Introduction to Dulux Group

Dulux Group is a manufacturer and marketer of the products and services which helps in maintaining and enhancing the spaces and the places in which people available in the market live. Dulux is an international brand which is dealing in the market of making over the houses and the spaces of living. In Australia Dulux works as an independent company and do not prefer to go with ICI. Dulux Group was created in 1918 and started its journey from Sydney, Australia (“Dulux Australia, New Zealand and Papua New Guinea”, 2017). Presently company has owned its name in the market and is working on the international level. For the company like Dulux it has become important that it should work towards to manage its market activities and should try to manage the things in a better way. Competition is increasing day by day in the market therefore; it has become necessary that Dulux should work towards to evaluate all the factors and strategies which could help it in attaining success and competitive advantage in the market.

DuluxGroup is the group which is recognized for its commitment to the sustainable management of the financial environment and social impacts which is fundamental to the success and wellbeing of both the businesses it is handling (Dupré & Perluss, 2016). DuluxGroup insures that it should take care of all the stakeholders in a proper way and should work towards to manage the needs and requirements they have with the company. DuluxGroup ensures that it could deliver on its safety and sustainability vision. The sustainability vision created by the company is “A Future Without Harm” and the company is trying its level best to ensure that the vision which is being targeted could be obtained as soon as possible (Camillus, 2016). DuluxGroup also ensures that it should work towards to manage all the financial track records in a proper way and take the initiatives so as to keep eye on all the risk factors which could have a huge impact on the progress of the company. Such type of activities of the group helps it in ensuring that it could move on the path of success and sustainability and could obtain all the targeted visions and missions developed for the welfare of the society as well as stakeholders attached with the company. Hence, it could be said that DuluxGroup is the groups which works towards positive aspects and ensures that it could lead the market by doing good and helping the people attached with the company (Mohamed, 2015).

Dulux Group holds a big name in the market and for such a big name goodwill remains at the utmost priority. So as to maintain goodwill in the market it becomes important for the organisation that it should take all the risk factors under consideration which could have a huge impact on the goodwill and position of the company in the market (Camillus, 2016). DuluxGroup have a set way of assessing the risk in which it evaluate the risk depending upon two variables which are assessing the risk on financial report level and assessing the risk at assertion level.

Sustainable Management of Dulux Group

At financial level pervasive risks which potentially affect many of the financial reporting areas are taken into consideration on the other hand at assertion level the risks which are specific in nature are taken into consideration (Posthuma, 2012). These are the risk factors which have a limited number of the specific balances.

Inherent risk is the risk in which susceptibility of the account balance or class of the transaction to the material misstatement is given. It is a risk at which misstatement in the financial reports of the company is done which has a huge impact on the progress of the company (Xie, 2011). Misstatement in the accounts of the business is done by the financial department, therefore to remain informed and to reduce the chances of the occurrence of inherent risk it is necessary that regular auditing should be done this will help in managing the work and reducing the chances of misstatements in the financial books.

IT risk is another risk which is attached with DuluxGroup (Dupré & Perluss, 2016). IT risks again have a huge impact on the progress of the organisation. Companies are going online and there are huge numbers of aspects which are related with the information technology. In this situation any loop in the IT section could have a huge impact on the progress of the company. Threat of hackers is another risk which is attached with the IT department of the company (Wood, et. al, 2013). Hence, it is necessary that IT department of DuluxGroup should apply proper set of firewalls and should use up to date technology. Doing so will provide a relevant set of support and will help the company in reducing the risk of future uncertainties and will help in processing the work in a smooth and subtle way (Campisi & Caprioni, 2016).

