Audit Risk And Compliance Management In The Retail Industry

Inherent Risk

Woolworths Limited: Retailing firm

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Inherent Risk


Assertion and Ledger Accounts Impacted

Audit Procedure

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In this case, the retailing firm might encounter inherent risk of enhancement in level of competition in the industry in which the firm operates

The business concern Woolworths Limited

is essentially functioning in a very crowded market in the retail industry. As such, this market where the company functions primarily stay competitive and increased competition from diverse novel along with present subsisting rivals might perhaps direct the way towards decrease in company’s sales along with company’s profitability. In this regard, this market in the present period carries inherent threat of decrease in firm’s sales (Arens et al. 2016). Furthermore, competition can also be encountered by the corporation from diverse online platforms even though the business concern increased online presence by approximately 35%.

Revenue as well as sales account might perhaps get affected due to the identified risk

Assertions Influenced:

-Occurrence: Business transactions detected in the financial assertions need to truly occur (Arens et al. 2016). Essentially, the risk owing to competition might perhaps direct the way towards earnings overstatement and in turn affect this specific assertion

Completeness: In the same way completeness that calls for the need of  firm’s assets as well as liabilities that were believed to be recorded have been detected in the financial assertions (Hay 2015).

-Evaluator might take into consideration the overall completion level that is encountered by the firm, company size in comparison to that of the rivals

-The evaluator might also assess company  the reputation among peers and government support for the firm Woolworths Limited operating in that industry.

-Another important consideration is the analysis of the demand level of the products and for products/services delivered by the company and diverse facets that exert impact on the demand.

-In this case audit procedure also includes consideration of the influence of the government support. Essentially, this issue is imperative at the time when the business faces significant worldwide competition (Hay 2015).

-Assessment also has the need to be carried out as regards the impact of diverse government regulations of the business together with the sector in which the corporation Woolworths Limited

operates (Trotman et al. 2015)

-In this case the audit procedure might perhaps contain proper scrutiny of both pricing of the firm as well as data on market share, examination of various complaints, firm’s customer service along with engagement analytics.

The company encounters trouble as regards reputation damage.

In essence, there subsists business risk of reputation loss even though business operations of the firm enjoy both reliability as well as belief with clientele (Trotman et al. 2015). In essence, a decline in higher level of reliability along with trust can negotiate on the whole leading position of the firm market in particular businesses and influence the functioning as well as performance of the entire group. According to the annual pronouncement, this too can occur due to security breach of system of IT, breach  of regulatory or else legislator requirements

Accounts that might get affected due to the identified risk include: Profit as well as loss accounts plus sales account

Assertions Influenced:

-Occurrence along with rights and obligations: In particular this assertion indicates towards revealed incidents along with transactions that have in point of fact occurred and pertain to the particular entity (Trotman et al. 2015). As such, the loss of reputation might perhaps get affected and exert impact on this assertion.

-Completeness: In particular, this assertion indicates towards diverse disclosures that ought to be included in the financial declarations must be included. Essentially, this particular risk might thus exert impact on this specific assertion (Simnett and Huggins 2015).

In this case, it is imperative to examine the on the whole reputational risk of the firm in which different social media might perhaps have profound impact. Diverse categories of risk segments that seem to be a reasonable fit or can allow business segments to develop to risk administration format. In essence, audit of reputation risk also have the requirement to evaluate internal along with external reputation threat. As such, this consists of development of inclusive action plan that consists of development of stratagems for various prioritized risks, firm’s timeline along with implementation, appropriate scrutinizing together with enumeration (Simnett and Huggins 2015). Subsequently, audit procedure also comprises of planning of scenario that consists of planning session according to crisis scenario.

Structure of Digital Risk (specifically ecommerce, specific social media subsistence of the corporation along with different online risks)

This company has diverse digital assets through various channels that is to say various e-commerce sites, different mobile apps together with infrastructure of IT that is possessed and simultaneously managed by the corporation (Knechel and Salterio 2016). Viewpoints of different individuals as regards the digital assets of the company’s are essentially outside the arena of control of the corporation.

Assertions that might influenced :

– Occurrence:  In essence, this specific assertion indicates towards recording of firm’s transactions along with various incidents. Essentially, this digital risk can exert impact this specific assertion (Knechel and Salterio 2016).

Accounts: Revenue account of the firm, profit as well as loss accounts of the corporation

In this case, audit processes might include evaluation of the capacity of the corporation to appropriately apprehend and simultaneously act in response to particular digital risks of the company (Knechel and Salterio 2016).

Efficient administration of digital risk require prospective in diverse areas, including novel competencies such as data analytics together with risk sensing

Therefore, the averting digital risk can be regarded to be very intricate. Hence, in this case support technology might also aid in the process of application of an effective stratagem (Knechel and Salterio 2016). Using this policy can aid in generating a second layer of defence particularly during audit. This in turn might need to take into account examining firm’s internal control.

-Again, cross functional communication can again aid assessor in identifying and addressing specific objectives of risk administration of the corporation and recognize firm’s assets that are very vital to shield (Knechel and Salterio 2016).

-Additionally, evaluator might also take into account the cyber insurance along with exposure of the firm

Analytical Review – Area of Concern/ comfort Identified

Justify Your Answer

Assertion and Ledger Account(s) Impacted

Audit Procedure

The internal control risk related to financial reporting refers to quality of subsisting processes as well as policy provisions within the corporation need to make certain justifiable compliance with the strategies of the company.

