Management Accounting Risk and Control Strategy

Question: Carry out an analytical review on the financial statements of these companies in the planning phase and identify areas of concern (high risk or problem areas) or comfort. Justify your answer.What audit procedures and/or tasks would you have planned to carry out in response to the high risks or problem areas identified by you above? Alternatively, in relation to which area would you have minimised your evidence gathering procedure?An Independent Auditors Report to the Members has been issued for each company:(a) Identify the type of audit opinion issued by each auditor, and justify your answer.(b) Do you agree with the type of opinion issued by the auditor? Why or why not? Pleaseindicate an alternative audit opinion if you do not agree with the one issued.(c) Are there any other matters or events that have taken place after the issue of the audit report that strengthens or weakens the auditors opinion? Answer: On the basis of the financial statements of Wesfarmers Limited (30-Jun-2014), it identified that the main areas of concern (high risk or problem areas) are: High interest expenses ($285000) that is much higher that impacts on net income. Current liabilities ($8,229,000) are much higher than long-term liabilities ($4,320,000) that is created financial risks for the company (Wesfarmers Limited, 2014). Current assets ($9,311,000) are less than long-term assets ($30,416,000) that is not good for the company. In addition, on the basis of the financial statements of Virgin Australia Limited (30-Jun-2014), it identifies that the main areas of concern (high risk or problem areas) are: High interest expenses ($120,000) that impacts on net income. Current liabilities ($1,921,000) are higher than long-term liabilities ($1,563,000) that is created financial risks for the company. Current assets ($1,235,000) are less than long-term assets ($3,444,000) that is not good for the company (Virgin Australia Airlines Pty Ltd, 2014). So, high interest expenses indicate the companies spend their money on pay interest that impacts on net profit. In addition to this, it is also analyzed that, the high current liabilities, but low current assets conditions indicate that these companies would face financial issues during pay their short-term obligation. On the basis of the identified risks in the above question, I would have planned three audit procedures and tasks that is planning, executing, and reporting to carry out in response to the high financial risks or problem areas in these companies. On the other hand, it is also observed that both companies faced similar types of financial risks, so that I would have firstly identified risks and then planning of auditing. Planning of audit includes recruitment of auditor, collects importance information, discusses the scope and objectives of the audit with management or auditor, decides audit processes, evaluates existing controls, and planning of the remaining audit steps (Collier Agyei-Ampomah, 2009). At the same time, it is also interpreted that, in the next process, I would have executing the audit process and then finally reporting my opinions, audit findings, and recommendations for improvements related to financial risks or short-term obligation issues on the base of proof colle cted in the executing process. Each auditor identified the financial risks or short-term obligation issues during the audit processes in an effective and more comprehensive manner. On the basis of analytical review on the financial statements of these companies, I am also agreed with the auditor opinion about the risks identified during the audit processes in an innovative and significant manner. Along with this, it should also be noted down that, the main strength of the auditors opinion is represented the actual risks or weaknesses of these companies (Collier Agyei-Ampomah, 2008). In addition, weakens the auditors opinion is they has not provided or recommended appropriate solution of these risks or issues. References Collier, P.M. Agyei-Ampomah, S. (2008). Management Accounting Risk and Control Strategy. USA: Elsevier. Collier, P.M. Agyei-Ampomah, S. (2009). CIMA Official Learning System Performance Strategy. USA: Elsevier. Virgin Australia Airlines Pty Ltd. (2014). Annual Reports. Wesfarmers Limited. (2014). Wesfarmers Limited 2014 Annual Report.