Audit and Assurance of Billabong International Limited †Free Samples

Question: Discuss about the Audit of Billabong International Limited. Answer: Background of Billabong International Limited and its recent developments This study had been conducted to prepare a report based by researching on the clients business named as Billabong International Limited (Billabongbiz.com 2017). La Trobe Partners is the audit firm that had been assigned to audit for Billabong International Limited for the first time. Billabong International Limited is a surf company that initially was a clothing retailer that used to produce accessories such as watches, skateboard, backpacks as well as snowboard products under the brand names. Billabong International Limited is a public limited company that operates in retail sector and listed in Australian Stock Exchange. Billabong International Limited offer major products such as apparel and sporting goods to the customers. Billabong International Limited has 5000 staff members working for them in and across the world. Their shares are listed in Australian Stock Exchange (William, Glover and Prawitt 2016). The products of Billabong International Limited are licensed and spread in more than 100 countries and available in around 10,000 doors in and across the world. Majority of revenue of Billabong International Limited is generated through wholly-owned operations in different countries. Billabong International Limited believes in promoting worldwide through relationship with high profile specialized athletes, events as well as junior athletes (Billabongbiz.com 2017). From the recent news articles that was published on 30th August 2017, it is understood that Billabong International Limited financial year revenues deals with continued operations down by 8.9% to $979.5 million (Editorial 2017). The company suffers loss that is attributable to members of continued $77.1 million versus loss of $23.7 million a year ago. Billabong International Limited expects that FY 18 will show further progress in Americas and Europe. They expect that combination of earnings will continue to be weighted towards Asia Pacific and retail in first half of 2018. Significant business and audit risks for Billabong International Limited Audit risk is the risk that the auditor of La Trobe Partners expresses to an inappropriate audit opinion when the financial statement of Billabong International Limited is materially misstated. In addition, audit risk is a purpose of the risks of material misstated figures and detection risk (William, Glover and Prawitt 2016). Therefore, audit risk is made of two main mechanisms such as risk of material misstatement and detection risk. Here, risk of material misstatement means the risk that arises when the financial statement of any company are misstated prior to audit. This includes two major mechanisms such as inherent risk and control risk (Billabongbiz.com 2017). There is five audit risk or business identified for the company Billabong International Limited that is mentioned below with proper justification: Inherent risk- One of the major risk faced by Billabong International Limited is the inherent risk that arises from the propensity of an declaration about a class of transactions, account balance or revelation to misstatement that could be material (Simnett, Carson and Vanstraelen 2016). Treatment of capital and revenue capital of Billabong International Limited is one of the risks that had been found from the financial statement. This risk takes place when it relates with the survival of property, plant and equipment when revenue expenditure has been capitalized rather than charged as an expense in the income statement. Upon recent trading, it was found that Billabong International Limited shares caught focus of OTC traders because the prices moved by $0.02 that touches $0.97 price point. Here, it is understood that financial statement of Billabong International Limited was misstated that need proper attention by the auditor of La Trobe Partners (Billabongbiz.com 2017). Control Risk- One of the major risk faced by Billabong International Limited is the control risk that arises from the misstatement because of an assertion about the transaction class, account balance or disclosure that could be material either individually or aggregated by the other misstatements that cannot be prevented or corrected so easily (Louwers, et al. 2015). Here, the problem is the valuation of inventory when there are significantly levels of aggregate inventory that cannot be properly managed by Billabong International Limited. Recently, Billabong International Limited received horrible news that profits had collapsed where the banks were looking threatening and the company has only two choices, either to sell assets or ask shareholders for more money. Billabong International Limited share prices are falling (Billabongbiz.com 2017). Detection risk- One of the major risk faced by Billabong International Limited is the detection risk where the risk takes place from the process that the auditor follows to reduce audit risk to an acceptably lower level (Knechel and Salterio 2016). Billabong International Limited does not have a global internal audit function but engages different professional firms to assess certain financial control environment as well as performing independent assessments of key project plans. In this case, detection risk can be reduced by the auditor by identifying the material misstated figures and presenting in the audit statement with proper measures as well. During the financial year 2016 and 2017, Billabong International Limited has continued to focus on areas that are identified by the professional firms as well as improve in the level of consistency of accounting practices as well as control over environments at the same time (Arens et al. 2016). Completeness of liabilities- Billabong International Limited faces risk from liabilities as their provisions have been incorrectly treated as contingent liabilities (William, Glover and Prawitt 2016). Asian markets modestly higher as risk aversion eases. Here, Billabong International Limited reports a new loss for the financial year 2017 because their underlying earnings missed its guidance range. The brand name (Billabong International Limited) shares remain unchanged (Eilifsen et al. 2013). Completeness of revenue- This risk is faced by Billabong International Limited where the entity being audited has considerable cash sales that was difficult to manage by the company (Billabongbiz.com 2017). Billabong International Limited restructured E-commerce overhaul after NetSuite. It is noted that Billabong International Limited had broken up the core components of its omni-channnel that in real handed the pieces to separate software providers after ditching its first attempt with NetSuite (Cohen and Simnett 2014). References Arens, A.A., Elder, R.J., Beasley, M.S. and Hogan, C.E., 2016.Auditing and assurance services. Pearson. Billabongbiz.com. 2017.Billabong Biz : Behind the Brand - Investors - Investors Home. [online] Available at: https://www.billabongbiz.com [Accessed 10 Sep. 2017]. Cohen, J.R. and Simnett, R., 2014. CSR and assurance services: A research agenda.Auditing: A Journal of Practice Theory,34(1), pp.59-74. Editorial, R. 2017.Stock Quote News - Stock Market Quotes, Online Stock Quotes, India. [online] IN. Available at: https://in.reuters.com/finance/stocks/BBG.AX/key-developments/article/3663501 [Accessed 10 Sep. 2017]. Eilifsen, A., Messier, W.F., Glover, S.M. and Prawitt, D.F., 2013.Auditing and assurance services. McGraw-Hill. Knechel, W.R. and Salterio, S.E., 2016.Auditing: Assurance and risk. Taylor Francis. Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015.Auditing assurance services. McGraw-Hill Education. Simnett, R., Carson, E. and Vanstraelen, A., 2016. International Archival Auditing and Assurance Research: Trends, Methodological Issues, and Opportunities.Auditing: A Journal of Practice Theory,35(3), pp.1-32. William Jr, M., Glover, S. and Prawitt, D., 2016.Auditing and assurance services: A systematic approach. McGraw-Hill Education.