Australian Auditing & Assurance Services For ASX Category: Role Of Auditors, Revenue And Market Share Analysis Of Telstra

Sources of Revenue of Telstra

Describe about the Australian Auditing & Assurance Services for ASX Category.

The present article is to emphasize on the issues auditing service and assurance of any company of ASX listed category. This article will emphasize on the role of auditors to the domain of public notification about the financial health of the company along with the stakeholders to make them aware about the present situation as well as the comparison of the financial statement of the company to conclude the financial health with growth prospect of the company. The role of auditor is like watchdog to find the loopholes along with the shortcomings of the company in different financial activities and assess the risks related to financial performance of the company. The company selected for this purpose is Telstra which is the giant in telecom industry in Australia. The company is proving its activities in the arena with supremacy and dictating the market with stiff competition faced from the other companies like Vodafone and Optus, to name a few. The job of the auditor is to find out the risks related to the company with specification of different financial elements like revenue with its source and the competitor analysis(Asx, 2015).

So far the activity of audit is concerned; it has high value of ethics, professionalism, legal and regulatory aspects to comply with the state and federal taxes, the obligatory part to the stakeholders to make them aware of the position of the company along with the compliance related to ASX formalities. In this article we will look into the factors of different financial operations and elements along with the detection of risk for Telstra(Capitalcube, 2016).

As per the financial report of the company, the following analysis had been found which are taken from the excerpts of the financial report of 2015. It is observed that the major heads of Telstra revenue is originated from Telstra retail which is contributing > 60% of the total revenue, while other heads of revenue contributes to the balance amount which is consisting of global enterprise and services contributing to around 20%, Telstra operation is contributing around 10% and Telstra wholesale contributes around 1% to the total revenue. It is also observed that the income from the shareholding of Sensis had yielded $ 552 million in the year 2014. It is observed that the total revenue is declined by 1% in 2015 in respect of 2014(Molinsky, 2016).  

Major services rendered by Telstra

The respective pictorial representation is shown below in the chart form:-

With the above spreadsheet and the chart, it is evident that the company is growing in its different sector of revenue generation with the substantial increase in Telstra core sector revenue generating aspects like Telstra retail with 5%, global enterprise and services with 8%, Telstra Operation with 11%, Telstra wholesale with 47% while other source of revenue had de-growth with 67%   and total Telstra segment excluding Sensis with the increase of 1% over 2014 in 2015. The revenue generated from Sensis was 552 million $ in 2014 which is not featured in 2015. The component of revenue generation in totality had shown de-growth in 2015 of 1% which is mainly due to the non-existence of Sensis in 2015 as a revenue generation component(Telstra, 2016).

The target audience of Telstra in Australia has high level of expectation from the company. As they are the leading telecom service provider of the country, the company is enjoying 41% of the market share so far serving the customers with their varied level of telecom products. As per the latest finalized financial report of 30the June, 2015, the revenue section of the company is consisting of different domestic and international services. The company is mainly involved in Telstra Retail which is yielding around 60% of the total revenue of the company in the domestic market of Australia. The other components are contributing to revenue of the company but without much significance. The overseas business is covered in the segment of Global Enterprise and Services which is contributing around 20% of the total revenue of the company(Telstra, 2015).

The company is facing major competition from two companies in the domestic market- Vodafone and Optus. Telstra is enjoying majority of the market share by holding around 41% of the telecom services market of the domestic market of Australia. The below chart can give clear idea of the holding of market share for the F Y 2015 and 2016 end June so far Australian domestic market related to telecom service is concerned(Budde, 2015).

From the chart it is evident that the main shareholder of the market of Australian telecom industry is Telstra who is followed by Optus and Vodafone. With the stiff competition faced in the market, Vodafone is gradually loosing control of market share to Telstra and Optus. The other competitors are other survivors in the market namely Virgin, Boost Amaysim/Vaya, ALDI, TPG/iinet and other service providers, from the recent analysis, it is evident that Telstra is maintain the overall control and supremacy of the market of telecom services in Australia. The below bar diagram can also depict the same (Accc, 2016).

Competition and Market Share

With the above analysis, it is evident that Telstra has brand loyal customers in Australia who contribute to the overall performance of the company. The level of services maintained by the company made it possible to satisfy the target audience and this is the inherent reason for the overall growth of the company in the sector of telecom services in Australia(Kidman, 2016).