Essentially, this

The Audit Risk Management and Compliance Committee can be considered to be a committee of the entire Board of the firm Woolworths Limited that is in charge of compliance. It is their responsibility to monitor the overall efficacy of the corporation Woolworths Limited, their policies as well as exercises that associate to compliance and conformation with laws, regulations as well as accounting standards. In order to avert risk, it is imperative to scrutinize the influence of changes in important laws, accounting standards as well as rules that might affect the operations of the firm.

-Occurrence-Firm’s transactions as well as events that have been registered have occurred and pertain to the company. This risk also affects this assertion (William Jr et al.  2016). 

-Completeness-Completeness refers recording of transaction amounts and other data that needs to be registered. In this case this might get affected in this case

-Accuracy- level of accuracy refers to recording of transactions as well as events correctly. In this case, managing derivative instruments and adjusting the same might affect the level of accuracy.

Cut off- It is also important that transactions have been registered at the correct period of accounting.

Accounts affected:

Revenue and expenditure accounts, different accounts of assets and liabilities

Auditor can consider establishment of content that includes identification of the risk of non-compliance, analysis of the detected risk, evaluation of risk, ways of treating the identified risk. In this case, the auditor can consider to avert the detected risk of non-conformation to rules by deciding not to carry on  with the activity or else selecting a substitute approach to attain the outcome.

Real audit risk at specifically the firm Woolworths Limited due to the several chains it controls. Basically, the corporation encounters intricate challenges in the context of oversight, a component that essentially makes company’s financial reporting by individual chains highly prone to fraud. Also, operating these several chains confuse guaranteed efficiency in evaluating risk along with effectiveness in collecting and presenting financial reporting information.

A lack of oversight leads to lack of confidence of the management that again affects the investors as well as creditors. The role of the assessor is to detect material misstatements and probable fraud. Due to presence of various wings of the company and chains, transactions of business become intricate.

-Classification: This calls for proper classification and fair presentation of transactions in the financial statements. Repeated engagements might hamper that as well.

-Accuracy- in this case the accuracy that refers to accurate recording of transactions in the financial statements might get affected due to overconfidence of the assessor (Alon and Vidovic  2015).

Accounts affected:

Revenue and expenditure accounts, accounts of assets and liabilities

The auditor needs to take into account various risks involved in operating different chains of the business, recognize risks of unethical operations in certain actions involved in functioning through chains. In addition to this, the evaluator might also deliver precision in the fulfilment procedures; examine geo political risks, financial risks from different suppliers and many others. Also, the auditor might also consider technical necessities during audit of different chains, prove dimensions of quality control and ascertain systems of management (Alon and Vidovic  2015).

Therefore, it can be said that audit of several chains necessarily begins with laying out necessities and analyse as against these requirements. Thereafter, auditor also have the need to detect suppliers and ascertain the kind of audit that assessor needs to carry out.  

Auditing accounting estimates can be considered to be an important area of risk. This implies that particular challenges or threats auditors encounter in the process of asserting the overall data reliability and enumerations utilized by a corporation in presenting accounting approximations.

The accounting estimates that are present in historical pecuniary statements enumerate the impact of previous business transactions or else incidents and current condition of asset/liability. Management of the firm Woolworths limited is accountable for carrying out the accounting estimates that is included in the financial assertions. In essence, incorrect assumptions by the management, inadequate knowledge as well as experience regarding past events regarding conditions lead to risk (Arens et al. 2016).

In order to understand the reasonableness of the accounting estimates that are used by the management, it is important to identify the data source as well as factors used in estimations and assumptions, and thereafter consider whether the factors are relevant, consistent, reliable as well as sufficient for the purpose (William Jr et al.  2016). Therefore,  the relevant assertions that are related to the estimate

Accounts affected:

Assets estimated at fair value through the statement of income, liabilities at fair value.

Auditors might examine and interview the decision makers of the corporation regarding the use of estimation techniques to lessen error (William Jr et al. 2016). The critical steps/procedures in this regard comprise of formal along with documented evaluation of how the items that are subject to estimation are recognized. Also, the assessor has the need to see the way the client recognizes and examines uncertainty of estimation, susceptibility of particularly accounting estimates. Further, the auditor might consider the way the company has recognized various new items that are necessarily subject to particular estimates. In addition to this, the assessor might consider examination of the source data that is utilized and based upon which estimate is based (Arens et al.  2014).

Corporate Governance in Woolworths Limited: Processes related to corporate governance

The company Woolworths Limited has a corporate governance framework and follows practices that are established in several documents together with policies. Every year the company essentially releases a statement on corporate governance that put forward the framework of governance that is adopted by the firm’s board. This statement elucidates in detail about the constitution, entire committee of the directors as well as group executives, board charter, risk management of the group, code of conduct, continuous policy of disclosure, safety and health policy, policy of diversity and securities trading strategy (Chandler 2014). 

3 (B) 

The company has an audit committee that includes Audit, Risk Management and Compliance Committee (ARMCC);

3 (C) 

The audit committee is of advantage to the auditor as this can help in the process of reviewing as well as monitoring delegations of authority of the company as well as other important corporate strategies (Hay 2015). This committee can also help in the process of assessing and providing input to the existing framework of the corporate governance. 


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