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Assessment Value: 20% Instructions: 1. This assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook. 2. It is the responsibility of the student who is submitting the work, to ensure that the work is in fact her/his own work. Incorporating another’s work or ideas into one’s own work without appropriate acknowledgement is an academic offence. Students can submit all assignments for plagiarism checking (self-check) on Blackboard before final submission in the subject. For further details, please refer to the Subject Outline and Student Handbook 3. Maximum marks available: 20 marks. 4. Due date of submission: Week 10 Friday. HA3032 AUDITING AND ASSURANCE SERVICES TRIMESTER 1, 2017 INDIVIDUAL ASSIGNMENT 2 2 One.Tel Case Strategic Business Risk Assessment, Inherent Risk Assessment and Preliminary Going Concern Assessment This Case is based on Week 5 to 8 Nature of the Entity’s Business One.Tel was launched in Sydney, Australia in May 1995. They were described as a global telecommunications company offering a fully integrated product list including low-cost international and national calls, Internet services, prepaid and post paid calling cards plus GSM mobile phone services. Their strategies as customer-focused and dedicated to providing innovative, quality telecommunication services at reduced prices. Details of total revenue by geographic segment for the year ended 30 June 20001 are as follows: Country $M % Australia XXXXXXXXXXUK XXXXXXXXXXFrance XXXXXXXXXXNetherlands XXXXXXXXXXHong Kong XXXXXXXXXXOther XXXXXXXXXXTotal 678.2 The Industry Australia’s telecommunications infrastructure with a fully digitised network is as sophisticated and as modern as any in the world. Land based phone lines penetrate about 96 per cent of all households, with 2 million Internet subscribers and over 7 million Internet users. Mobile phone services are well established in Australia with more than 8 million users or 42 per cent of the population, one of the highest user rates in the world. Telstra, Optus and Vodafone each operate separate GSM mobile networks. Telstra’s market share is around 57 per cent, Optus 31 per cent and Vodafone 11 per cent. (Source: US Department of State FY2001 Country Commercial Guide) Prior to the deregulation of Australia’s telecommunications industry on 1 July 1997, there were two carriers. There are now 35 carriers who are often former service providers and are generally reliant upon leasing network capacity from Telstra, although some are developing their own switching and network capability. The influx of smaller carriers into the telephony market has

David · Accepted Answer

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Answer 1.  
Inherent Risk: The susceptibility of an assertion about account balance, class of transactions 
and disclosure towards misstatement, which may either individually or collectively with other 
misstatements, becomes material without considering any of the internal controls laid down by 
the management. 
In other words, inherent risk refers to the risk that the financial statements will not be in 
accordance to the applicable Financial Reporting Framework ignoring all internal control system 
established in the organization. 
An auditor need to evaluate the overall audit risk involved in the conduct of an audit prior 
initiating an audit engagement. For the purpose of it, evaluation of inherent risk, control risk and 
detection risk is necessary. The auditor, in accordance with ASA 315: “Understanding the 
Entity and its Environment and Assessing the Risk of Material Misstatement” is required to 
take an understanding of the entity and its business and operating environment in order to 
evaluate the risk of material misstatement and the overall audit risk as per it. 
Inherent Risk at the financial report level means the factors that influence the financial 
statements as a whole and which are not traceable through individual accounts or group of 
accounts.  
In the given case, factors that would have contributed to an increased inherent risk assessment at 
the financial report level are as follows: 
1. Level of operations: One Tel is a global telecommunication company, the operations of 
which are distributed globally. The major geographical segments are Australia, UK, 
France, Netherlands, Hong Kong, etc. The company operates in number of countries 
along with number of services to be provided such as international and national calls, 
internet services, prepaid and postpaid calling cards plus GSM mobile phone services. 
Therefore, the volume and nature of transactions will be large and complex respectively 
which contributes to high inherent risk at the financial report level. 
2. Multi-national operations: The Company operates in multiple nations and hence is 
governed by the laws and regulations of the countries in which it provides services. A 
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Company is required to comply with the Legal Regulatory Framework applicable to it in 
order to lawfully operate in a country. Different countries have different government 
regulations which affect the legal environment of the Company. Hence, it increases the 
number of compliances and increases the inherent risk at the financial report level. 
3. Industry: The industry in which the company operates has high number of users. 
Further, the infrastructure of the industry is fully digitized and sophisticated. Australia’s 
telecommunication industry went under deregulation, due to which a number of 
competitors emerged with the time. Due to less regulations and no control over the entry 
to the industry, the numbers of small service providers have increased which are engaged 
in providing similar services to that of the entity. 
4. Growth Prospects:

Assessment Value: 20% Instructions: 1. This assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook. 2. It is the responsibility of the...

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