Research Project for The reject shop
You are required to conduct and document a business risk analysis for an Australian public company (one ASX listed company you select) and then prepare a broad audit strategy for the company for inclusion in the audit report.
Assignment Objectives:
– practical experience in gaining an understanding of an auditee and the processes of conducting a detailed strategic risk analysis from an auditor perspective, and Fraud analysis from the view of a forensic accountant.
– enhance your report writing skills
– read background material on business risk assessment that you can find. Don’t limit yourself to the textbook. Use audit firm websites for example.
Consider the following matters and how they affect the financial statement assertions:
Circumstantial information:
a. key economic factors about company’s industry
b. stage of company’s life cycle
c. business success factors
d. notable accounting issues for this industry
e. legal or regulatory matters of concern
f. social matters
Internal information:
g. its primary products
h. company size (sales, assets, employees)
i. locations / segments
j. related parties / associates
k. corporate governance issues
Analyse the company’s position:
l. financial strength
m. performance trends
n. sources of capital
o. market / media responses to company news
p. quality of earnings
q. compare company to rest of industry
r. use industry benchmarks, ratio analysis
Outline your broad audit strategy, and forensic investigation:
s. identify high-risk areas of the business
t. identify low risk areas for the business
u. explain how these risk areas are reflected in the financial statements
v. identify significant types of transactions and transaction cycles
w. Will it be appropriate to reduce assessed control risk?
x. Use the Fraud Triangle and Fraud Scale to critically analyse your listed company?
The above list does not provide an appropriate structure for your report and is not intended to be exhaustive. It is merely a list of some things to consider and provides a default minimum task list.
How much weight you place on any matter is an exercise in your judgement and you are expected to use your initiative in developing your own assessment.
Grading Criteria (20%)
– Company description (4%)
Originality (non-annual report material)
Relevant matters
– Analysis (10%)
Understanding of Business
Understanding of Industry
Analytical Review/Fraud Analysis
Industry Comparisons
Attention to detail
Depth/quality of interpretation
– Conclusions and audit strategy (4%)
Supported by the analysis
Usefulness for audit planning
Identifies important audit matters
– Presentation (2%)
Executive summary
Physical layout
Ordering of material
Maximum Length: 10 double-spaced typed A4 pages

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