (Britton & Jorissen, 2007). For instance, the company risks being driven out of the market if it fails to expand its foothold beyond Europe and America. 7. Inventory Risk David Jones deals majorly in technology products such as tablets, television, phones, and phones. Such products become obsolete very fast as new and advanced products are unveiled in the market. This scenario results to undervaluing of such products, which can in turn result to loss. 8. Natural Disaster Natural disaster is inevitable in business and David Jones is no exception (Ali, 2007). It is important that measures are put in place to ensure that the company has in place disaster preparedness mechanisms to ensure that such disasters do not cripple the operations of the business. Such disasters include fire, floods, and lightening. Reflection Report Introduction I was the chairperson of the group; my role was to coordinate the team so that we produce a comprehensive report regarding the case study. Our team was comprised of six members and I was unanimously chosen to lead the group because they had faith in my leadership ability. Our team produced excellent results, which can be attributed to the fact that all the members were cooperative and fully participated in the affairs of the groups. Thoughts on the performance of the group case study assignment In general, the performance of our group is best described as outstanding. The success of my group was exhibited from the fact that were able to compile our report in a timely manner yet produce excellent results unlike many groups which failed to level to the expectations. Our team worked as a group, each member of the group was given the free hand to participate in the group. All the views of the group members were taken into consideration to arrive at the right response to the assignment questions. The group dynamics played in our favor in that each member of the group was committed and made individual contribution for the success of the group (Ali, 2007). I learned several valuable lessons during my experience with the team; for instance, it is important to be punctual so that deadlines are met with excellent results. The other factor that I have learnt is that it is important that people remain objective during group discussions. People should desist from focusing on irrelevant issues such as one religion, ethnicity, and race. The guiding principle that ought to dictate the discussions in the group is the subject under discussion. The other invaluable lesson that I learnt is that teamwork makes people to learn to coexist. Previously I used to be more laid back nevertheless; my experience with the group left me more outgoing and aggressive person. However, I vow to improve my listening skills in the future. Comment and Recommendations I am proud of my group’s performance; in fact, my group was ranked the best out of the 10 groups which were undertaking the assignment. However, I would iron out in future some grey areas. For instance, in future I will ensure that the members of the group members are notified in good time details of the meeting (Higgins, 2004). Such a move will ensure that there is punctuality and that the deadlines are met within the stipulated time. The other issue I will iron out in future is the issue of representation; my team had more male than female. Overall Reflections My experience with the team made me realize that I have good interpersonal relationship; this came into light because I developed a good rapport with the members of the group. More importantly, I learnt that setting realistic goals is key to success in the group. References Ali K., 2007. Commercial Business Organization. New York: Routledge-Cavendish. Britton A. & Jorissen A., 2007. International Financial Reporting and Analysis. Boston, MA: Cengage Learning EMEA. Higgins R., 2004. Analysis for Financial Management. New York: McGraw-Hill Irwin. Monye, S., 2006. The International Business Blueprint. New Jersesy: Wiley Blackwell. Read More