Queensland Audit - Research Proposal Example

QUEENSLAND AUDIT REPORT Affiliation Executive summary This report is an audit carried out on Queensland Fun In The Sun Pty Ltdand will cover the activities and potential of the business. This report aims to explain on the risk of preliminary materiality, and the factors that will impact the risk of materiality misstatement. The report will also explain on the information audited and what conclusion or recommendations could be made. The report indicates that there is a risk of materiality misstatement as there is the presence of inherent risk which includes the presence of related parties and the need for judgment. There will also be presence of acceptable risk in the form of shortage of funds, risky industry, competency of management and decline in net income. There has also being an investigation carried out by the Royal Commission that indicated that there will be a big damage brought to the coral reefs by the global warming. This will occur in the coming 10 years hence the company has to set up plans on the matter. Queensland Audit Report Introduction This report is an audit of Queensland Fun In The Sun Pty Ltd which was prepared after a request by leatherwood co-owner and the chairman of the board of directors Mr. Robert Leatherwood. This request was made after a private equity investor had made an acquiring of 25% of the company’s shares. This is considering the fact that Queensland Fun In The Sun Pty Ltd is not a listed company hence an audit has never been required. External audit is always the best way to audit as there is no vested interest (Porter & Simon 2014). In preparation of an audit, there is always the chance of the presence of materiality either through carelessness or intentionally. In cases of intentionally, that qualifies for fraud hence there may be prosecution (AUASB). Therefore it is the duty of the auditors to prove how authentic is the information being showed. Aims The aim of this report is to audit the performance and accounting of Queensland Fun In The Sun Pty Ltd. The audit is to: Carry out an audit of Queensland Fun In The Sun Pty Ltd Examine the types of risk that would be considered when determining preliminary materiality for the 2015 audit of Queensland Fun In The Sun Pty Ltd FITS Identifying the factors that would impact on the risk of material misstatement and explaining the effect of those factors on planning materiality and risk. Methodology This audit will be carried out through several different processes. There will be the study of all the reports and receipts to see how they add up and make sure there are no discrepancies. There will also be interviews carried out on the employees which will not only help clarify the findings that have being made in the accounting books but will also provide extra information on other company activities. To ensure that the findings from the companies are true there will also be an interview carried on some of the customers to see if the quality of the service offered is at the level revealed in the inside report (PWC, 2015). Types of risks in determining Preliminary materiality As per AUS materiality is defined as, ‘that information which if omitted, misstated Or not disclosed separately has the potential to adversely affect decisions about the allocation of scarce resources made by the users of the financial report” (Martinov & Roebuck, 2014). As per the Auditing and Assurance Standards Board released this year when carrying out the audit, there will presence of several risk of material misstatement. For this reason the risk are classified in different categories depending on the cause of the risk. The types of risk will include: There is presence of inherent risk. This might be caused by the presence of related parties whereby Leatherwood owns Queensland Fun In The Sun Pty Ltd hence their transactions will present a risk. Also where a judgment is needed may present another preliminary materiality risk. There may be acceptable risk in the form of shortage of funds, risky industry, competency of management, and declining net income. Factors that would impact on the risk of material misstatement In the preparation of an audit report, there is always presence of the risk of material misstatement; this is especially for first time audits. There are several factors that will impact the presence of the risk of material misstatement, these are; An incorrect estimation. This will impact the risk of materiality as it was not fraud but a misjudgment made by the company. Incorrect information. This will also affect the risk of material misstatement as the materiality originated from a wrong data that was used in calculations. Application of not generally accepted accounting principles. This will increase the materiality. Application of policies by the company that the auditor does not see appropriate. This will be judged to the digression of the auditor as he is to determine what policies seem appropriate and which are not. Omission of a financial statement. This might be deliberate which qualifies as fraud or accidently which will be excused. Results