	Employee benefit	Inventories
Explain why the account balance is at significant risk of material misstatement.	Since there is huge risk in employee benefits as in Dulux Group, there were many accidents and incidents related to employees. There are many employees who are supposed to retire or superannuate in coming years, therefore there is possibility of material misstatement is present in this account. Also, while assessing business risk, it is noted that, in Dulux Group there is risk of regulatory safety. Therefore employee benefit account shall be treated as significant and shall be examined thoroughly.	For every business organisation, inventories are its life line or initial stage that is then converted into finished goods. In this case of Dulux Group Limited, inventories account is at significant risk of material misstatement. There are various levels of inventories i.e. raw material, work in progress and finished good. All these are required to be properly measured and reported in the books of accounts. In case of Dulux Group Limited, there is no control over material management as there are various factors that is small sized or value raw material inventories, frequent changing demand of customer, changes taken place in the market and many other factors.	Another account that can be at risk of significant material misstatement is intangible assets that Dulux Group Limited holds in their financial statements. Since intangible assets does not have any physical existence and are only exists on papers, therefore it is very important and crucial that it may be at risk of significant material misstatement. In case of Dulux Group Limited, intangible assets is of significant nature i.e. it covers large part of total non-current assets at the statement of financial position (Trompeter & Wright, 2010). Intangible assets are non – monetary assets but are identifiable in nature.
Explain the key assertion at risk of not being valid.	For employee benefit account balance there are 3 assertions i.e. occurrence and cut-off and accuracy. Occurrence assertion suggests that the transaction related to employee benefit shall actually occur and should be related to entity only. There is possibility that Dulux Group has not recorded or recorded incorrect transaction related to employee benefit. Cut-off assertion suggests that transaction shall be recognised in correct account period. As, in case of employee benefit there are long halting transaction therefore it should be checked for cut-off assertion. Last assertion that can be at risk and shall be examined in detail is accuracy. In calculating employee benefit amount there are lot of assumptions, market rates and other external factors are involve (Lee, et. al, 2014). Therefore it is more exposed to risk of material misstatement.	In case of inventory at significant risk of material misstatement, there are accuracy and completeness assertions that shall be examined and should be taken care of. In case of accuracy assertion, it suggests that amount of inventory calculated shall be free from mistake of calculation and all measurements shall be accurately done. Amount of raw material, work in progress and finished goods shall be recorded accurately (Knechel & Salterio, 2016). On the other hand, completeness is the assertion that shall be analysed and examined while auditing. Inventory items shall be completed in terms of its value and quantity and shall be recognised in the financial statements completely.	In case of intangible assets, there are majorly two assertions that shall be examined and checked by auditor and they are existence and valuation. Since, intangible assets does not have any physical existence therefore it is very difficult for auditor or management to identify intangible assets and account them. On the other hand, valuation assertion of intangible asset is at very high rate of risk. Valuation of intangible assets includes various internal and external factors that overall contributes in making it difficult (Boolaky & Cooper, 2015). Another issue is related to allocation of intangible assets and estimates or assumptions that is made at the time of valuation of intangible assets.
Detail one (1) relevant substantive audit procedure to address the assertion at risk as identified in b) above.	In this case, relevant substantive audit procedure can to be to check each and every document and verify calculations made for the amount. In substantive audit procedure, auditor shall verify each and every interest rate, amount, nature and duration of employee benefit and most importantly timing of transaction related to employee benefit has occurred.	In case of inventory to accurately accounted and there shall be completeness in the inventory, auditor shall conduct physical verification of inventories kept and inventory sheet shall be checked. (Inventory sheet is the sheet where receipt, issue and balance of inventories are recorded). Here inventory means, raw material inventory, work in progress inventory and finished goods inventory (Rachchh, et. al, 2015).	In order to manage intangible assets and to get them free from material misstatement, continuous schedule shall be prepared and should be verified at regular intervals by management and by internal auditor. Another aspect that shall be managed is related to depreciation on intangible assets. This aspect is managed through proper documentation and verification of intangible calculations (Whitehouse, 2013).
Detail one (1) relevant practical internal control that would mitigate the risk in relation to the assertion at risk as identified in b) above.	In case of employee benefits, internal control shall be strong and include process of checking and verifying amounts at the initial stage. Employee benefit amount shall be cross checked by two clerks and then shall be approved by finance manager and internal auditor on regular intervals.	In order to mitigate the risk of material misstatement from the inventory account, internal control system shall be examined and shall be strong enough to identify misstatements. In order to mitigate accuracy assertion, inventory valuation shall be checked and verified by inventory manager on daily basis and same shall be verified and checked by the internal auditor (Hanim, et. al, 2005). Inventory valuation shall be one of the key points of internal audit report. In order to mitigate completeness assertions, physical verification shall be conducted at regular intervals. Completeness of inventories shall be examined through physical counting, recording of same and verified by inventory manager.	Internal control procedure to manage or mitigate significant risk of material misstatement is to make schedule of intangible asset, which should contain information related to nature of intangible asset, value of intangible assets, adjustments in intangible assets, nature of adjustments and many other information shall be recorded (Wong, 2007).

References

Boolaky, P. and Cooper, B. (2015). Comparing the Strength of Auditing and Reporting Standards and Investigating their Predictors in Europe and Asia. Australian Accounting Review, 25(3), 292-308.

Camillus, J. (2016). The wicked challenge of the business environment. International Journal Of Business Environment, 8(1), 19.

Campisi, J., & Caprioni, E. (2016). Social and Political Risks: Factors Affecting FDI in China’s Mining Sector. Thunderbird International Business Review, 1-5.

Dulux Australia, New Zealand and Papua New Guinea. (2017). duluxgroup. Retrieved 13 September 2017, from https://www.duluxgroup.com.au/Our-Businesses/Dulux-ANZ-and-PNG/Dulux-ANZ-and-PNG/default.aspx

Dupré, D., & Perluss, P. (2016). Mastering risks: An illusion. Research In International Business And Finance, 37, 620-628.

Hanim Fadzil, F., Haron, H., & Jantan, M. (2005). Internal auditing practices and internal control system. Managerial Auditing Journal, 20(8), 844-866.

Knechel, W. R. & Salterio, . ‎. E., 2016. Auditing: Assurance and Risk. s.l.: Taylor & Francis. Copyright. .

Lee, J., Kang, M., Oh, Y., & Pyo, G. (2014). Does continuous auditing enhance the quality of financial reporting? Korean evidence. Asia-Pacific Journal of Accounting & Economics, 1-24.

Mohamed, A. (2015). The international business environment: a proposed analytical framework. International Journal Of Business Environment, 7(2), 168.

Posthuma, R. (2012). Will your workers sue you? State-by-State risks and strategic responses. Business Horizons, 55(1), 65-79.

Rachchh, M., Gadade , S. T. & Gunvantrai, 2015. Introduction to Auditing. s.l.:Vikas Publishing House.

Trompeter, G., & Wright, A. (2010). The World Has Changed—Have Analytical Procedure Practices? Contemporary Accounting Research, 27(2), 350.

Whitehouse, Tammy. (2013). Examining permanent reinvestment assertions.(ACCOUNTING & AUDITING). Compliance Week, 10(108), 29,65.

Wong, J. (2007). Auditing and assurance handbook 2007. Melbourne, Victoria: Pearson Education Australia.

Wood, J., Brown, W., & Howe, H. (2013). IT Auditing and Application Controls for Small and Mid-Sized Enterprises Revenue, Expenditure, Inventory, Payroll, and More (Wiley Corporate F&A). Hoboken: Wiley.

Xie, C. (2011). Economic Transition And Business Risks In Chinese Private Firms: Disentangling Organizational And Project Risks. International Business & Economics Research Journal (IBER), 10(2), 67-78.