PEST analysis is the analysis of any organization to find out the political, economical, social and technological aspects to find out its implication in the stakeholders’ interests and accordingly plan the strategic steps to ensure the sustainability of business or activities of such organization. The analysis can emphasize on the facts of the company with the actions which they initiate to keep balance of the aspects to make the company viable in domestic and global arena to ensure future business of the company with keeping the stakeholders’ interest on high priority(Hopq, 2015).

The company is possessing presence in both domestic market of Australia and global market in the sector of telecom industries. To run the business, the company has to find the stability of the government with keeping an eye on the expected future changes of the government and the legislation of the country. The political aspect is mainly conferred the to the business law prevailing in the country concerned. The compliance of the same is to be met by the company on top priority. The government of Australia has implied the business law with strict compliance on competition restriction which ensures the stable business policy of the country and leaves no such scopes to make the business ambience of the country in volatile position. The regulatory bodies of the country are running their operation in transparency and this makes the job of the company to run the show with ease and proficiency. Both the provincial and the country government are keen to help the business grow in the steady political situation which is enhanced by the easy and flawless application of the legislation in the country in different segments of governmental operation(Telstra, 2013).

So far the economic analysis of Telstra is concerned; the company is confirming high level of growth with their different sectors of operation. Moreover the company possesses the giant share of the market in the telecom industry of Australia. It enhances the revenue level of the company with the subsequent profit margin of the company to ensure the sustainability of existence of Telstra with the stakeholders.  The market of telecom industries grows in regular rate both in global and domestic market. It is also observed that the company yields good profit margin and that makes the shareholders of the company in comfortable situation. So far the statutory compliance related to provincial and country government, the company maintains the highest level accuracy prioritizing this issue on to brace of the objectives of the company. This business has no season, in fact this business runs through the entire season and being the market leader, Telstra is well placed in comfortable position with further strive for excellence from the launch pad where they stands now(Nguyen, 2014).

PEST Analysis of Telstra

So far social analysis is concerned; the company stands responsible to the society with their different activities which ensure the CSR of the company. The company initiated different steps in the area of corporate social responsibilities through which they can justify their stands in the social aspect. The main market of this company is the domestic company of Australia which has population of mixed demography and everybody needs this service to sustain in modern life. Media reports say that the company is well placed so far its existence is concerned which is ensured through the high level of deliverance of service by the company to the target audience. The company runs with honoring the ethical values of the business by not violating the Competition Law of Australian Business Law in the areas of prices and other commercial activities with the assurance of non violation of such laws(Continuum, 2011).

The technological analysis of Telstra shows the high level of application of most sophisticated technology related to the field of operation of telecom service business. The global adaptability of telecom industry grows in faster pace and it is the basic requirement of the company to be at par with the trend and with the constant strive to excel in the field. The company is maintaining good research and developmental work which normally adds value to the performance of the company in high level to enable them to be placed at first spot of the Australian Telecom Service Industry. The company is ready to adopt the latest technologies evolved and marketed by other leaders globally and with the proper evaluation and utilization of the same, the company is holding the position of market leader in Australia so far telecom service industry is concerned(Hopq, 2015). 

Operational Risks

The risk area of the company is the business itself. As the company is dealing with telecom service, it needs huge involvement of high level and most sophisticated technology which originates from the expertise of the human resource.  Moreover the retention of efficient and expert human resources is the most important issue, failing which the company may face huge threat towards sustainability. This business is dynamic with the trend of growth which is depending upon the regular increase of network traffic powered with the continuous evolution of technologies and new markets. These specific trends is contributing to different risks which is posing challenges for accomplishment of strategic objectives of the company which includes the ambitious growth plan followed by future monetary activities. There different risk factors which can dominate the business of Telstra and these are defined as material risks which includes the material exposure related to economy, environment and society so far the sustainability risks are concerned.

It is the challenge of the company to minimize those risks. There is no such clear demarcation of this risks as per significance as they are not encompassing. Instead the reflection of most major risks is identified mainly in the level of whole entity through risk management process of the company and the same is set out in the corporate governance of Telstra segment. The risk such identified by the management is being non-responsive to the development of technology and market level through the exercise of cost effective and productive way. The exposure of this risk is enhancing day by day due to changed market position which includes geared-up advancement of technology which is instrumental for the gradual increment of expectation of customers with relevant performance of the company. The role of competitor can’t be denied with negative approach followed by simpler models of business which is prevalent in both domestic and international markets. The risk of disruptive services may happen due to environmental reason related natural calamity which can’t be acceptable to the customers at any point of time due to the nature of service provided by the company(Telstra, 2016).