Offered services Queensland Fun In The Sun Pty Ltd is a family owned company that offers several services to the customers. The services include: Holiday and leisure activities A five star resort Backpackers accommodation A family hotel Employees Queensland Fun In The Sun Pty Ltd currently employs full time staffs, part time staffs and casual staffs. The full time staffs consist of 35 staffs that are spread throughout administration, accounting, catering, cleaning, and hotel/restaurant duties. The accounts office is headed by the CFO Eunice Leatherwood. Below the CFO there is Mary Lamp who is the accounts senior manager. The accounts senior manager is aided by two accounts staff in the name of George and Katie. The company relies allot on delegation and hence Mary Lamb delegates most work to her staff which is also a transition for she plans to retire in three years hence there will be a competent replacement. Employee duties The CFO is the chief financial officer and the duties comprises of financial planning, record keeping and also reporting the financial situation of the company to the higher management. The senior accounts manager is tasked with managing sales and also relationship with the accounts customers. The senior accounts customer is only assigned to particular customers and mostly only deal with the customers assigned to them all throughout. Accounts staff is divided into two different categories of the full time staff and part time staff. The full time staff, Katie, is responsible with opening mail, processing payments and receipts, banking funds received and performing reconciliation. The part time employee, George, is responsible with posting journals and performing payroll function. However they are free to assist each other whenever in a position. Style of management Queensland Fun In The Sun Pty Ltd runs in a very flexible system which gives the employee some more room for working. This enables employees not to feel so controlled hence enjoy their work (Miller, 2006). This has done well for it has led to most accounts officers not requesting for the usual annual leave and sick leave are as rare as possible. This has being indicated to be basically because the workers enjoy their work so much. Major issues During an investigation carried out recently by The Royal Commission on the Great Barrier Reef, it has being indicated that the global warming will have a significant effect on the coral reefs. It is predicted that there will be a significant damage on the coral reefs and a very devastating tropical storms over the next 10 years. Considering that coral reef is a big part of their business, it calls for a big concern over these investigations. There should be a set of plans put in place to show what actions will be taken in the event of the damage of the coral reefs. Conclusions Queensland Fun In The Sun Pty Ltd can be seen to have a very healthy and working system of operations which has seen the employees provide the optimum services. The system of management is workable hence should be promoted and maintained. As for the delegation system, it has also worked well as it enables the company to continue smoothly when an employee retires as there is a fit replacement. However, the future of coral reefs seem to be darker hence Queensland Fun In The Sun Pty Ltd must ensure to invest more on knowing and devising what policies will be put in place to deal with that problem. This will enable the company be ready when the problem present itself. The company will also be exposed to preliminary materiality as they have not carried out previous auditing and the company operates on trust rather than on facts. Recommendations Queensland Fun In The Sun Pty Ltd runs the possibility of a preliminary materiality being detected. This may majorly be because they do not carry out auditing. For this reason the company should adopt a policy of doing auditing more frequently which will remove any risks of material misstatement. The internal control should be stricter with internal auditing to be carried on a regular basis and not only rely on trust (Cascarino 2013). With internal control, the chances of risk of material misstatement will be reduced to a minimal. References Auditing and Assurance Standards Board (AUASB) - Home. (n.d.). Retrieved May 4, 2015, from http://www.auasb.gov.au/admin/file/content102/c3/Jun11_Compiled_ASQC_1.pdf Miller c. Brian. 2006. Keeping employees accountable for results. Chicago: AMACOM Div American Mgmt Assn Cascarino, R. 2013. Corporate fraud and internal control a framework for prevention. Hoboken, N.J.: John Wiley & Sons. Martinov, N., & Roebuck, P. (n.d.) 2014. The Assessment and Integration of Materiality and Inherent Risk: An Analysis of Major Firms Audit Practices. International Journal of Auditing, 103-126. Porter, B., & Simon, J. (n.d.) 2014. Principles of external auditing (Fourth edition.). N.J.: John Wiley & Sons PWC, Understanding a financial statement audit - Global. (n.d.). Retrieved May 4, 2015, from http://www.pwc.com/en_GX/gx/audit-services/publications/assets/pwc-understanding-financial-statement-audit.pdf Read More