Solution
David answered on
Dec 26 2021
EXECUTIVE SUMMARY
This is as per audit standard ASA3000, whereby the audit manager will be assisted in creating a detailed audit plan.
The audit fee of this whole process of audit is $700,000 and the same has been communicated in advance to the
client. The client in this case is Reece Group Limited. The company is a private entity and is the largest supplier of
athroom and plumbing supplies in Australia. The year which ended in 30-June, 2016, the revenue of the company
stood at $2.2 billion and profit after tax for the company stood at $0.19 billion. The company has business both in
New Zealand and Australia. Over the years strong business performance and cash flow generation has led company
to invest back in business and also reduce net debt levels of the company. One key important consideration that we
need to assess during the audit is the fact that profit after tax included profit which the company incu
ed due to sale
of property in New South Wales, foreign cu
ency losses and also goodwill impairment charges related to AC
components, which is a subsidiary of the Actrol group.
The annual report of 2016 says that Board of Reece group Limited reviewed the appropriateness of goodwill value
and the various assumptions which were considered the underlying impairment calculation for the company.
The ASX under the principle 2.4 and 2.5 recommends that the board of the companies comprise majority of directors
which are independent in nature. It is advised that the chairperson of the company is independent too. However
Reece group doesn’t comply with the same in cu
ent situation and board structure.
Another point and key information which should be considered in the Audit is the fact that company does not have
any nomination committee as of now. The principle 2.1 of ASX recommends board to establish nomination
committee.
1.0 Introduction
The objective of the paper is to lay down the Audit plan which will assist the Audit Manager in planning the
details of the audit. This is as per audit standard ASA3000, whereby the audit manager will be assisted in creating a
detailed audit plan. The audit fee of this whole process of audit is $700,000 and the same has been communicated in
advance to the client. The client in this case is Reece Group Limited. The company is a private entity and is the
largest supplier of bathroom and plumbing supplies in Australia. The company is 70% owned by Lesile Alan Wilson.
Internal audit operations include creating an audit universe, planning audit cycles, planning specific audit projects,
audit risk assessments, audit scheduling, auditor and auditee allocation, audit time and expense management,
organizing audit tasks and activities, work paper management, evidence management, reporting and issue tracking.
2.0 Key Information
(a) Our Understanding of the client
(b) The year which ended in 30-June, 2016, the revenue of the company stood at $2.2 billion and profit after tax
for the company stood at $0.19 billion. The company has business both in New Zealand and Australia. Over
the years strong business performance and cash flow generation has led company to invest back in
usiness and also reduce net debt levels of the company. One key important consideration that we need to
assess during the audit is the fact that profit after tax included profit which the company incu
ed due to sale
of property in New South Wales, foreign cu
ency losses and also goodwill impairment charges related to
AC components, which is a subsidiary of the Actrol group.
(c) If LOB management is delighted with an Reece Group system, but the staff resent it and are looking outside
of approved systems for the tools they need to succeed, then something is seriously misaligned. This is
where experience is becoming a trigger for needed change. As experience starts to become a leading
indicator of engagement and engagement becomes a metric of business value delivered, these
misalignments will be forced into sharper focus. A key assumption underlying all of this is that the LOB
manager also acts as an effective proxy for the needs and requirements of the staff reporting to him or her.
But is this a reasonable assumption?
(d) The manager's role is multifaceted. Certainly, it includes individual mentorship and coaching of staff.
1Beyond individual engagement, management is also responsible for establishing targets and incentives,
and rigorously collecting and monitoring performance data. 2 But, if we consider the
oad range of manager
esponsibilities relative to what an Reece Group system can do for a manager, what becomes apparent is
that Reece Group doesn't really offer much support for mentoring and coaching responsibilities. The real
enefit is in collection and monitoring of performance data. And, the more comprehensive the performance
data collection is, the easier it is to do target and incentive planning.
(e) It's not that LOB management doesn't care about coaching and mentoring. It's just that, when it comes to
Reece Group systems, the types of systems that collect data on behavior for controlling and monitoring
purposes are the systems most likely to contribute to achieving managers' goals. Hence, those types of
Reece Group systems are most likely to be authorized by managers.
(f) Over time, working environments are being rendered increasingly complex, bureaucratic and
disempowering. High-performance employees are given increasingly less scope to be creative and
collaborative in achieving the same objectives held by management. It is highly likely that complaints about
the experience of working with enterprise Reece Group have little to do with the actual technology but more
to do with the suboptimal working environment the experience manifests.
(g) Obliging staff to use these systems and papering over the problems through change management programs
or beefed-up help desk support constitute a serious misdiagnosis of the problems at the root of the
complaints. Staff complaints and their demands to create more flexible, agile workforces are actually
eflective of their desire to accomplish the CEO's objectives. 4
(h) This doesn't mean that process-centric, control and monitoring systems are inherently bad. Given the
cu
ent view of business alignment, this approach means that little else other than these types of systems
ends up being created. That is bad. Ultimately, delivering suboptimal Reece Group systems creates
situations where the LOB managers the CIO is hoping to serve end up being squeezed between disgruntled
staff and disgruntled CEOs.
(i) The growing realization among leading organizations is that observation-based digital design leads to great
experiences and business outcomes regardless of whether the audience is a customer or an employee or
any other stakeholder. As one example, a public hospital was able to achieve improvements in key areas of
enchmarked performance by spending time observing how its intensive care nurses worked. The insights
from the effort were a complete surprise to hospital administrators. As a result, the project was significantly
smaller in scope than originally planned. It created a clear improvement to the working environment of the
nurses and drove the business outcomes hospital management was looking for.
It is becoming increasingly clear that one of the best ways to create compelling experiences
that also drive innovation and deliver tangible business outcomes is to start by observing staff.
https:
www.gartner.com/document/3667617?ref=solrAll&refval=184200401&qid=716774afc4b29d71bcb27562477461be#dv_1_m_buckingham
https:
www.gartner.com/document/3667617?ref=solrAll&refval=184200401&qid=716774afc4b29d71bcb27562477461be#dv_2_n_bloom
https:
www.gartner.com/document/3667617?ref=solrAll&refval=184200401&qid=716774afc4b29d71bcb27562477461be#dv_4_the_talent
Then, explicitly and unapologetically seek to improve their environment and the way they
accomplish their work.
Understanding the Business and its Environment
Auditors must obtain a sufficient understanding of the entity and its environment which includes internal
control to assess the material misstatement risk of the financial report (Bostick & Luehlfing 2007). This
knowledge could assist the auditor to identify the transactions, practices, events and risks that may
have a significant effect on the financial report (Grant & Roger 2015). ASA 315 (ISA 315) provides
guidance on the stages of understanding the entity and its environment. It consists of 5 different areas
of understandings which are Industry, Regulatory and other external factors, Nature of the entity,
Accounting policies, Objective and strategies and relation business risks and finally, Measurement and
eview of financial performance.
Industry, Regulatory and other External Factors
Reece Group Limited is always concerned on customer and staff relationship. Cu
ently, Reece Group
Limited is facing a challenge on how to engage evocatively with staff and customers when they are
located in hundreds of different locations across Australia and New Zealand. This year, Reece Group
Limited conducted Reece Road Shows in central locations that covered 230 stores with activities, for
instance, presentations on innovative new products, seminars on running a better...