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Auditing Assignment Examining Annual Report of Woolworth’s


Task: For this auditing assignment, choose an ASX listed firm. You are responsible for auditing the intangible assets of the firm for the year ending June 2019. Your must address the following issues.

1. To demonstrate your understanding of the firm, provide a detailed description of how it conducts its operations. Specific attention should be paid to the firm’s accounting policies on the recognition, measurement and disclosure of its intangible assets. This must include a description of the firm’s products and services, business processes, competitive environment, strategies, management and governance. The information presented should be reflective of your in-depth understanding of how the firm operates, not merely a summary of information from the annual report.

2. List and explain three audit assertions that are most related to the intangible assets. Provide three examples of audit evidence you will examine to support each of the three audit assertions. You must use ASA 500 to substantiate your choices of audit evidence.


The Woolsworth group selected in the present context of auditing assignment has emerged as one of the leading business organization in the Australian retail industry. It caters to serve more than 28 million consumers across the nation allowing them to experience top notch brands and products. Its portfolio consists of three major businesses including Australian food, New Zealand Food and portfolio as well as Endeavour Group Limited. It also stretches out to benefit its customers through its wide variety of insurance products and other financial services (Alexander, 2016). Countdown is the brand run under the New Zealand Food group that manages to serve a total of 250 lakhs of customer each week. In this assignment an analysis of the financial statement of the company for FY19 and the relevant audit report for that period has been done.

The governance of the Woolsworth group includes significant role of the board of directors in paying special focus to aspects that ate outside their control, establish the people performance committee and Significant changes in the asset valuation of the business. There are certain policies that have been formulated to ensure efficient standards of confidentiality and integrity of official data is maintained (Bailey, et al., 2017). It includes hedging policy where senior executive directors of the company are not allowed to enter in any derivative transactions, malice policy that enables the board of directors to determine forfeiture of unpaid or unlisted LTE, FDI awards if misappropriate action is charged against any of the senior executives. There exists a minimum shareholding pattern which allows a maximum of 200 percent of the total TFR as well as a 100 percent of TFR to CEO and other executives respectively. Furthermore, only those shares shall be provided to the senior executives as the equal the value of dividends of the performance period and the time of vesting (Barnes, 2015).

Managing operations
As the pandemic hit the world hard and how, Woolsworth group of companies are to be impacted both materially and financially by the disease. Despite having huge turnover across the nation, depending make severely impacted its earnings before interest and taxes in the second half of the year. With the passage of time, the management Inc needful activities within its operations such as implanting automatic hand sanitizer at several workstations and departments, implementing the use of PPE kits and facilitating the use of face mask at the workplace to ensure public safety in the best possible and safest manner (Bizfluent, 2017). Staff was given additional training to adhere to safety standards such as temperature check trainings, health screening, use of disposable gloves and several other measures. Hand washing at regular intervals was mandatory to maintain Hygiene practices and ensuring social distancing the major criteria across its staff members. Several passengers were made contact list to ensure protection of both the internal staff and its customers (Bogle, 2018).

Strategic objectives
This year the company focused on six pillars as the strategic plan to create value for the organization overall. It included the following-
1. Recognising improved and accelerated efforts towards better and early achievement of goals
2. Ensuring recognition and awards been uploaded through the launch of everyday rewards app. This application was downloaded by millions of consumers to enjoy personalised rewards and to track their orders as well

3. During the financial year, the management has decided invoice it’s in-store experience because of changes in consumer preferences and shopping habits. Hence, social distancing, hand sanitizer and packaged foods were the most in demand

4. The management also sought to support its independent producers during the year by reducing its payment terms to 2 weeks.

5. The management decided to unlock business value for long-term shareholders from its portfolio after assessing significant growth

6. Creating a scene for shopping experience for its consumers by adding improvements to end procedures, installing sensors and implementing CCTV monitors for better team training and financial assistance(Defond & Lennox, 2017)

Managing competition
The retail business environment in Australia is intensely competitive and draws its major from both current and potential competitors within the industry. As every coin has two sides, this year’scompetition also gives growth opportunities as well as in adequate financial conditions for the business with me deeply impacts its business performance and the overall market share. Understanding this situation, the management has undertaken several meditating activities to deal with the same. The internal management as well as the board of directors review their approved strategies on a regular basis and obtain feedback on the same to monitor and provide adequate strategic direction for the progress of the business. Moreover, the executive committee is also engaged in monitoring Existing market trends, sales propositions, its promotional strategies, prime consumer section, supply a metrics and the overall competitive landscape. They also provide incentives for the staff and the team members to ensure effective and implementation of their business strategy

Description about its intangible assets
Goodwill, brand value, software and licenses are included in the list of intangible assets of the organization. Goodwill exists as a result of acquisition of a business by the Woolworth group at a price exceeding its fair value of Total net assets. Software assets include several programs as well as operating systems as used by the management of the group. Brand value and names are a resulting several supermarkets in New Zealand thereby helping in identification as well as differentiation of business network of Woolsworth group from others (Hepp, 2018).

