AUDITING
WORD COUNT: 2500
REFERENCE: 15-20
REFERENCE STYLE: HARVARD
Context
This assessment requires to examine real-world case studies to evaluate reporting standards and determine whether appropriate audit opinion has been expressed under different circumstances and decide the appropriate treatment for subsequent events. This assessment requires student to download the last annual reports of two ASX delisted companies’ annual report (Billabong International Limited and Fantastic Holdings Limited) of year 2018 and 2019. Both above-mentioned companies have been signed off by their external auditors without qualification of the pending business status (delisted). There are differences in the amount of information published in the auditor’s report since BBG was audited by one of the Big Four accounting firm while FAN was audited by a non-Big Four accounting firm.
Structure
Each student is to investigate the following ASX listed entities and answer the questions in the requirements following the table below, Company name ASX Ticker Fantastic Holdings Limited FAN (until 2019) Billabong International Limited BBG (until 2019)
Requirement:
The main objective is to evaluate whether the auditor’s report fully complies with ASA 700s. Your discussion should cover the following points:
1. Appraise the information contents of the independent auditor’s report for BBG and FAN. Your discussions should refer to ASA 700s on compliances and usefulness of audit reports. (10 marks)
2. Evaluate if there are undisclosed subsequent events of the entities that may affect the estimates inherent in the financial report. (10 marks)
3. In your opinion, propose substantive testing of an account in BBG and FAN respectively that could enhance the sufficiency and appropriateness of audit evidence. The reference to a specific account in the company should be based on detrimental facts of the business internal or external environment that led to delisting from ASX. (10 marks) 4. Propose a new set of factors to be considered in going concern assessment for an Australian retailer firm during this period of Covid-19 Pandemic. (10 marks)
Some Helpful Websites and Resources
Australian Government Australian Securities and Investments Commission 2020, COVID-19 implications for financial reporting and audit: Frequently asked questions (FAQs) | ASIC – Australian Securities and Investments Commission, Asic.gov.au.
Adele Ferguson, 2016. Fantastic Furniture in turmoil. The Australian financial review, pp.The Australian financial review, 2016–02-01.
Anon, 2010. ACCC institutes proceedings against Fantastic Furniture, Spotlight and Smash over unlabelled bean bags. M2 Presswire, pp.M2 Presswire, 2010–12-20.
Anon, 2020. BILLABONG INTERNATIONAL LIMITED. Hoover’s Company Records, pp.Hoover’s Company Records, 2020–10-01.
‘Audit Evidence’ Like You’ve Never Seen It Before! n.d., www.youtube.com, viewed 14 April 2021, .
Billabong International Limited – Strategic SWOT Analysis Review. (2018). In GlobalData Company Profiles – Strategic SWOT Analysis Review. GlobalData plc.
Buchman, Thomas A & Collins, Denton, 1998. Uncertainty about Litigation Losses and Auditors’ Modified Audit Reports. Journal of business research, 43(2), pp.57–63. Page 4 of 7
Eden Estopace, 2015. Billabong kickstarts supply chain transformation. Enterprise Innovation, pp.Enterprise Innovation, 2015–01-12.
Hossain, Mahmud, Raghunandan, Kannan & Rama, Dasaratha V, 2020. Abnormal disclosure tone and going concern modified audit reports. Journal of accounting and public policy, 39(4), p.106764.
Introduction to Modified Audit Reports n.d., www.youtube.com.
Mark Ludlow, 2016. Former Billabong chief guilty of fraud after failed China gamble. The Australian financial review, pp.The Australian financial review, 2016–12-21.
Muñoz-Izquierdo, Nora et al., 2019. Is the External Audit Report Useful for Bankruptcy Prediction? Evidence Using Artificial Intelligence. International journal of financial studies, 7(2), p.20.
Myers, Linda A et al., 2018. Measuring the market response to going concern modifications: the importance of disclosure timing. Review of accounting studies, 23(4), pp.1512–1542.
Stock Delisted. Good or Bad!? n.d., www.youtube.com, viewed 14 April 2021, .
The Rise and Fall of Billabong n.d., www.youtube.com, viewed 14 April 2021, .
Zhang, Joseph H, 2018. Accounting Comparability, Audit Effort, and Audit Outcomes. Contemporary accounting research, 35(1), pp.245–276.
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