The audit risks are three types- inherent, control and detection risks. The company with its financial statements prevails that the inherent risk of material misstatement due to omission or error may be there as the entry level work is made by human being. Due to its complex nature of business, the probability of such risks always prevails. The company has high level of control in the financial operations and the risk related to control raising material misstatement is mitigated. The detection risks are always there for the auditors as, due to complexity of the nature of the business of Telstra, the auditor may overlook some of the important material misstatement which may cause severe impact on the audit work of Telstra(Telstra, 2016).

Conclusion

Telstra is a prime brand of Australian telecom provider and the business is growing with the eminent level of services extended by the company to its customers. The company ahs a strong base of loyal bunch of customers and they really depend upon the services of the company as the company is excelling its performance with the adaptation of latest technology in the field with the application for the customers. The company has high level of research and development wings that devotes time, energy and money for this purpose to afford more value added services to the customers.

The company ahs risks related to business, as like other businesses. It is the prime job of the company to minimize the same and look for the best possible affordable service to the customers. The risks related to auditing is always there for any company so far audit operation is concerned, and the same is to be mitigated with the expertise and professionalism by the audit agency to understand the system of operation of the company well and so the mitigation of audit risk can be ensured which is required for the interest of stakeholders like shareholders, creditors, government, suppliers and the employees. Telstra, being a professional company always insists on transparency and that helps the auditors to minimize the audit risk as well to perform the best possible audit for the company. . .

References:

Accc. (2016, February 05). Competition in the Australian telecommunications sector. Retrieved October 07, 2016, from Accc: https://www.accc.gov.au/system/files/ACCC%20Telecommunications%20reports%202014%E2%80%9315_Div%2011%20and%2012_web_FA.pdf

Asx. (2015). Asx Listinig Rules. Retrieved September 29, 2016, from https://www.asx.com.au/documents/rules/gn04_foreign_entities.pdf

Budde. (2015, December 01). Telstra remains the master of the game. Retrieved October 07, 2016, from budde: https://www.budde.com.au/Research/Australia-Telco-Company-Profiles-Telstra-Optus-and-Vodafone

Capitalcube. (2016, January 12). Telstra Corp. Ltd. – Value Analysis (ASX:TLS) : January 22, 2016. Retrieved September 20, 2016, from Capitalcube: https://www.capitalcube.com/blog/index.php/telstra-corp-ltd-value-analysis-asxtls-january-22-2016/

Continuum, Q. (2011, July 06). Equities Spotlight: Telstra (TLS). Retrieved October 07, 2016, from Macrobusiness: https://www.macrobusiness.com.au/2011/07/equities-spotlight-telstra-tls/

Hopq. (2015, March 23). PESTAnalysis. Retrieved October 07, 2016, from Hopq: https://www.hopq.info/essays/Pest-Analysis-362245.html

Kidman, A. (2016, July 28). Telstra still tops in Australian mobile market share. Retrieved October 07, 2016, from Finder: https://www.finder.com.au/telstra-still-tops-in-australian-mobile-market-share

Molinsky, R. (2016, August 11). Telstra 2016 financial results. Retrieved October 07, 2016, from exchange: https://exchange.telstra.com.au/2016/08/11/telstra-2016-financial-results/

Nguyen, H. (2014, October 05). Strategic Human Resource Management – Telstra. Retrieved October 07, 2016, from prezi: https://prezi.com/lihsho-x0kvs/strategic-human-resource-management-telstra/

Telstra. (2016). Financial results. Retrieved October 07, 2016, from telstra: https://www.telstra.com.au/aboutus/investors/financial-information/financial-results

Telstra. (2015, August 13). Governance at Telstra. Retrieved October 07, 2016, from telstra: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf%20D/governance-at-telstra.pdf

Telstra. (2016, August 11). Governance at Telstra. Retrieved October 07, 2016, from Telstra: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/FY16-Corporate-Governance-Statement-and-Appendix-4G.pdf

Telstra. (2016). Take The Risk Out. Retrieved October 07, 2016, from Telstra: https://www.telstra.com.au/business-enterprise/download/document/business-security-consulting-datasheet.pdf

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