The company has adopted the following accounting policies for its group of intangible assets
1. Goodwill of the company amounts to $ 4196 million in the year ending 2020. It is measured at historical cost after deducting all its cumulative impairment losses over the years.

2. Other intangible belongings to the business organisation are measured at historical price after deducting all impairment losses and amortisation costs. If it is acquired as a result of business combination, then cost shall be replaced by the fair value of the asset existing at the time of acquisition. Depending on the lives of the intangibles, depreciation is calculated accordingly. For instance, assets having finite period of life span is to be calculated at straight line method of depreciation (Webster, 2017).

Below given is the data depicting the useful life of the videos in tangible assets possessed by the group-?
a. Brand names and giving licences have in definite useful lives
b. The useful life of Victorian gaming entitlement is of about 10 years c. The useful life of the software and forced by the group ranges from 3
to 5 years for non-core systems versus 5 to 10 years for core software system
d. Other intangibles have an in definite useful life up to 20 years(Yadao, 2018)
The above assessment useful life is completely the critical judgment of the internal management of the organization. Brand name is considered to have an in definite useful life solely based on its brand image, accelerated profitability forecasts and ongoing internal as well as external support for the organization. Store formats, several product offerings and network belongings are included as complimentary assets within the section. Other intangible assets like liquor and gaming licenses is considered to have an infinite useful life because the management is of the opinion that such licenses will be renewed as per the existing regulatory and legal requirements

Audit assertions
Audit assertions can be defined as claims made by the internal management of the organization about the correctness and completeness of the financial information contained in its financial statements. These are further tested upon by the auditors and several practicing CPAs to check its authenticity overall. The below given is a list of certain audit assertions that are usually considered by the auditors as evidence to support its opinion about a particular asset, event or a transaction.

These are as follows-
1. Existence-this audit is a Wishing verifies that the financial
statements of the organisation contain a particular asset or liability, what did that particular transaction or an event. The role of the auditor here is to substantiate its existence by verifying several accounts and balances. He can call for verification of cash books and bank statements to cross check amounts paid for such purchase. He may also sit with the internal management team for discussion on the minutes laid down about the method of charging amortisation expenses during its life and carry on further with recalculations if he deems appropriate (Yeates & Keoghan, 2019).

2. Occurrence-this is another assertion that is used for determining the genuineness of a particular transaction recorded in the books and statements. This includes verifying and indicating several books and accounts to justify its existence

3. Accuracy - accuracy refers to that audit assertion whereby an auditor is required to check the correctness of the amount recorded in the financial statements. This is usually done by cross verifying several accounts and memos for a particular transaction or in event.

4. Completeness-this assertion enables the auditor in verifying that the transaction has been examined in complete manner and are recorded in the relevant period concerning the matching concept (Liu, et al., 2019).

5. Valuation- This is the most important assertion whereby an auditor engages in determination of financial statements to carefully analyse whether the assets possessed by the business organisation have been valued at proper figures based on relevant accounting policies and estimates for the same

After considering the above analysis and financial assertions about the business organization in question, the three most important audit assertions that can be used most appropriately for the intangible assets to just by the business organization always follows-

1. Existence-It is important for the auditor to understand the genuineness of something I was reported in the financial statements of the business by the internal management of the organisation. The auditor is required to confirm to the genuineness of its inclusion in such financial statements.

2. Completeness-The Value of intangible assets as reported by the entity should be complete and thorough in all respects. The verification process undertaken by the auditor should produce an outcome that is complete and accurate in all aspects and hence should not be vague

3. Valuation-Valuation as explained above refers to the actual economic value produced by the intangible asset in particular. Hence, the audit procedures should focus on analysing several accounting policies and estimates adopted by the management to comply with the IFRS and GAAP requirements

In the given case, Woolsworth group of companies seem to possess intangibles that have been evolved over the years or result from a business combination. Therefore, testing on the above three parameters shall hold relevance and reliability for all its intangible assets to the auditor. The accounting policies and estimates as produced by the management to the auditor shall further help him investigate into its conformity with International accounting as well as auditing standards

ASA 500, Audit Evidence discusses about the relevance and appropriateness of audit evidences to support an account balance, transaction or an event. It allows the auditor to undertake processes such as inspection, observation, recalculation, analytical procedures, enquiry and external confirmation to obtain enough audit evidences for the timely and efficient completion of audit procedures. Following are the audit procedures that an auditor can undertake to gather enough and appropriate audit evidences to achieve the following audit assertions respectively. These ares-

1. Existence- Intangible Assets are created either out of business mergers and acquisitions such as goodwill and patents or due to contractual liabilities like licenses and system software. The auditor should ask for supporting documentation including all legal agreements and fees to confirm the existence of such intangible assets as owned by the organisation. This should further be cross validated along with other accounting information. Secondly, the auditor can verify from external parties engaged with such emergence of intangible assets to gather information on its existence. Lastly, the audit engagement team could also gain adequate evidence on through reperformance of its audit procedures about its existence

2. Completeness - here, the auditor can trace back all the documentations received and gather during the audit procedure to other details records to evaluate its completeness. This is done usually to get assurance about the intangible assets showing up on the balance sheet are not missing. This can also be achieved if the auditor in particular gathers evidences of last year’s data and check with current year transactions to estimate its useful lives. Also, the auditor can gain evidences about the purchase requisitions to gain full estimate of the intangible assets. He may check cash memos or bank cheque to judge the authenticity of the cost price. In case any intangible asset ire charged at fair value, it is the foremost duty of the auditor to check the reason and logical estimation behind the same.

3. Valuation- valuing intangibles of any business organisation is extremely crucial. Since these are born out of contractual or legal obligations including business combinations, its valuation is usually done either at cost value or fair value in the absence of any acquisition cost. For the same, the auditor can ask for documentations from the internet. It can also go through several documents and accounting books to understand the reasoning of the management’s judgement towards deciding the useful life of the intangible assets. This would help the auditor gain reasonable assurance about the calculation of amortisation expenses to be charged against such assets. This may also help the auditor gain evidences about the accuracy of the calculation of depreciation of such assets (Gassen & Schwedler, 2010).

Conclusion and recommendations
From the above analysis, it is quite clear that Woolsworth group of companies have been quite efficient in presenting the financial statements in an effective manner. The auditors have expressed a qualified opinion on the financial statements as presented and prepared by the management and relates to its completeness and adherence with the requirements of Corporations Regulations 2001 and Accounting Standards. However, there are certain aspects which need to be investigated apart from receiving such opinion. Intangible assets hold a significant portion of the total noncurrent assets of the organization (Garon, 2018). These need to be checked upon carefully before any amortization charges are deducted. Every accounting detail should be clearly mentioned to understand its concept, estimates and existence. Hence, it is required that the internal management discloses such relevant information in their notes to address their stakeholders requirements overall. Although their presentation and preparation are based on correct accounting policies and estimates, its conformity with accounting requirements should remain intact as well in the following times.

Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431.

Bailey, C., Collins, D. & Abbott, L., 2017. The Impact of Enterprise Risk Management on the Audit Process: Evidence from Audit Fees and Audit Delay. Auditing: A Journal of Practice & Theory, 37(3), pp. 25-46.

Barnes, J. L., 2015. How to Tell If Standard Costs are Really Standard. Journal of Management Accounting Research, 25(3), pp. 130-143.

Bizfluent, 2017. Advantages & Disadvantages of Internal Control. [Online]

Available at: [Accessed 07 december 2017].

Bogle, J. C., 2018. The Modern Corporation and the Public Interest.. Financial Analysts Journal, 74(3), pp. 1-10. Defond, M. & Lennox, C., 2017. Do PCAOB Inspections Improve the Quality of Internal Control Audits?. Journal of Accounting Research, 55(3), pp. 591-627.

Garon, J., 2018. Ownership of University Intellectual Property. Cardozo Arts & Ent. LJ, 36(1), p. 635.

Gassen, J. & Schwedler, K., 2010. The decision usefulness of financial accounting measurement concepts: evidence from an online survey of profesional investors and their advisors.. European Accounting Review, 19(3), pp. 495-509.

Hepp, J., 2018. ASC 606: Challenges in understanding and applying revenue recognition. Journal of Accounting Education, 42(1), pp. 49-51.

Liu, J., Zhu, Y., Serapio, M. & Cavusgil, S. T., 2019. The new generation of millennial entrepreneurs: A review and call for research. International Business Review., pp. 55-100.

Webster, T., 2017. Successful Ethical Decision-Making Practices from the Professional Accountants' Perspective. ProQuest Dissertations Publishing, 3(1), pp. 142-156.

Yadao, J., 2018. Forensic accountants and big data.

Yeates, C. & Keoghan, S., 2019. Big banks and accounting firms defend auditors' independence. Banking and Finance, 3 August, pp. 2-8.

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